Thanks to some clever analysis by Finaeon chief economist Bryan Taylor, it’s possible to calculate that £10,000 put into UK shares in 1692 would now have grown to £5.3trn. To be strictly accurate, his analysis covers the period to 2018, but I’ve assumed that the same growth rate has continued to the present day.
During this time, the dividend yield was estimated to be 4.66%. And the average annual growth rate of 6.62% assumes these payouts were reinvested, buying more shares. Overall, 70% of the return came from the impact of dividends, which demonstrates the benefits of compounding.
Why bother?
Okay, my analysis is a little unrealistic. In 1692, a lump sum of £10,000 was a lot of cash. In today’s money, it’s worth £1,830,480. And what’s the point of investing for 334 years when most of us won’t live to be 100?
However, this does help illustrate the importance of taking a long-term view. This is the approach of many famous investors, including Warren Buffett, chairman and chief executive of Berkshire Hathaway.
From 1964-2024, ‘his’ company’s share price increased by 5,502,284%.
Having an investment horizon spanning several decades helps smooth the inevitable troughs that will hit the stock market from time to time. In my opinion, it’s important not to be distracted by short-term price volatility. And have faith that quality companies will continue to deliver over an extended period.
Been around a long time
One business that pre-dates 1692 is Barclays (LSE:BARC). It was founded two years earlier and is now (23 May) the FTSE 100’s third-biggest bank (based on market-cap).
For 2024, it reported net income of £5.3bn, an increase of 24% on the previous year. And this strong performance has continued into the first quarter of 2025, with a 19% increase in profit before tax compared to the same period 12 months earlier.
In cash terms, its 2024 dividend was 40% higher than in 2021. However, thanks to a recent share price rally that’s seen its value increase by 53% in the past year, the stock’s yield isn’t particularly impressive. However, the bank’s directors have pledged to return £10bn to shareholders over the next two years through a combination of dividends and share buybacks.
Global turbulence
The risks associated with taking a position in the bank are not specific to Barclays and could apply across the sector. These mammoth financial institutions are often a barometer for the wider economy. Economic headwinds in their key markets are likely to impact earnings with bad loans posing the biggest threat.
Barclays is particularly exposed to the UK where growth appears fragile. It also has a strong US presence, which could be teetering on the edge of a recession. But global uncertainty can create opportunities. I’m confident that the bank’s investment arm is currently taking advantage of falling asset values.
And its shares appear to offer good value at the moment. Based on the 2025 consensus forecast of analysts, its price-to-earnings ratio’s currently a very reasonable 8. Looking ahead to 2027, this falls to just 5.6.
This is the primary reason why I have Barclays in my Stocks and Shares ISA and plan to keep it there for many years to come. Other investors could consider doing the same.
