“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a ten year holding period for an investor who was considering Red Hat Inc (NYSE: RHT) back in 2009, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 06/11/2009 |
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| End date: | 06/10/2019 | ||||
| Start price/share: | $20.52 | ||||
| End price/share: | $185.14 | ||||
| Starting shares: | 487.33 | ||||
| Ending shares: | 487.33 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 802.24% | ||||
| Average annual return: | 24.60% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $90,248.94 | ||||
As we can see, the ten year investment result worked out exceptionally well, with an annualized rate of return of 24.60%. This would have turned a $10K investment made 10 years ago into $90,248.94 today (as of 06/10/2019). On a total return basis, that’s a result of 802.24% (something to think about: how might RHT shares perform over the next 10 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
