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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 Dollar Tree Inc (NASD: DLTR) back in 2002. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 04/29/2002


End date: 04/27/2022
Start price/share: $12.86
End price/share: $166.09
Starting shares: 777.60
Ending shares: 777.60
Dividends reinvested/share: $0.00
Total return: 1,191.52%
Average annual return: 13.64%
Starting investment: $10,000.00
Ending investment: $129,145.99

As we can see, the two-decade investment result worked out quite well, with an annualized rate of return of 13.64%. This would have turned a $10K investment made 20 years ago into $129,145.99 today (as of 04/27/2022). On a total return basis, that’s a result of 1,191.52% (something to think about: how might DLTR shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

More investment wisdom to ponder:
“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.” — William Feather