“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 Akamai Technologies Inc (NASD: AKAM) back in 2014. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:
| Start date: | 01/29/2014 |
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| End date: | 01/26/2024 | ||||
| Start price/share: | $47.55 | ||||
| End price/share: | $123.06 | ||||
| Starting shares: | 210.30 | ||||
| Ending shares: | 210.30 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 158.80% | ||||
| Average annual return: | 9.98% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $25,883.56 | ||||
As shown above, the decade-long investment result worked out well, with an annualized rate of return of 9.98%. This would have turned a $10K investment made 10 years ago into $25,883.56 today (as of 01/26/2024). On a total return basis, that’s a result of 158.80% (something to think about: how might AKAM 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:
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” — George Soros
