AMP Ltd (ASX: AMP) shares have been a huge disappointment for investors over the last decade.
During this time, the financial services company with a focus on creating wealth for its clients, has destroyed the wealth of its shareholders.
What has happened to AMP?
While AMP shares were struggling long before the Royal Commission, it was this event that appears to have had the biggest impact on their performance.
The company’s reputation took a major hit due to its questionable financial planning practices. This includes AMP charging thousands of dead superannuation customers for life insurance, despite allegedly being aware that there was no longer a life to insure.
Unsurprisingly, since then the reputational damage has led to the company experiencing billions of dollars of fund outflows, putting further pressure on AMP’s shares and its profits.
What if you had invested $1,000 into AMP shares 10 years ago?
Over the last 10 years the AMP share price has crashed a massive 73.2%.
This means that if you had invested $1,000 into AMP shares in August 2011, your shares would be worth just ~$270 today.
Though, it is worth noting that AMP was a generous dividend payer up until recently. This has arguably been the saving grace for shareholders.
If you had reinvested its dividends over the period, those AMP shares would be worth approximately $800 today. This represents an average annual negative return of 2.23% per annum over the period.
While this is of course much better than the share price return, investors need to consider opportunity cost. This is essentially the difference between the return on one asset versus another that investors could have chosen.
For example, during the same period, the Australian share market provided a total return of 10.4% per annum. This would have turned a $1,000 investment into just under $2,700. That’s $1,900 more than investors earned with AMP shares.
Shareholders will no doubt be hoping AMP’s restructure and new management team leads to a significantly better performance in the decade ahead.