“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 twenty year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Mohawk Industries, Inc. (NYSE: MHK) 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:||7.65%|
As we can see, the twenty year investment result worked out well, with an annualized rate of return of 7.65%. This would have turned a $10K investment made 20 years ago into $43,715.10 today (as of 06/18/2020). On a total return basis, that’s a result of 337.53% (something to think about: how might MHK shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Another great investment quote to think about:
“Ensure management’s interests are aligned with shareholders.” — Sam Zell