“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— 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 ten year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Chipotle Mexican Grill Inc (NYSE: CMG) back in 2013. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:
| Start date: | 02/07/2013 |
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| End date: | 02/06/2023 | ||||
| Start price/share: | $318.45 | ||||
| End price/share: | $1,700.28 | ||||
| Starting shares: | 31.40 | ||||
| Ending shares: | 31.40 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 433.92% | ||||
| Average annual return: | 18.23% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $53,392.00 | ||||
As shown above, the ten year investment result worked out exceptionally well, with an annualized rate of return of 18.23%. This would have turned a $10K investment made 10 years ago into $53,392.00 today (as of 02/06/2023). On a total return basis, that’s a result of 433.92% (something to think about: how might CMG shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Here’s one more great investment quote before you go:
“If you’re looking for a home run, a great investment for five years or 10 years or more, then the only way to beat this enormous fog that covers the future is to identify a long-term trend that will give a particular business some sort of edge.” — Ralph Wanger
