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If I am looking at a multi-year price chart of a stock, do I need to adjust the prices for inflation? In the presence of inflation, the recent prices are more comparable to the current price than the earlier prices. If I draw a line from an earlier price to a more recent price, the percentage change would be misleading because inflation distorts the earlier price more than the recent price.

I currently look at total return charts that are dividend-adjusted and split-adjusted. Should I also adjust for inflation, especially when inflation is high?

Flux
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2 Answers2

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You could adjust for inflation if you want. But make sure you do the same for anything else you are thinking of investing in.

Most people don't bother, and instead compare the growth (inflation included) of any investments they are considering.

Simon B
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  • Presumably it would be most relevant when you are considering investments denominated in different currencies? – Dave Aug 21 '21 at 11:25
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The dqydj S&P 500 return calculator offer that option.

I'd only see inflation adjustment as useful:

  1. over long time frames,
  2. includes dividends and
  3. Stock splits.

For stocks you don't own, it's doable, but I'm dubious as to whether it's really worth the effort.

Doing it for stocks that you already own is quite doable, and could be quite useful.

RonJohn
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