“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 two-decade holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of ABIOMED, Inc. (NASD: ABMD) 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:||14.17%|
As we can see, the two-decade investment result worked out quite well, with an annualized rate of return of 14.17%. This would have turned a $10K investment made 20 years ago into $141,695.28 today (as of 06/12/2020). On a total return basis, that’s a result of 1,316.65% (something to think about: how might ABMD 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:
“The intelligent investor is a realist who sells to optimists and buys from pessimists.” — Benjamin Graham