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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a decade-long holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of United Airlines Holdings Inc (NASD: UAL) back in 2010. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 01/15/2010
$10,000

01/15/2010
$66,315

01/14/2020
End date: 01/14/2020
Start price/share: $13.25
End price/share: $87.85
Starting shares: 754.72
Ending shares: 754.72
Dividends reinvested/share: $0.00
Total return: 563.02%
Average annual return: 20.82%
Starting investment: $10,000.00
Ending investment: $66,315.24

The above analysis shows the decade-long investment result worked out exceptionally well, with an annualized rate of return of 20.82%. This would have turned a $10K investment made 10 years ago into $66,315.24 today (as of 01/14/2020). On a total return basis, that’s a result of 563.02% (something to think about: how might UAL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

One more piece of investment wisdom to leave you with:
“Smart investing doesn’t consist of buying good assets but of buying assets well. This is a very, very important distinction that very, very few people understand.” — Howard Marks