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“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 two-decade holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into NVIDIA Corp (NASD: NVDA) back in 1999: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full two-decade investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.

Start date: 12/02/1999


End date: 11/29/2019
Start price/share: $3.26
End price/share: $216.74
Starting shares: 3,067.48
Ending shares: 3,330.57
Dividends reinvested/share: $3.43
Total return: 7,118.69%
Average annual return: 23.85%
Starting investment: $10,000.00
Ending investment: $721,820.54

As we can see, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 23.85%. This would have turned a $10K investment made 20 years ago into $721,820.54 today (as of 11/29/2019). On a total return basis, that’s a result of 7,118.69% (something to think about: how might NVDA shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that NVIDIA Corp paid investors a total of $3.43/share in dividends over the 20 holding period, marking a second component of the total return beyond share price change alone. Much like watering a tree, reinvesting dividends can help an investment to grow over time — for the above calculations we assume dividend reinvestment (and for this exercise the closing price on ex-date is used for the reinvestment of a given dividend).

Based upon the most recent annualized dividend rate of .64/share, we calculate that NVDA has a current yield of approximately 0.30%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .64 against the original $3.26/share purchase price. This works out to a yield on cost of 9.20%.

One more investment quote to leave you with:
“If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.” — Bernard Baruch