If an investment gives you 7 percent return annually, is that good or bad? How about guaranteed return? On the face of it, this looks good, but what if the inflation rate is 6 percent? Then, if you deduct the inflation rate from your investment return, all you get in your hand is 1 percent. This return is called inflation-adjusted return. When investing in any instrument, you must look at this real return. Inflation is expense that eats into your return and is unavoidable. A positive return, post inflation, means your money grows despite inflation. But if your investment has a negative inflation-adjusted return, then it is as good as reducing every year.