Real yield after inflation: what is actually left
Every few months someone sends me a screenshot of a product paying eight, ten or fifteen percent a year and asks whether it is worth it. The honest answer always starts with the same subtraction.
Start with the nominal yield. Subtract expected inflation in the currency you will eventually spend. Subtract fees, including the ones hidden in spreads. Then subtract an allowance for the chance that the whole thing goes to zero.
| Item | Example A | Example B |
|---|---|---|
| Nominal yield | 4.5% | 12.0% |
| Inflation | −2.8% | −2.8% |
| Fees and spreads | −0.2% | −1.5% |
| Expected loss | −0.1% | −6.0% |
| Real yield | 1.4% | 1.7% |
The second product looks almost three times better on the label and ends up roughly equal, with far more variance. That is the usual pattern.
A yield is a price for a risk. If you cannot name the risk, you are probably the one selling it.
None of this means high-yield products are bad. It means the comparison has to happen after the subtraction, not before.