Photo credit:

“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 twenty year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Netflix Inc (NASD: NFLX) 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: 09/30/2002


End date: 09/27/2022
Start price/share: $0.69
End price/share: $224.36
Starting shares: 14,492.75
Ending shares: 14,492.75
Dividends reinvested/share: $0.00
Total return: 32,415.94%
Average annual return: 33.53%
Starting investment: $10,000.00
Ending investment: $3,252,857.84

As we can see, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 33.53%. This would have turned a $10K investment made 20 years ago into $3,252,857.84 today (as of 09/27/2022). On a total return basis, that’s a result of 32,415.94% (something to think about: how might NFLX shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

One more piece of investment wisdom to leave you with:
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” — George Soros