During this period, the S&P 500 (excluding dividends) has a nominal annualized rate of return of 6.94% and inflation averaged 3.79% for a real (inflation-adjusted) return of 3.03% (…). If dividends were reinvested, the nominal rate of return would have been 10.65% or 6.61% after inflation adjustment.
Nota: Most people estimate the inflation-adjusted rate of return (often called the real rate of return) by subtracting the inflation rate from the return. However, the correct formula looks like this:
where k is the real rate of return, r is the nominal return and i is the rate of inflation. Thus, the simple estimate of the real rate return would be 3.15% (6.94% minus 3.79%). The true real rate, however, is 3.03%. (v. Doug Short)