INVESTMENT EXTRA: Six of the best in the past 60 years

Published In: News Articles Created Date: 2012-06-02

What can you get for a hundred quid? Not much these days it seems.

It might cover the cost of a week’s groceries at a stretch, a tank of petrol, or a decent meal out with the family (tip and alcohol not included).

If we go back to 1952, the year of the Queen’s Coronation, then that £100 would have gone a lot, lot further. It might have bought a decent second hand motor, or paid a good chunk of the deposit on a new home.

That house 60 years ago would have set you back £1,891, according to the Nationwide. Today it would be worth £164,134 – a very handsome return on your initial investment. And that got me thinking as to just how much you might have made by investing £100 back in 1952 – and would we be seeing diamond returns in the jubilee year? Property has been a very shrewd investment over six decades. But how does this compare with other mainstream and alternative investments? I also looked at the performance of six separate investments (including residential property) over the period since the coronation.

On the list were shares, gilts (government bonds), and the traditional bank and building society account. I also assessed the performance of gold and fine wine.

In reckoning the returns from shares and government bonds, I leaned heavily on an impressive statistical report produced by Barclays Capital called the Equity Gilt Study. What it revealed was on the face of it quite stunning – that a £100 investment in shares would have returned just under £108,000. That same investment in gilts returned £6,850, while £100 deposited in a building society account would be worth around £6,000 today. So investing in a broad basket of shares appears to have been a very effective way of saving for
the long-term.

Now, there are number of observations to make here. None of these figures include the effect of inflation. Real returns would have been far less impressive. Also, the impact of dividend reinvestment was huge so far as equities are concerned. In fact if you excluded dividends, the return would have been a fraction of the original figure I quoted.
The performance chasm between equities and gilts may come as a surprise to anyone who has watched government bonds outperform shares for the past decade. However, our study includes the halcyon era for stock market investing from the early 1950s to the late 1980s.

Forgetting bonds and shares, we all know gold has enjoyed a decent run of late. But what if you had spent £100 six decades ago? Well, it would have bought you just over eight ounces of the yellow metal worth £8,167 today. This is based on an historic bullion price of $34.60, or £12.36 at 1952 exchange rates. So it was a good investment, but definitely not the best.

It being the Diamond Jubilee, it seemed right to calculate whether diamonds are not just a girl’s best friend, but an investor’s too. Unfortunately the Rapaport Price List, the primary source of diamond prices, only goes back to 1978. A one carat, top quality diamond has risen 52pc in value in that 34-year period. So you might, if you were extremely lucky, have seen the price of top-notch diamonds double in 60 years.

This leaves us with fine wine, which has been one of the best-performing alternative investments for many years, though investors should exercise caution and do thorough research before buying. Novices can easily come a cropper and there are some scoundrels operating in the market. According to the investment firm Premier Cru, it would have provided a phenomenal return over the past 60 years. Our £100 could today be worth as much as £478,000 tax free.

‘In 1952 the youngest vintage you could buy would have been the ’51, but that and the 1950 were not very good,’ explains Stacey-Lea Golding, the company’s founder and investment director. ‘If a wine merchant was advising you, you would have probably purchased wines such as the Chateau Latour 1949 and Chateau Mouton Rothschild 1945.

‘At that time the Mouton Rothschild was not a Premier Cru and therefore not as expensive as the Latour.’ Golding reckons £100 would have bought three cases of each vintage. Today the Latour 1949 costs in the region of £3,800 per bottle, or £45,600 per case, while the Mouton Rothschild 1945 changes hands for around £9,500 per bottle, or £114,000 per case. What better way to toast the jubilee than with a glass of wine – but perhaps something a little cheaper than the Mouton Rothschild.