Your real return is what your money earned after fees and inflation, measured against a benchmark you chose in advance.
The mistake
Judging a portfolio by last quarter’s number, by a headline index, or by the one holding that did well. None of these tells you whether you are on track for your goals.
The evidence
Consumer prices rose 3.7% over the 12 months to September 2026 (BLS, Consumer Price Index, released 14 October 2026). At that rate of inflation, a 6% return buys only about 2.2% more than it did a year ago.
Over longer periods the effect compounds. Here is what $1,000,000 buys after 20 years, in today’s dollars:
| Average inflation | Buying power of $1,000,000 after 20 years |
|---|---|
| 2% a year | $673,000 |
| 3% a year | $554,000 |
| 4% a year | $456,000 |
Two returns, two questions
Time-weighted return measures how the investments did, ignoring when money went in or out. It answers: did the portfolio do its job? Money-weighted return counts the timing of your deposits and withdrawals. It answers: what did my money earn? Mistake 4 shows how far apart the two can be.
Both mean more against a benchmark chosen before the results come in: an index or blend that matches the allocation your plan calls for.
What to do instead
- Pick your benchmark now, from your target allocation, and write it down.
- Look at both returns, time-weighted and money-weighted, after fees.
- Subtract inflation to see what your money can actually buy.
- Measure progress against each goal in its base case, not against last year.
The tool: an “am I on track?” page
| Measure | This year | Since you started |
|---|---|---|
| Portfolio return, time-weighted, after fees | ||
| Your return, money-weighted, after fees | ||
| Benchmark you chose in advance | ||
| Inflation (CPI-U) | ||
| Real return (your return minus inflation, roughly) | ||
| Fees paid, in dollars | ||
| Each goal: on track in the base case? |
How this is handled in practice
Performance is reported against a benchmark, so the question “is this working?” has an answer rather than an opinion. Vivek holds the CIPM® designation, which is about measuring and evaluating investment performance. Investment management is offered through Gwynedd Wealth Partners, LLC.
Series · Ten common investor mistakes
- Whose plan are you following?
- Capacity, willingness and requirement: the three sides of risk
- Too concentrated, or too diversified?
- Why popularity makes value harder to judge
- The best days sit next to the worst days
- What you keep, not what you earn
- Do you know your real return?
- Plans fail quietly
- Five checks before you hand anyone your money
- Your savings rate: the lever you control
This article is for education and is not a recommendation to buy or sell any security. The illustration is hypothetical. Past performance does not guarantee future results. Investment advisory services are offered through Gwynedd Wealth Partners, LLC.