“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 Synopsys Inc (NASD: SNPS) 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: | 07/16/2019 | ||||
| Start price/share: | $30.31 | ||||
| End price/share: | $135.91 | ||||
| Starting shares: | 329.92 | ||||
| Ending shares: | 329.92 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 348.40% | ||||
| Average annual return: | 7.79% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $44,848.50 | ||||
The above analysis shows the twenty year investment result worked out well, with an annualized rate of return of 7.79%. This would have turned a $10K investment made 20 years ago into $44,848.50 today (as of 07/16/2019). On a total return basis, that’s a result of 348.40% (something to think about: how might SNPS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“A 10% decline in the market is fairly common, it happens about once a year. Investors who realize this are less likely to sell in a panic, and more likely to remain invested, benefitting from the wealthbuilding power of stocks.” — Christopher Davis
