“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 twenty year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into ABIOMED, Inc. (NASD: ABMD) back in 1999: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full twenty year investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
| Start date: | 07/19/1999 |
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| End date: | 07/17/2019 | ||||
| Start price/share: | $7.94 | ||||
| End price/share: | $260.06 | ||||
| Starting shares: | 1,259.45 | ||||
| Ending shares: | 1,259.45 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 3,175.31% | ||||
| Average annual return: | 19.05% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $327,499.34 | ||||
As we can see, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 19.05%. This would have turned a $10K investment made 20 years ago into $327,499.34 today (as of 07/17/2019). On a total return basis, that’s a result of 3,175.31% (something to think about: how might ABMD shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Another great investment quote to think about:
“The best stock to buy is the one you already own.” — Peter Lynch
