“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
A critical pearl of wisdom from Warren Buffett teaches us that with any potential stock investment we may make, as soon as our buy order is filled we will have a choice: to remain a co-owner of that company for the long haul, or to react to the inevitable short-term ups and downs that the stock market is famous for (sometimes sharp ups and downs).
The reality of this choice forces us to challenge our confidence in any given company we might invest into, and keep our eyes on the long-term time horizon. The market may go up and down the interim, but over a twenty year holding period, will the investment succeed?
Back in 1999, investors may have been asking themselves that very question about Berkshire Hathaway Inc New (NYSE: BRK.B). Let’s examine what would have happened over a twenty year holding period, had you invested in BRK.B shares back in 1999 and held on.
| Start date: | 06/11/1999 |
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| End date: | 06/10/2019 | ||||
| Start price/share: | $46.44 | ||||
| End price/share: | $207.16 | ||||
| Starting shares: | 215.33 | ||||
| Ending shares: | 215.33 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 346.08% | ||||
| Average annual return: | 7.76% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $44,617.72 | ||||
As we can see, the twenty year investment result worked out well, with an annualized rate of return of 7.76%. This would have turned a $10K investment made 20 years ago into $44,617.72 today (as of 06/10/2019). On a total return basis, that’s a result of 346.08% (something to think about: how might BRK.B shares perform over the next 20 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
