“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— 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 decade-long holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Salesforce.com Inc (NYSE: CRM) back in 2011. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:
|Average annual return:||21.86%|
As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 21.86%. This would have turned a $10K investment made 10 years ago into $72,290.66 today (as of 02/22/2021). On a total return basis, that’s a result of 622.71% (something to think about: how might CRM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“Never test the depth of a river with both feet.” — Warren Buffett