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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 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: 09/03/2014
$10,000

09/03/2014
  $16,869

08/30/2024
End date: 08/30/2024
Start price/share: $60.37
End price/share: $101.84
Starting shares: 165.65
Ending shares: 165.65
Dividends reinvested/share: $0.00
Total return: 68.69%
Average annual return: 5.37%
Starting investment: $10,000.00
Ending investment: $16,869.71

As we can see, the decade-long investment result worked out well, with an annualized rate of return of 5.37%. This would have turned a $10K investment made 10 years ago into $16,869.71 today (as of 08/30/2024). On a total return basis, that’s a result of 68.69% (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.]

More investment wisdom to ponder:
“Cash combined with courage in a time of crisis is priceless.” — Warren Buffett