Buying Commonwealth Bank of Australia (ASX: CBA) shares five years ago would have delivered more than twice the gains posted by the S&P/ASX 200 Index (ASX: XJO) over the same period.
Among the helpful tailwinds, the ASX 200 bank stock has benefited from a strong management team as well as its market dominating position.
Not only does CommBank count as Australia's biggest bank, for much of the past five years it was also the biggest stock on the ASX. A title it only recently handed back to BHP Group Ltd (ASX: BHP).
So, if you'd bought $10,000 worth of CBA shares five years ago, just how much would that really be worth today?
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A $10k investment in CBA shares
Five years ago, on 18 June 2021, you could have picked up CBA shares for $103.69 each.
For $10,000, then, you could have bought 96 shares in the ASX 200 bank stock, with enough change left over for a decent lunch.
In afternoon trade on Wednesday, shares were changing hands for $162.89, marking a five-year gain of 57.1%. That means you could now sell your 96 shares for $15,637.
But wait. There's more!
If you owned CBA shares for the last five years, you'd also have received the past 10 fully franked dividends the bank paid to eligible stockholders over this time.
According to my trusty calculator, that works out to $22.20 a share in passive income.
Assuming you spent those dividends as they came in, rather than reinvesting them, then the accumulated value of the 96 CommBank shares you bought five years ago for $10,000 is now worth $17,769.
Not to mention that decent lunch you had.
But what is that really worth?
Real versus nominal value
With inflation coming back with a vengeance following the COVID years, it pays to distinguish between real value and nominal value.
What do I mean?
Basically, the nominal value of an Australian dollar doesn't change over time. However, its real value is eroded over time by inflation as the purchasing power of that dollar declines.
According to various estimates, since June 2021 inflation has reduced the real value of the Aussie dollar by around 22.3% to 22.9%.
If we take the middle value of 22.6%, then the $10,000 in cash you have buried in your backyard would be worth around $8,156 five years ago. Which is why we aim to buy ASX shares that outpace the eroding powers of inflation and tend to leave the cash burying to others.
Now, as we saw above, the nominal value of the $10,000 worth of CBA shares you bought five years ago would be $17,769 today.
The real value would be worth $14,493.
So, while inflation has taken a material bite out of those real gains, CommBank stock has still delivered a real return of around 50% in five years.
