The ASX 200 is down 1% in a year. So how have 'average' investors banked more than 3% gains?

Some ASX 200 shares have more than doubled over the past year, while a few big fallers have dropped more than 75%.

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The S&P/ASX 200 Index (ASX: XJO) is marching higher today.

In early afternoon trade on Tuesday, the benchmark index – containing the largest 200 companies on the ASX by float-adjusted market cap – is up 0.2%.

Still, that leaves the ASX 200 down 1.1% since this time last year.

Which isn't to say some top stocks haven't returned outsized gains. Like Ramelius Resources Ltd (ASX: RMS), up 120% over the 12 months.

But despite some of those big winners, the index has been pulled down by other stocks on the slide. Those include The Star Entertainment Group Ltd (ASX: SGR), down 78% in a year.

Why has the ASX 200 lost ground?

Most listed Aussie companies rocketed higher following the COVID market panic.

From 20 March 2020 through to 3 February this year, this saw the ASX 200 gain a remarkable 57%. Since 3 February, however, the benchmark index has lost 10%.

Pressure has come on several fronts. And the moves lower have been mirrored on most international exchanges.

Ongoing and rising global geopolitical tensions count among the headwinds.

Sticky inflation – both in Australia and much of the developed world – is causing its own headaches for ASX 200 investors. Chief among those is the spectre of even higher interest rates, with rates now being flagged to remain 'higher for longer' in Australia, the United States and Europe.

Add in the economic slowdown in China – the world's number two economy and top export market for Aussie goods – and you're starting to get the picture of what's been dragging on the benchmark index.

Which brings us to our headline question.

Why have 'average' investors still booked gains?

While the ASX 200 is down 1.1% in a year, the 'average' index tracking investor should be sitting on gains of some 3.1%.

How is that possible?

Dividends, of course.

Many ASX 200 companies are well-known for paying out generous dividends. And with many of them paying fully franked dividends, this can add to investors' real returns come tax time.

Here's the kind of difference dividends can make.

The S&P/ASX 200 Gross Total Return Index (ASX: XJT) – which includes all cash dividends reinvested on the ex-dividend date – is up 3.1% in a year.

And the further you go back in time, the more outperformance the Total Return Index tends to give. A welcome reminder of the potential value offered by dividends.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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