“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a twenty year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Incyte Corporation (NASD: INCY) back in 1999: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full twenty year investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
| Start date: | 03/15/1999 |
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| End date: | 03/13/2019 | ||||
| Start price/share: | $12.03 | ||||
| End price/share: | $85.06 | ||||
| Starting shares: | 831.26 | ||||
| Ending shares: | 831.26 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 607.07% | ||||
| Average annual return: | 10.27% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $70,693.61 | ||||
As shown above, the twenty year investment result worked out quite well, with an annualized rate of return of 10.27%. This would have turned a $10K investment made 20 years ago into $70,693.61 today (as of 03/13/2019). On a total return basis, that’s a result of 607.07% (something to think about: how might INCY shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“As time goes on, I get more and more convinced that the right method of investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes.” — John Maynard Keynes
