“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 Amazon.com Inc (NASD: AMZN) back in 2005. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:
| Start date: | 01/13/2005 |
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| End date: | 01/10/2025 | ||||
| Start price/share: | $2.13 | ||||
| End price/share: | $218.94 | ||||
| Starting shares: | 4,694.84 | ||||
| Ending shares: | 4,694.84 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 10,178.87% | ||||
| Average annual return: | 26.06% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $1,028,246.32 | ||||
As we can see, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 26.06%. This would have turned a $10K investment made 20 years ago into $1,028,246.32 today (as of 01/10/2025). On a total return basis, that’s a result of 10,178.87% (something to think about: how might AMZN shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Here’s one more great investment quote before you go:
“Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.” — Dave Ramsey
