“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 twenty year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into ABIOMED, Inc. (NASD: ABMD) back in 2000: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full twenty year investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
| Start date: | 10/02/2000 |
|
|||
| End date: | 09/30/2020 | ||||
| Start price/share: | $32.75 | ||||
| End price/share: | $277.06 | ||||
| Starting shares: | 305.34 | ||||
| Ending shares: | 305.34 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 745.98% | ||||
| Average annual return: | 11.26% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $84,559.42 | ||||
As shown above, the twenty year investment result worked out quite well, with an annualized rate of return of 11.26%. This would have turned a $10K investment made 20 years ago into $84,559.42 today (as of 09/30/2020). On a total return basis, that’s a result of 745.98% (something to think about: how might ABMD shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Here’s one more great investment quote before you go:
“While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.” — Seth Klarman
