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Redoing the Math of an Index





This is bad judgment. It makes index funds really easy to beat the index in 2004.

From New York Times:

But S.& P., the keeper of the index, doesn't count every dividend, and that's where the argument for a higher return begins. It ruled that a $3-a-share dividend paid by Microsoft last November, totaling $32 billion, was a one-time event. Because it was not the regular quarterly dividend of 8 cents a share that Microsoft pays shareholders, S.& P. did not include it in calculating the index's total return. Counting it would bring the total return to 11.23 percent.

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S.& P., however, has chosen to smooth out the numbers by excluding one-time dividend blips. But that doesn't make its total-return math more logical.

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