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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 Illumina Inc (NASD: ILMN) back in 2003. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 01/10/2003


End date: 01/09/2023
Start price/share: $1.84
End price/share: $207.31
Starting shares: 5,434.78
Ending shares: 5,434.78
Dividends reinvested/share: $0.00
Total return: 11,166.85%
Average annual return: 26.63%
Starting investment: $10,000.00
Ending investment: $1,126,823.32

The above analysis shows the two-decade investment result worked out exceptionally well, with an annualized rate of return of 26.63%. This would have turned a $10K investment made 20 years ago into $1,126,823.32 today (as of 01/09/2023). On a total return basis, that’s a result of 11,166.85% (something to think about: how might ILMN shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

One more investment quote to leave you with:
“The policy of being too cautious is the greatest risk of all.” — Jawaharlal Nehru