The Historical Rate of Return for the major indexes is an important part of stock market history. The rate of historical returns needs to include dividend distributions in order to get an accurate measure of the total return one would have gotten from investing in the stock market.
During the 20th century the stock market returned an average of 10.4% a year. Just $1,000 invested in 1900 would be worth over $19.8 million by the end of 1999. At 15% average return per year, it only takes 30 years to turn $15,000 to $1 million.
|Decade||Average Return Per year|
Over the stock market history corporate earnings have gone up an average of 7% per year and the inflation history of the markets shows that inflation has averaged around 4% per year. The % weights of sectors has changed a lot from 1900 to 2000. For example back in 1900, railroads made up over 60% of the stock market yet make up only .2% today. More than 60% of American’s lived in rural areas in 1900 and by 1990 that number had dropped to less than 25% according to the U.S. census.
What we have done is compiled data that shows the price change and dividend distribution to come up with the total market return.