“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 two-decade 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 two-decade investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
| Start date: | 06/04/2001 |
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| End date: | 06/01/2021 | ||||
| Start price/share: | $5.38 | ||||
| End price/share: | $407.45 | ||||
| Starting shares: | 1,858.74 | ||||
| Ending shares: | 1,858.74 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 7,473.42% | ||||
| Average annual return: | 24.15% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $757,616.20 | ||||
As we can see, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 24.15%. This would have turned a $10K investment made 20 years ago into $757,616.20 today (as of 06/01/2021). On a total return basis, that’s a result of 7,473.42% (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.]
Another great investment quote to think about:
“Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.” — Dave Ramsey
