“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— 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 ten year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Laboratory Corporation of America Holdings (NYSE: LH) back in 2009: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full ten year investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.
| Start date: | 06/08/2009 |
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| End date: | 06/05/2019 | ||||
| Start price/share: | $60.86 | ||||
| End price/share: | $166.84 | ||||
| Starting shares: | 164.31 | ||||
| Ending shares: | 164.31 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 174.14% | ||||
| Average annual return: | 10.61% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $27,404.63 | ||||
The above analysis shows the ten year investment result worked out quite well, with an annualized rate of return of 10.61%. This would have turned a $10K investment made 10 years ago into $27,404.63 today (as of 06/05/2019). On a total return basis, that’s a result of 174.14% (something to think about: how might LH shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“Smart investing doesn’t consist of buying good assets but of buying assets well. This is a very, very important distinction that very, very few people understand.” — Howard Marks
