Consider the components of equity returns

As the summer rolls along we will be coming back to this subject a few times, for example, why companies with higher earnings retention tend to underperform as investments (think managerial wish lists, empire building etc.)
From Investment Postcards from Cape Town:

The raison d’être of investment or wealth management is to maintain, or hopefully improve, one’s standard of living, i.e. to earn a real return on the investment amount. This sounds easy enough if one considers that the S&P 500 Index (and its predecessors prior to 1957) delivered a nominal return of 8.7% per annum from January 1871 to June 2008. With an average inflation rate of 2.2% per annum over the period, this meant a real return of 6.5% per annum....MORE

Have a look at the following chart: