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?
S&P surges
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.
Gold rush
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…
A FTSE 100 superstar
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%.
Earlier this year, Lloyds shares were riding high, peaking at 114.6p on 4 February. They have since fallen by 15.6%, driven down by the US-Iran war, soaring energy prices, and fears of an economic slowdown. Of course, if the UK endures another recession, banking revenues, profits, and cash flow could take a nasty hit.
That said, sticky, above-target inflation hinders the Bank of England from cutting interest rates. This boosts Lloyds’ net interest margin, boosting its 2026 earnings. And that’s why we will keep holding tightly onto our Lloyds shares!
