“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a ten year holding period potentially?
For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 10 years to 2010, investors considering an investment into shares of Cadence Design Systems Inc (NASD: CDNS) may have been pondering this very question and thinking about their potential investment result over a full ten year time horizon. Here’s how that would have worked out.
| Start date: | 04/15/2010 |
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| End date: | 04/14/2020 | ||||
| Start price/share: | $7.01 | ||||
| End price/share: | $76.33 | ||||
| Starting shares: | 1,426.53 | ||||
| Ending shares: | 1,426.53 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 988.87% | ||||
| Average annual return: | 26.95% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $108,866.66 | ||||
As shown above, the ten year investment result worked out exceptionally well, with an annualized rate of return of 26.95%. This would have turned a $10K investment made 10 years ago into $108,866.66 today (as of 04/14/2020). On a total return basis, that’s a result of 988.87% (something to think about: how might CDNS 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:
“If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.” — Peter Lynch
