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I wondered how well or badly I would have done if I had invested £5,000 in Lloyds Banking Group (LSE:LLOY) shares in September 2015.
And then I remembered that I bought some shares in Lloyds at the time. The problem was that I paid 76p for each one. If I had invested £5,000, after charges, I would have bought 6,530 shares.
Nearly nine years later, Lloyds' share price stands at 56p. And 6,530 shares are now worth just about £3,650 after sales charges. That's a loss of 27%. Wow!
A disaster?
So what's the point of telling you all this now? Is it just to put one of my worst investment disasters behind me and move on?
Well, no.
First, when I add dividends to the picture, the result is not as bad as it seems.
And then I see a broader lesson about the stock market in general, and I think it's very encouraging.
But first the dividends, and I calculate that Lloyds will have generated a total of 21p per share in that time. That means each share would be worth a total of 77p today – a penny more than I paid for it in 2015!
Oh, and I would have done better if I had reinvested my dividend money into more stocks.
I do, but I'm including it in my next investment and I wouldn't buy any more Lloyds shares. So I'll be putting aside any potential additional gains.
Break even point
What at first glance seems like a bad investment actually turns out to be a break-even point.
Now, “I invested some money and nine years later I haven't lost anything.“Isn't that the kind of conversation Warren Buffett's letters to Berkshire Hathaway Shareholders, this is a very interesting read.
But there's a real lesson from the stock market for me.
I held some stocks in one of the hardest hit sectors of the past 10 years, in the worst decade for the market I can remember.
And I didn't lose anything.
So where is all that dangerously risky danger that makes so many people shudder with horror when they hear me say that I buy stocks and shares?
Long term
The truth is that yes, there are risks, but those who take the risk are those who embark on the adventure of getting rich quickly.
I know the cash I invested in Lloyds would actually have performed better in a cash ISA, but it is my worst performing stock of the past decade. And because I always diversify, my stocks and shares ISA generally looks a lot better.
Those of us who are patient and invest for a decade or more can greatly reduce our chances of experiencing risk-based pain.
Researchers in Barclays We've looked at investments over consecutive time periods. And the longer the period, the greater the chances that stocks will outperform cash.
In fact, looking at 20-year periods, UK stocks have never lost value against cash in over a century.
Sell my Lloyds shares? No way.
