“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 decade-long holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into O’Reilly Automotive, Inc. (NASD: ORLY) back in 2009: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full decade-long investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.
| Start date: | 07/20/2009 |
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| End date: | 07/17/2019 | ||||
| Start price/share: | $41.07 | ||||
| End price/share: | $399.64 | ||||
| Starting shares: | 243.49 | ||||
| Ending shares: | 243.49 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 873.07% | ||||
| Average annual return: | 25.56% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $97,329.00 | ||||
The above analysis shows the decade-long investment result worked out exceptionally well, with an annualized rate of return of 25.56%. This would have turned a $10K investment made 10 years ago into $97,329.00 today (as of 07/17/2019). On a total return basis, that’s a result of 873.07% (something to think about: how might ORLY 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:
“Sentimentality about an investments leads to lack of discipline.” — Sam Zell
