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“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 ten year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Akamai Technologies Inc (NASD: AKAM) back in 2011. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 11/21/2011


End date: 11/18/2021
Start price/share: $27.33
End price/share: $110.54
Starting shares: 365.90
Ending shares: 365.90
Dividends reinvested/share: $0.00
Total return: 304.46%
Average annual return: 15.00%
Starting investment: $10,000.00
Ending investment: $40,455.58

The above analysis shows the ten year investment result worked out exceptionally well, with an annualized rate of return of 15.00%. This would have turned a $10K investment made 10 years ago into $40,455.58 today (as of 11/18/2021). On a total return basis, that’s a result of 304.46% (something to think about: how might AKAM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Here’s one more great investment quote before you go:
“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.” — Warren Buffett