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"Are you saying that if I purchase $250,000 worth of an index fund mutual fund, I can't count on receiving $25,000 in dividends per year with a resonable degree of certainty (realizing some risk)? "

You can assume anything you like but there exist a probablity that it will not happen.

"I thought the average rate of return on index funds was well over 10% during the last 10 years. Maybe I'm confusing growth and return. Is that the case?

The total return for S&P 500 since 1926 through 1993 has been 10.49%. But there was a 10 yr period ending in 1974 where the average total return was 1.2%.

Total return for a stock is the dividends and the price appreciation of the stock. Let's say the Stock costs $10 on Dec 31, 1998. It issues a $0.25 dividend on Dec 31, 1999 and it's price has risen to
$10.50.

The total return is 7.5% which is:

((Div + (End $/sh - Start $/sh))/Start $/sh

(($0.25 + ($10.50 - $10.00))/$10.00 = ($0.25 +$0.50)/$10

$0.75/$10 = 7.5%.

Growth is how much some measurable term gets larger. Margins, Sales, net Income, Returns and etc. can grow, shrink, stay the same.

What I think you may be confusing is that growth investments - meaning investments in companies that are growing will generally have larger total returns than companies or investments that are not growing.

BGP
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