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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 twenty year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Dollar Tree Inc (NASD: DLTR) 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: 05/19/2003
$10,000

05/19/2003
  $191,104

05/16/2023
End date: 05/16/2023
Start price/share: $8.31
End price/share: $158.82
Starting shares: 1,203.37
Ending shares: 1,203.37
Dividends reinvested/share: $0.00
Total return: 1,811.19%
Average annual return: 15.89%
Starting investment: $10,000.00
Ending investment: $191,104.18

As shown above, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 15.89%. This would have turned a $10K investment made 20 years ago into $191,104.18 today (as of 05/16/2023). On a total return basis, that’s a result of 1,811.19% (something to think about: how might DLTR shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Another great investment quote to think about:
“Finding the best person or the best organization to invest your money is one of the most important financial decisions you’ll ever make.” — Bill Gross