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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 twenty year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of AutoZone, Inc. (NYSE: AZO) 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: 11/14/2002


End date: 11/11/2022
Start price/share: $85.15
End price/share: $2,408.99
Starting shares: 117.44
Ending shares: 117.44
Dividends reinvested/share: $0.00
Total return: 2,729.11%
Average annual return: 18.19%
Starting investment: $10,000.00
Ending investment: $283,147.25

As shown above, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 18.19%. This would have turned a $10K investment made 20 years ago into $283,147.25 today (as of 11/11/2022). On a total return basis, that’s a result of 2,729.11% (something to think about: how might AZO 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:
“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.” — Warren Buffett