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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 DaVita Inc (NYSE: DVA) back in 2001. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 01/04/2001


End date: 12/31/2020
Start price/share: $5.57
End price/share: $117.40
Starting shares: 1,795.33
Ending shares: 1,795.33
Dividends reinvested/share: $0.00
Total return: 2,007.72%
Average annual return: 16.46%
Starting investment: $10,000.00
Ending investment: $210,725.47

As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 16.46%. This would have turned a $10K investment made 20 years ago into $210,725.47 today (as of 12/31/2020). On a total return basis, that’s a result of 2,007.72% (something to think about: how might DVA shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

More investment wisdom to ponder:
“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” — Robert Allen