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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— 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 Fiserv Inc (NASD: FISV) back in 2000. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 08/24/2000


End date: 08/21/2020
Start price/share: $8.71
End price/share: $95.63
Starting shares: 1,148.11
Ending shares: 1,148.11
Dividends reinvested/share: $0.00
Total return: 997.93%
Average annual return: 12.72%
Starting investment: $10,000.00
Ending investment: $109,724.73

As shown above, the twenty year investment result worked out quite well, with an annualized rate of return of 12.72%. This would have turned a $10K investment made 20 years ago into $109,724.73 today (as of 08/21/2020). On a total return basis, that’s a result of 997.93% (something to think about: how might FISV shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

More investment wisdom to ponder:
“Buy not on optimism, but on arithmetic.” — Benjamin Graham