Photo credit:

“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— 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 twenty year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Inc (NASD: AMZN) back in 2001. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 10/08/2001


End date: 10/07/2021
Start price/share: $7.12
End price/share: $3,302.43
Starting shares: 1,404.49
Ending shares: 1,404.49
Dividends reinvested/share: $0.00
Total return: 46,282.44%
Average annual return: 35.91%
Starting investment: $10,000.00
Ending investment: $4,639,685.46

As shown above, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 35.91%. This would have turned a $10K investment made 20 years ago into $4,639,685.46 today (as of 10/07/2021). On a total return basis, that’s a result of 46,282.44% (something to think about: how might AMZN 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:
“The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” — Seth Klarman