“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a ten year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Illumina Inc (NASD: ILMN) back in 2012: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full ten year investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.
| Start date: | 03/26/2012 |
|
|||
| End date: | 03/23/2022 | ||||
| Start price/share: | $50.69 | ||||
| End price/share: | $339.79 | ||||
| Starting shares: | 197.28 | ||||
| Ending shares: | 197.28 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 570.33% | ||||
| Average annual return: | 20.96% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $67,017.98 | ||||
As we can see, the ten year investment result worked out exceptionally well, with an annualized rate of return of 20.96%. This would have turned a $10K investment made 10 years ago into $67,017.98 today (as of 03/23/2022). On a total return basis, that’s a result of 570.33% (something to think about: how might ILMN shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more piece of investment wisdom to leave you with:
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.” — Warren Buffett
