Investing in our FTSE 100 banks 10 years ago would not have been a good strategy with hindsight and you dont need me to tell you that!
A 10,000 investment in Barclays back in September 2004 would have been worth only 6,785 a decade later if you reinvested your dividends, but the same in Lloyds Banking Group would have fared considerably worse and would have been reduced to 3,545!
With the shares trading at around 764p at the start of the period, dropping to 626p by the end of September this year, youd have recorded a capital loss of 1,806, turning that original 10,000 into 8,194.
But HSBC managed to keep reasonable dividend payments going, right through the crisis and the recession, as it largely escaped the property-led liquidity crunch that hit the more Western-facing banks. Even at its lowest in 2010, HSBCs dividend was yielding 3.4%, and it was back up to 4.6% by 2013.
Saved by the dividend
So, though youd have lost on the share price, youd have been compensated with 4,151 in dividend cash over the 10 years, taking the value of your investment to 12,344. A 23.4% profit over a decade is nothing to get excited about, but its a lot better than a loss.
But what would have happened if youd reinvested your dividend cash instead of spending it?
With Barclays we saw that would have lost you some money, as the share price is still a long way down from its pre-crash levels and youd have been reinvesting at average prices some way above todays.
But HSBCs price is doing better, and youd have actually made a slight profit by reinvesting, of 457. It would take your initial 10,000 up to 12,802, for a 28% gain.
The next ten
Thats clearly not a great return for a 10-year investment, but its on a par with savings account levels. And you really wouldnt have been too badly off if youd had one allotment of, say, a 10-stock portfolio in HSBC. And looking forward, where youd have started the last decade with 1,300 shares, youd be heading into the next 10 years with 1,980 of them.
I have three more banks to go, and itll be interesting to see how theyve fared as a whole over this turbulent period.
A well-balanced portfolio chosen from a number of sectors really is the best way to build yourself a healthy retirement pot, but should HSBC be one of them?
You have to decide for yourself, but the Motley Fool’s latest analysis of Five Shares To Retire On should give you some welcome help. It covers five very solid blue-chip shares and tells you why our experts think they’ll serve you well in the decades ahead!
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.