“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 two-decade holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Incyte Corporation (NASD: INCY) back in 2002: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full two-decade investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
| Start date: | 10/28/2002 |
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| End date: | 10/25/2022 | ||||
| Start price/share: | $4.33 | ||||
| End price/share: | $72.42 | ||||
| Starting shares: | 2,309.47 | ||||
| Ending shares: | 2,309.47 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 1,572.52% | ||||
| Average annual return: | 15.12% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $167,179.55 | ||||
As we can see, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 15.12%. This would have turned a $10K investment made 20 years ago into $167,179.55 today (as of 10/25/2022). On a total return basis, that’s a result of 1,572.52% (something to think about: how might INCY shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Another great investment quote to think about:
“All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.” — Peter Lynch
