“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 Zebra Technologies Corp. (NASD: ZBRA) back in 2003. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:
|Average annual return:||13.35%|
As shown above, the two-decade investment result worked out quite well, with an annualized rate of return of 13.35%. This would have turned a $10K investment made 20 years ago into $122,667.27 today (as of 02/15/2023). On a total return basis, that’s a result of 1,126.63% (something to think about: how might ZBRA shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more piece of investment wisdom to leave you with:
“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” — Charlie Munger