“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 Charles River Laboratories International Inc. (NYSE: CRL) 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:||9.49%|
As shown above, the two-decade investment result worked out well, with an annualized rate of return of 9.49%. This would have turned a $10K investment made 20 years ago into $61,334.51 today (as of 10/03/2023). On a total return basis, that’s a result of 513.38% (something to think about: how might CRL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“While it might seem that anyone can be a value investor, the essential characteristics of this type of investor-patience, discipline, and risk aversion-may well be genetically determined.” — Seth Klarman