“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
A critical pearl of wisdom from Warren Buffett teaches us that with any potential stock investment we may make, as soon as our buy order is filled we will have a choice: to remain a co-owner of that company for the long haul, or to react to the inevitable short-term ups and downs that the stock market is famous for (sometimes sharp ups and downs).
The reality of this choice forces us to challenge our confidence in any given company we might invest into, and keep our eyes on the long-term time horizon. The market may go up and down the interim, but over a ten year holding period, will the investment succeed?
Back in 2010, investors may have been asking themselves that very question about Electronic Arts, Inc. (NASD: EA). Let’s examine what would have happened over a ten year holding period, had you invested in EA shares back in 2010 and held on.
|Average annual return:||23.53%|
As shown above, the ten year investment result worked out exceptionally well, with an annualized rate of return of 23.53%. This would have turned a $10K investment made 10 years ago into $82,693.81 today (as of 09/03/2020). On a total return basis, that’s a result of 727.02% (something to think about: how might EA 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:
“The best stock to buy is the one you already own.” — Peter Lynch