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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 two-decade holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Inc (NASD: AMZN) 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: 04/28/2003


End date: 04/27/2023
Start price/share: $1.46
End price/share: $109.82
Starting shares: 6,849.32
Ending shares: 6,849.32
Dividends reinvested/share: $0.00
Total return: 7,421.92%
Average annual return: 24.10%
Starting investment: $10,000.00
Ending investment: $752,425.08

The above analysis shows the two-decade investment result worked out exceptionally well, with an annualized rate of return of 24.10%. This would have turned a $10K investment made 20 years ago into $752,425.08 today (as of 04/27/2023). On a total return basis, that’s a result of 7,421.92% (something to think about: how might AMZN 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:
“Wide diversification is only required when investors do not understand what they are doing.” — Warren Buffett