There’s a lot of talk at year-end of the S&P stock index being virtually flat for 2011. It is more helpful to look at this index over time, including the effects of inflation and dividend payouts. Some interesting statistics from Simplestockinvesting.com on historical returns for the S&P 500. Looking at every decade from 1950 you can see that this index showed a positive return in every decade but one. Looking more closely however you can see that on an inflation adjusted basis, the index did pretty poorly in 2 of the 6 decades presented. While the S&P did quite well both on a nominal and inflation adjusted basis for the entire 60 year period, there were significant stretches when your investment would not have kept pace with inflation. You might fare better if you carefully reviewed individual stock fundamentals and purchased individual equities selectively but most people I know neither have the time or the interest to do so. So if you going to invest in mutual funds, most of which don’t outperform the S&P 500, keep in mind that you might need a long time horizon to come out ahead after factoring in inflation.