Final answer:
It is true that market indexes typically do not include dividend reinvestment and do not represent total return. Market indexes measure stock performance excluding the gains from reinvested dividends, which historically have been a notable portion of total returns for investors.
Step-by-step explanation:
It is true that market indexes typically do not include dividend reinvestment, and do not represent total return. To elaborate, market indexes such as the S&P 500 often measure the performance of stock prices alone and do not account for the additional gains from reinvested dividends. Historical data indicates that dividends have been a significant part of the investor's total return. Specifically, from the 1950s to the 1980s, annual dividends were about 4% of a firm's stock value, which has since decreased to about 1% to 2% in recent decades. While capital gains have generally been higher than dividends since the 1980s, the total return can be materially affected by whether dividends are reinvested back into the market or not.