Three years ago, I was moments away from making a purchase Aviva (LSE:AV) shares. I was filling out my SIPP and it was a toss-up between Aviva and the competition FTSE 100 index Insurance and asset manager Legal and General Group (London Stock Exchange: Elgin).

Both looked good value, with price-to-earnings (P/E) ratios of six or seven. Both have underperformed for years. They both looked ready to rebound.

Inflation was still raging at the time. The CPI reached 10.3% in February 2023, not much lower than its peak of 11.1% last October. High interest rates and the cost of living crisis had their impact on the FTSE 100 index, which reached 7,878 points. But investing is cyclical. I felt that prices couldn’t stay high forever. When they fall, UK stocks, especially high-yielding stocks, look more attractive than boring old bonds and cash. That was the theory anyway.

FTSE 100 sector competitors

At the time, investors could earn risk-free returns of 5% or more, so many felt there was less need to risk capital by investing in stocks. I took a different point of view. Aviva had a return of 7.5%, while Legal & General had a return of 10%, with capital growth potential on top when its shares recover. Faced with this choice, I bought Legal & General, tempted by its impressive income.

Overall, my theory proved correct. Base interest rates fell from 5.25% to 3.75%, and appear to be on track to fall further. Bond yields and savings rates followed. The FTSE 100 is now trading at around 10,780 points, up 36% in three years. With dividends, total returns reach 50%.

High-yielding financial stocks have seen a notable rise, particularly Aviva, which has risen by almost 50% over three years, and 30% in the past 12 months, with all dividends included. Other FTSE 100 dividend paying financials in my portfolio, Lloyds Banking Group, M&G and Phoenix Holdings Group It also rose. Unfortunately, there was one clear laggard: legal and public. This is the thing I got wrong.

Its shares are up about 12% over the past year and a scant 5% over three years. Yes, investors received a lot of dividend income, but they would have received almost as much with Aviva, and enjoyed more capital growth.

Legal and public achievements

I won’t complain too much. I’m sitting on several big winners and there is no finish line in investing. I plan to hold these stocks for at least the next decade. Legal and public have time to make up for what they lost. Like I said, investing is cyclical.

Aviva looks pricier after its strong run, with its P/E at 26.7 and yield narrowing to 5.4%. Legal & General’s P/E ratio is 92, which sounds strange but reflects three consecutive double-digit declines in earnings per share (which also explains the share price decline). The trailing yield remains chunky at 7.9%.

As for the future, the picture appears calmer. Aviva is trading at an undemanding P/E of 11.9 for 2026, with Legal & General at 11.3. Forward yields of 6.36% and 8.35% respectively still look impressive.

Should I buy Aviva now? This was the better bet three years ago, and may still have the edge. It has momentum and has been streamlined into a more straightforward business. If I were starting from scratch, it would be my first choice. But I stick to common law and common law, hoping that my patience will eventually be rewarded. They say that investing is cyclical.