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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 Monster Beverage Corp (NASD: MNST) 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: 04/20/2010


End date: 04/17/2020
Start price/share: $6.87
End price/share: $62.19
Starting shares: 1,455.60
Ending shares: 1,455.60
Dividends reinvested/share: $0.00
Total return: 805.24%
Average annual return: 24.65%
Starting investment: $10,000.00
Ending investment: $90,557.17

As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 24.65%. This would have turned a $10K investment made 10 years ago into $90,557.17 today (as of 04/17/2020). On a total return basis, that’s a result of 805.24% (something to think about: how might MNST shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Another great investment quote to think about:
“The policy of being too cautious is the greatest risk of all.” — Jawaharlal Nehru