Dividends have cushioned an eight-year rollercoaster ride for share investors. This is illustrated by looking at the ups and downs of the S&P/ASX200 Index (prices only) and the S&P/ASX200 Accumulation Index (share price plus dividends) over this period. 
A little over eight years ago on November 1, 2007, the S&P/ASX200 closed at a record, 6828.7 points, its pre-GFC closing high. And on March 6, 2009, this index closed at 3145.5, its lowest close in the depths of the GFC.
By contrast on November 1, 2007, the S&P/ASX200 Accumulation Index closed at a record 43,094.3, its pre-GFC high. And on March 6, 2009, this index fell to 21,298.1, its lowest point in the depths of the GFC.
Now fast forward to today to see how these indices have faired over the past eight years:
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On November 20, 2015, the S&P/ASX200 Index (prices only) closed at 5256.1 points. This is still well below its pre-GFC closing high yet 67 per cent above its GFC closing low.
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On November 20, 2015, the S&P/ASX200 Accumulation Index (share price plus dividends) stood at 47,868.3. This is 11 per cent above its pre-GFC high and around 125 per cent above its GFC low.
The contrasting performances of the two indices reinforce several critical principles of sound investment practice.
It makes much sense for investors to focus on their total returns (capital gains and income), to understand the rewards of compounding and to concentrate on their long-term goals rather than being swayed off-course by short-term market movements.
For more on the rewards of compounding as income is earned on past income as well as capital, see What goes up might come down, Smart Investing, November 22.
Written by Robin Bowerman, Principal, Market Strategy and Communications at Vanguard Australia.
Reproduced with permission of Vanguard Investments Australia Ltd
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