Final answer:
The historical rates of return on investments in common stocks have varied. From the 1950s to the 1980s, the average return was 13.58%, and since the 1990s, it has been closer to 1% to 2%. The stock market can have periods of modest returns and can also experience significant declines.
Step-by-step explanation:
The historical rates of return that investors have earned on investments in common stocks have varied over time. From the 1950s to the 1980s, the average annual return from dividends and capital gains on stocks in the S&P 500 index was around 13.58%. In the 1990s, dividends dropped, and the return became closer to 1% to 2%. The gap between the percent earned on capital gains and dividends was higher in the 1980s and 1990s.
It is important to note that the stock market can be volatile, and individual company stock values can rise and fall substantially. In certain periods, such as the 1970s or the first decade of the 2000s, the overall return on the stock market can be modest. The stock market can also experience significant declines, as seen in the 2008 financial crisis.