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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— 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 two-decade holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of F5 Inc (NASD: FFIV) 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: 12/03/2001


End date: 11/30/2021
Start price/share: $11.07
End price/share: $227.58
Starting shares: 903.34
Ending shares: 903.34
Dividends reinvested/share: $0.00
Total return: 1,955.83%
Average annual return: 16.31%
Starting investment: $10,000.00
Ending investment: $205,447.40

As we can see, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 16.31%. This would have turned a $10K investment made 20 years ago into $205,447.40 today (as of 11/30/2021). On a total return basis, that’s a result of 1,955.83% (something to think about: how might FFIV shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Here’s one more great investment quote before you go:
“You can get in much more trouble with a good idea than a bad idea, because you forget that the good idea has limits.” — Benjamin Graham