What does “adjusted for inflation” mean and how are they related to investment portfolios?
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In order to get an idea of actual growth of an investment in regard to buying power, you need to determine how it did relative to inflation. If an investment goes up 10% annually for 10 years, that’s great if inflation was only 2%, but your buying power dropped if inflation was 20% during that time.
Let’s say you have $50k which would buy you a loaded BMW 3-series today… in 10 years will that still buy you a loaded 3-series, a stripped down Hyundai (not good), or a Rolls-Royce (good!)
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