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“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— 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 Edwards Lifesciences Corp (NYSE: EW) 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: 09/19/2002


End date: 09/16/2022
Start price/share: $2.05
End price/share: $93.35
Starting shares: 4,878.05
Ending shares: 4,878.05
Dividends reinvested/share: $0.00
Total return: 4,453.66%
Average annual return: 21.03%
Starting investment: $10,000.00
Ending investment: $455,318.06

As we can see, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 21.03%. This would have turned a $10K investment made 20 years ago into $455,318.06 today (as of 09/16/2022). On a total return basis, that’s a result of 4,453.66% (something to think about: how might EW 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:
“While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.” — Seth Klarman