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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

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a decade-long holding period for an investor who was considering Microsoft Corporation (NASD: MSFT) back in 2014, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 01/21/2014


End date: 01/17/2024
Start price/share: $36.17
End price/share: $389.47
Starting shares: 276.47
Ending shares: 328.30
Dividends reinvested/share: $18.83
Total return: 1,178.63%
Average annual return: 29.04%
Starting investment: $10,000.00
Ending investment: $127,831.19

As shown above, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 29.04%. This would have turned a $10K investment made 10 years ago into $127,831.19 today (as of 01/17/2024). On a total return basis, that’s a result of 1,178.63% (something to think about: how might MSFT shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Microsoft Corporation paid investors a total of $18.83/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 3/share, we calculate that MSFT has a current yield of approximately 0.77%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3 against the original $36.17/share purchase price. This works out to a yield on cost of 2.13%.

More investment wisdom to ponder:
“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. You need to keep raw, irrational emotion under control.” — Charlie Munger