“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— 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 ten year holding period, will the investment succeed?
Back in 2009, investors may have been asking themselves that very question about Red Hat Inc (NYSE: RHT). Let’s examine what would have happened over a ten year holding period, had you invested in RHT shares back in 2009 and held on.
|Average annual return:||25.57%|
As shown above, the ten year investment result worked out exceptionally well, with an annualized rate of return of 25.57%. This would have turned a $10K investment made 10 years ago into $97,285.07 today (as of 07/08/2019). On a total return basis, that’s a result of 873.09% (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.]
Another great investment quote to think about:
“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” — Albert Einstein