“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a ten year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into DexCom Inc (NASD: DXCM) back in 2010: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full ten year investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.
| Start date: | 07/12/2010 |
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| End date: | 07/09/2020 | ||||
| Start price/share: | $11.07 | ||||
| End price/share: | $440.50 | ||||
| Starting shares: | 903.34 | ||||
| Ending shares: | 903.34 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 3,879.22% | ||||
| Average annual return: | 44.54% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $397,997.65 | ||||
As shown above, the ten year investment result worked out exceptionally well, with an annualized rate of return of 44.54%. This would have turned a $10K investment made 10 years ago into $397,997.65 today (as of 07/09/2020). On a total return basis, that’s a result of 3,879.22% (something to think about: how might DXCM 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:
“I think you have to learn that there’s a company behind every stock, and that there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.” — Peter Lynch
