“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 decade-long holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Incyte Corporation (NASD: INCY) back in 2010: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full decade-long investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.
| Start date: | 10/19/2010 |
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| End date: | 10/16/2020 | ||||
| Start price/share: | $16.97 | ||||
| End price/share: | $90.63 | ||||
| Starting shares: | 589.28 | ||||
| Ending shares: | 589.28 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 434.06% | ||||
| Average annual return: | 18.24% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $53,412.66 | ||||
As shown above, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 18.24%. This would have turned a $10K investment made 10 years ago into $53,412.66 today (as of 10/16/2020). On a total return basis, that’s a result of 434.06% (something to think about: how might INCY 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 make no attempt to forecast the market; my efforts are devoted to finding undervalued securities.” — Warren Buffett
