“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 Akamai Technologies Inc (NASD: AKAM) back in 2011: 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: | 01/18/2011 |
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| End date: | 01/14/2021 | ||||
| Start price/share: | $52.24 | ||||
| End price/share: | $102.85 | ||||
| Starting shares: | 191.42 | ||||
| Ending shares: | 191.42 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 96.88% | ||||
| Average annual return: | 7.01% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $19,686.25 | ||||
As we can see, the decade-long investment result worked out well, with an annualized rate of return of 7.01%. This would have turned a $10K investment made 10 years ago into $19,686.25 today (as of 01/14/2021). On a total return basis, that’s a result of 96.88% (something to think about: how might AKAM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“The emotional burden of trading is substantial; on any given day, I could lose millions of dollars. If you personalize these losses, you can’t trade.” — Bruce Kovner
