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“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 JPMorgan Chase & Co (NYSE: JPM) 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: 10/21/2013


End date: 10/19/2023
Start price/share: $54.27
End price/share: $145.29
Starting shares: 184.26
Ending shares: 243.63
Dividends reinvested/share: $28.25
Total return: 253.97%
Average annual return: 13.47%
Starting investment: $10,000.00
Ending investment: $35,384.30

As shown above, the ten year investment result worked out quite well, with an annualized rate of return of 13.47%. This would have turned a $10K investment made 10 years ago into $35,384.30 today (as of 10/19/2023). On a total return basis, that’s a result of 253.97% (something to think about: how might JPM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that JPMorgan Chase & Co paid investors a total of $28.25/share in dividends over the 10 holding period, marking a second component of the total return beyond share price change alone. Much like watering a tree, reinvesting dividends can help an investment to grow over time — for the above calculations we assume dividend reinvestment (and for this exercise the closing price on ex-date is used for the reinvestment of a given dividend).

Based upon the most recent annualized dividend rate of 4.2/share, we calculate that JPM has a current yield of approximately 2.89%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.2 against the original $54.27/share purchase price. This works out to a yield on cost of 5.33%.

Here’s one more great investment quote before you go:
“Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.” — Benjamin Graham