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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 ten year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Advanced Micro Devices Inc (NASD: AMD) 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: 03/03/2010
$10,000

03/03/2010
$56,857

03/02/2020
End date: 03/02/2020
Start price/share: $8.35
End price/share: $47.46
Starting shares: 1,197.60
Ending shares: 1,197.60
Dividends reinvested/share: $0.00
Total return: 468.38%
Average annual return: 18.97%
Starting investment: $10,000.00
Ending investment: $56,857.53

The above analysis shows the ten year investment result worked out exceptionally well, with an annualized rate of return of 18.97%. This would have turned a $10K investment made 10 years ago into $56,857.53 today (as of 03/02/2020). On a total return basis, that’s a result of 468.38% (something to think about: how might AMD shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Here’s one more great investment quote before you go:
“He who earns and does not invest will have to work for the rest of his life.” — Debasish Mridha