Realizing the importance of RETURNS and INFLATION are important,
these two are some of the basics in investing.

Return is what your investment will earn for you. It is also called earnings. It is computed this way.

Total amount received at the end of the period amount invested = Return in currency

Or

Total amount received at the end of the period divided by amount invested 1 = Return in Percent

So, let's say you put your savings of $100,000 in a time deposit for one month. At the end of the month, the bank gives you $100,666. What is the return?

Return in Currency = $100,666 $100,000 = $666.00

Return in Percent = ($100,666 / $100,000) 1 = 0.67% for one month or 8% per year.

Alone, knowing your earnings from a certain investment is not enough. You have to make sure you also know the effect of inflation. Inflation, the upward trend of prices of goods and services is one of the obstacles to financial freedom. For example, the tuition and fees you are paying here in a school is around $120,000.00 a year. The school informed you, however, that they are increasing tuition by 10 percent for the coming school year. You now have to set aside $132,000.00 for your tuition and fees.
Of course, this may not be a big problem if your earnings (say, your salary), also increase by 10 percent. But if you have had no salary adjustment (which rarely happens by the way), the increase in tuition and fees means that you have $12,000.00 less to spend on your other needs (or wants).
Inflation in some countries reached 7% per annum last year. Meaning, the things they have to buy have, on average, increased by 7%. Unless their earnings increase by more than 7%, or the interest rate in banks increase by more than 7% they will find themselves being able to buy less with the money that they have. In short, though they're getting money, they're actually losing it.

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