Final answer:
Stocks have historically provided varying annual returns, with an average capital gains return of 13.58% according to S&P 500 data. Dividends decreased from about 4% in the 1950s-1980s to 1-2% recently, which contributes to total returns. The answer to the provided question would therefore be closest to C) 10-12% when factoring both dividends and capital gains over the long term.
Step-by-step explanation:
Over the long run, stocks have provided investors with annual returns that have varied across different decades. According to historical data, which includes both dividends and capital gains, stocks within the S&P 500 index showed an average annual return of 13.58% from capital gains alone.
Including dividends, which have decreased from about 4% in the mid-20th century to about 1-2% in recent decades, suggests that total returns may have been even higher at certain periods.
It's important to grasp the variability of returns over time; for instance, in the 1980s and 1990s, capital gains were significantly higher than dividends, while in the 2000s, the stock prices fluctuated and ended the decade roughly where they had started.
This pattern indicates that while stocks can be a high-return investment, they also come with considerable risk, and returns can be modest or even negative over certain periods, such as the 1970s or 2000s.