“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 twenty year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Illumina Inc (NASD: ILMN) back in 2001: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full twenty year investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
| Start date: | 03/23/2001 |
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| End date: | 03/22/2021 | ||||
| Start price/share: | $4.03 | ||||
| End price/share: | $429.92 | ||||
| Starting shares: | 2,481.39 | ||||
| Ending shares: | 2,481.39 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 10,567.99% | ||||
| Average annual return: | 26.29% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $1,067,117.97 | ||||
As shown above, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 26.29%. This would have turned a $10K investment made 20 years ago into $1,067,117.97 today (as of 03/22/2021). On a total return basis, that’s a result of 10,567.99% (something to think about: how might ILMN 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:
“The policy of being too cautious is the greatest risk of all.” — Jawaharlal Nehru
