“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a twenty year period?
Today, let’s look backwards in time to 2001, and take a look at what happened to investors who asked that very question about F5 Networks, Inc. (NASD: FFIV), by taking a look at the investment outcome over a twenty year holding period.
| Start date: | 02/20/2001 |
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| End date: | 02/17/2021 | ||||
| Start price/share: | $4.81 | ||||
| End price/share: | $204.14 | ||||
| Starting shares: | 2,079.00 | ||||
| Ending shares: | 2,079.00 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 4,144.07% | ||||
| Average annual return: | 20.61% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $424,729.36 | ||||
As shown above, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 20.61%. This would have turned a $10K investment made 20 years ago into $424,729.36 today (as of 02/17/2021). On a total return basis, that’s a result of 4,144.07% (something to think about: how might FFIV shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more piece of investment wisdom to leave you with:
“If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.” — Warren Buffett
