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I saw an article a few weeks ago about the Nikkei closing at a 15-year high.

If I understand correctly that might mean something like:

Feb. 15, 2000 close: 9000
Feb. 15, 2015 close: 8999 (the highest it's been that's not over 9000)

My questions are,

A) If I'd invested in an index fund (assume perfect tracking) on Feb. 15, 2000, would that mean I'd just about be "breaking even" (ignoring inflation) on Feb. 15, 2015?

B) If I'd invested in stocks with the exact composition of the index on Feb. 15, 2000, and traded only to follow changes in the composition, would that mean I'd just about be "breaking even" (ignoring inflation) on Feb. 15, 2015?

C) If the answer to one or both A and B is "no", what's the correct way to think of index values?

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You would have had a positive return over that time period due to the dividends paid by the stocks in the index (between 1% and 2% per year).

Indices are just numbers calculated based on the values of the stocks tracked. The formula can be anything. They account for current values, not total return. They are really only useful numbers when you use them in comparison to something else (usually to their own past values).

  • I've been on a personal campaign for years to get changes in indexes reported as percent change, rather than points on a scale set long ago... – keshlam Mar 1 '15 at 2:38
  • @kent follow-up: that applies to both A and B? What about the (perhaps unlikely) case of no dividends being paid? – jcm Mar 1 '15 at 5:52
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    If none of the stocks in the index paid any dividends in all that time, then you would just now be breaking even. As you say, highly unlikely. – Kent A. Mar 1 '15 at 6:41

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