“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 Autodesk Inc (NASD: ADSK) 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:||22.49%|
As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 22.49%. This would have turned a $10K investment made 10 years ago into $76,118.30 today (as of 06/28/2021). On a total return basis, that’s a result of 661.18% (something to think about: how might ADSK shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more investment quote to leave you with:
“If you’re prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won’t get bored.” — Peter Lynch