Do all major indexes make sense for regular passive investment?

Question

There are articles that say "buying" an index is a very good approach to investment, that beats most of the active funds. But, looking at the value of FTSE 100 for the past 20 years, it has roughly stayed within a 4000 to 7000 points interval. So, for someone who just buys at regular intervals, I think that such on index brings roughly no value in the long run, especially not the average 8%/year that I read about.
I understand that there are other indexes (e.g. DJIA) that have performed much better, but can someone please explain to me whether there is something that I have missed about this passive approach to investment?

glglgl · Accepted Answer

With all indexes, you have to differentiate between performance index and price index.
The FTSE 100 is a price index, which means that only the current values of the contents are used when calculating it. Dividend payments are not contained and must be accounted for separately.
Suppose you have a security which is $100 worth. Its value rises over the next months to $105, and then there is a dividend payment of $5. So it retured to $100.
Considering the price, the security didn't gain in value, but you had the dividend payment which gave you a return of $5, i. e. 5%.
The same holds for price index vs. performance index: the first only looks at the price, the second one considers the complete performance.

Do all major indexes make sense for regular passive investment?

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