“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 decade-long holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Netflix Inc (NASD: NFLX) back in 2013. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:
|Average annual return:||24.12%|
The above analysis shows the decade-long investment result worked out exceptionally well, with an annualized rate of return of 24.12%. This would have turned a $10K investment made 10 years ago into $86,830.99 today (as of 10/10/2023). On a total return basis, that’s a result of 768.59% (something to think about: how might NFLX shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“People who invest make money for themselves; people who speculate make money for their brokers.” — Benjamin Graham