Inflation in Returns return, example, required

joehogue

I'm sure this has been discussed....so sorry in advance.

Do we add it to the return at the end? Or do we link it?

example:

Calculate the required return based on expenses and portfolio as 5%. Expected inflation is 3%. Is total required return 8?%

Or is it (1.05)(1.03) - 1 = 8.15%?


Does it even matter?