[gphil]

It depends on what you are looking at, but generally index returns (such as the FTSE 100) are calculated as if you are rebalancing your portfolio periodically to reflect the changing composition of the index over time, which is what a passive index fund manager would do for you if you were to invest in a FTSE 100 index fund, for example.

I am not aware of any non-index based stock market performance measures like what you are suggesting--e.g. if I bought all the stocks in the FTSE 100 index in 1994 and never rebalanced, what would have happened? I suspect that the returns would indeed have been a lot worse but I can't say for sure.