“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 decade-long holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Fiserv Inc (NASD: FISV) back in 2012. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:
| Start date: | 03/19/2012 |
|
|||
| End date: | 03/17/2022 | ||||
| Start price/share: | $17.23 | ||||
| End price/share: | $100.04 | ||||
| Starting shares: | 580.38 | ||||
| Ending shares: | 580.38 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 480.62% | ||||
| Average annual return: | 19.23% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $58,057.11 | ||||
As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 19.23%. This would have turned a $10K investment made 10 years ago into $58,057.11 today (as of 03/17/2022). On a total return basis, that’s a result of 480.62% (something to think about: how might FISV shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price.” — Benjamin Graham
