“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 Align Technology Inc (NASD: ALGN) 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: | 06/12/2013 |
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End date: | 06/09/2023 | ||||
Start price/share: | $34.22 | ||||
End price/share: | $304.44 | ||||
Starting shares: | 292.23 | ||||
Ending shares: | 292.23 | ||||
Dividends reinvested/share: | $0.00 | ||||
Total return: | 789.66% | ||||
Average annual return: | 24.44% | ||||
Starting investment: | $10,000.00 | ||||
Ending investment: | $88,989.72 |
As we can see, the ten year investment result worked out exceptionally well, with an annualized rate of return of 24.44%. This would have turned a $10K investment made 10 years ago into $88,989.72 today (as of 06/09/2023). On a total return basis, that’s a result of 789.66% (something to think about: how might ALGN 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:
“People who invest make money for themselves; people who speculate make money for their brokers.” — Benjamin Graham