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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 two-decade holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Intuitive Surgical Inc (NASD: ISRG) 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: 12/21/2000


End date: 12/18/2020
Start price/share: $2.02
End price/share: $789.09
Starting shares: 4,950.50
Ending shares: 4,950.50
Dividends reinvested/share: $0.00
Total return: 38,963.86%
Average annual return: 34.76%
Starting investment: $10,000.00
Ending investment: $3,907,778.77

As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 34.76%. This would have turned a $10K investment made 20 years ago into $3,907,778.77 today (as of 12/18/2020). On a total return basis, that’s a result of 38,963.86% (something to think about: how might ISRG shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Another great investment quote to think about:
“The intelligent investor is a realist who sells to optimists and buys from pessimists.” — Benjamin Graham