“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:
|Average annual return:||12.72%|
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