Remember 2020/21, when Covid-19 crashed stock markets? At their 2020 lows, the UK FTSE 100 and US S&P 500 indexes had collapsed by 35%. Nevertheless, 2020/21 was a great time to buy shares, because returns have been outstanding since.
But would I done better five years ago buying the S&P 500 or investing in gold, one of the world’s oldest stores of value?
Over the past five years, the S&P 500 has leapt by 70.4%. However, this capital gain excludes cash dividends — regular cash returns paid by some companies to shareholders.
Adding dividends, the S&P 500’s return jumps to 81.8%, turning $10,000 into $10,818. That works out at a compound yearly growth rate of 12.7%.
Then again, as a British investor, I buy US assets using pounds sterling. The US index’s return in GBP terms over five years is 13.6% a year. This equates to a five-year total return of 89.2% — still a handsome result for UK buyers of US shares.
For many, gold is the ideal asset in times of trouble. First, it has several uses: as a store of value (often in bank vaults), for jewellery, and as an excellent conductor of electricity in electronics. Second, it is scarce: all the gold ever mined would fit into a cube with sides of under 23m.
As I write, the gold price stands at £3,484.50. This is up an impressive 178.5% over the past five years. That works out at a compound yearly growth rate of 22.7% a year — thrashing the S&P 500’s returns.
Of course, gold pays no income, but these bumper returns can more than make up for this omission. Then again, with the S&P 500 worth around $60trn, its gains have been enjoyed by a much larger cohort of investors
Thus, over the past five years, investors have made more money owning gold than investing in the S&P 500. And speaking of high-performing investments, here’s another hidden gem from spring 2021…
As an older investor (I turned 58 this month), my family portfolio is packed with boring, old-school FTSE 100 and FTSE 250 shares that pay generous dividends.
For example, my family owns shares in Lloyds Banking Group (LSE: LLOY), whose stock has soared since 2021. As I write, Lloyds shares trade at 96.68p, valuing the Black Horse bank at £56.7bn.
Over one year, the shares are up 37.8%, easily beating major market indexes. Over five years, this stock has soared by 135.6% — comfortably beating most UK and US shares over this timescale.
Again, the above returns exclude dividends, which Lloyds stock pays out generously. Right now, its dividend yield is 3.8% a year, beating the wider FTSE 100’s yearly cash yield of 3.1%.