Pull up the historical prices of Wal-Mart (WMT), let's say from 5 years ago. I just picked the price as of Oct 21, 2002, it was $56.40. Even I use the current dividend of $0.88 per annum, to divide by the $56.40, I could only get 1.6% dividend yield. So a 5-year average dividend yield out of $56.40 I assume it is about 1%.
Friday's closing price is $44.98, it means a 5-year annualized return of holding WMT is -4.4%. Assume you earn the 1% dividend each year it means you lose 3.4% per annum. If you are a Canadian investor, very sorry. US dollar depreciated from about $1.5682 Cdn as of Oct 21, 2002 to $0.9637 Cdn as of Oct 19, 2007. Just the currency you lost 9.3% per annum. Therefore, if you exchanged your Canadian dollar on Oct 21, 2002 to buy one set of WMT and sold on Oct 19, 2007 and exchanged the money back to Canadian dollar, you lost 12.7% per annum over the last 5 years. A compounded total loss of 49%. About a half.
Well I'm not sure if you hold WMT for longer period you eventually can get back to breakeven, but I guess I am a normal human being that I can only live that long. How many 5 years do I have???
In a case that you invest in a big cap over a wrong period of time, you can still lose about half of your money in 5 years. You now see big cap is not a sure win.
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