“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 ten year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Discovery Inc (NASD: DISCA) 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: | 06/08/2009 |
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| End date: | 06/06/2019 | ||||
| Start price/share: | $11.88 | ||||
| End price/share: | $28.38 | ||||
| Starting shares: | 841.75 | ||||
| Ending shares: | 841.75 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 138.89% | ||||
| Average annual return: | 9.10% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $23,891.72 | ||||
As shown above, the ten year investment result worked out well, with an annualized rate of return of 9.10%. This would have turned a $10K investment made 10 years ago into $23,891.72 today (as of 06/06/2019). On a total return basis, that’s a result of 138.89% (something to think about: how might DISCA shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Another great investment quote to think about:
“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
