Sources of S&P 500 Annualized Returns by Decade

Breaking down the total returns by source, helps you understand perfectly how total returns are generated

Total Returns are a function of:

1. Dividends

2. Earnings Per Share Growth

3. Change in valuation

The first two items matter the most in the long run; the last matters the most in the short run.

Ultimately, the trade-offs between each item on a given time period determine total returns overall.

As Benjamin Graham aptly summarized it, "In the short-run, the market is a voting machine. In the long-run, the market is a weighting machine."

I recently found a chart that breaks down S&P 500 returns by decade, starting in 1880 and ending in 2019.