“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:
|Average annual return:||15.00%|
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