“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 twenty year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Alexion Pharmaceuticals Inc. (NASD: ALXN) back in 2000. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:
|Average annual return:||9.75%|
The above analysis shows the twenty year investment result worked out well, with an annualized rate of return of 9.75%. This would have turned a $10K investment made 20 years ago into $64,347.75 today (as of 02/10/2020). On a total return basis, that’s a result of 543.79% (something to think about: how might ALXN shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more investment quote to leave you with:
“Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.” — Charlie Munger