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There's the standard S&P 500 index (SPX) and the rarer used S&P 500 Total Return index (SPTR). If you compare graphs, you'll find that the latter grows faster. Supposedly, SPTR assumes reinvestment of dividends while SPX doesn't.

What does SPX assume you do with your dividends? Put them under the pillow interest-free, or invest them at the risk-free rate? Even SPX must somehow account for dividends, or else each time a company issues a dividend (which is of course accompanied by a drop in stock price), the index would drop.

I assume (but do not know) that ETFs or index funds that claim to track S&P 500 would reinvest dividends, and so I'd expect that their prices would follow SPTR instead of SPX. However, from looking at graphs, the opposite seems to be the case. Obviously I'm missing something.

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Basically the Total Return Index assumes reinvestments compared to "regular" indices.

"A total return index is an index that measures the performance of a group of components by assuming that all cash distributions are reinvested, in addition to tracking the components' price movements.1 While it is common to refer to equity based indices, there are also total return indices for bonds and commodities..."

WIKI

The S&P 500 index just tracks the price-levels of the index itself & assumes no reinvestments such as the Dividend Reinvestment Program (DRIP)

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Actually the S&P 500 Index incorporates special distributions but not normal distributions. – Norgate Data Sep 29 '15 at 8:08

I don't see that this question has been answered. Why does the Vanguard S&P 500 Index fund (and all others I have looked at) track the S&P 500 Index instead of the S&P 500 Total Index? For example, the Vanguard index fund shows a slight loss on the year-to-date for 12/24/2015. However, with dividends reinvested it should be showing about a 2% gain. Who is keeping that 2%?

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The Vanguard ETF does track S&P 500 total return. Have you accounted for dividends paid by the ETF when you computed its YTD returns? – haginile Dec 28 '15 at 16:22

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