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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a decade-long holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Dollar Tree Inc (NASD: DLTR) back in 2009. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 06/26/2009
$10,000

06/26/2009
$76,636

06/25/2019
End date: 06/25/2019
Start price/share: $14.22
End price/share: $108.95
Starting shares: 703.23
Ending shares: 703.23
Dividends reinvested/share: $0.00
Total return: 666.17%
Average annual return: 22.58%
Starting investment: $10,000.00
Ending investment: $76,636.99

As shown above, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 22.58%. This would have turned a $10K investment made 10 years ago into $76,636.99 today (as of 06/25/2019). On a total return basis, that’s a result of 666.17% (something to think about: how might DLTR shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

One more piece of investment wisdom to leave you with:
“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” — Charlie Munger