“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
A key lesson we can learn from Warren Buffett is how to think about a potential stock investment in the context of a long-term time horizon. Every investor in a stock has a choice: bite our fingernails over the short-term ups and downs that are inevitable with the stock market, or zero in on stocks we are comfortable simply buying and holding for the long haul — maybe even a two-decade holding period. Investors can even choose to completely ignore the stock market’s short-run quotations and instead go into their initial investment planning to hold on for years and years regardless of the fluctuations in price that might occur next.
With that in mind, it can be helpful to look back at an actual long-term holding period for a well-known financial stock. Today, we examine what would have happened over a 20-year holding period had you decided back in 2006 to buy shares of Morgan Stanley (NYSE: MS) and simply hold through to 2026, with dividends reinvested along the way.
| Start date: | 03/24/2006 |
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| End date: | 03/23/2026 | ||||
| Start price/share: | $61.47 | ||||
| End price/share: | $164.32 | ||||
| Starting shares: | 162.68 | ||||
| Ending shares: | 299.53 | ||||
| Dividends reinvested/share: | $41.46 | ||||
| Total return: | 392.19% | ||||
| Average annual return: | 8.29% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $49,209.77 | ||||
The above analysis shows that the two-decade investment result would have worked out well, with an annualized rate of return of 8.29% when dividends are reinvested. This would have turned a $10,000 investment made 20 years ago into $49,209.77 as of 03/23/2026. On a total return basis, that is a gain of 392.19% over the period.
Importantly, this return profile spans one of the most volatile eras for global financials. Between 2006 and 2026, Morgan Stanley navigated the 2008–2009 global financial crisis, the subsequent regulatory overhaul of large banks and broker-dealers, the European sovereign debt crisis, a decade of ultra-low interest rates, the COVID-19 shock of 2020, and a rapid rate-hiking cycle beginning in 2022. Through that backdrop, the firm shifted its business mix away from more volatile trading and investment banking revenue toward fee-based wealth and investment management, aided by acquisitions such as Smith Barney in the wake of the financial crisis and, more recently, E*TRADE and Eaton Vance. That evolution has been a key driver of its ability to sustain and grow its dividend over time.
Many investors refuse to own any stock that lacks a dividend; in the case of Morgan Stanley, investors have received $41.46 per share in dividends over the 20 years examined in the exercise above. That stream of cash payments played a meaningful role in the total outcome. Total return was driven not just by share price appreciation from $61.47 to $164.32, but also by the dividends received (and what the investor did with those dividends).
For this exercise, we assume all dividends are reinvested — that is, used automatically to purchase additional shares on the dividend ex-date at the prevailing closing price. This mechanism, often referred to as a dividend reinvestment plan (DRIP), is what allowed the original position of 162.68 shares to grow to 299.53 shares over 20 years, even without any additional cash contributions. The increase in share count means that a larger number of shares is receiving each subsequent dividend payment, creating a compounding effect that can be especially powerful over multi-decade horizons.
Based upon the most recent annualized dividend rate of $4.00 per share, we calculate that MS has a current yield of approximately 2.43%. Another useful datapoint is “yield on cost” — in other words, expressing the current annualized dividend of $4.00 against the original $61.47 per-share purchase price. This works out to a yield on cost of 3.95%, meaning the stock is now paying out nearly 4% annually on the investor’s original capital, before taking into account any dividend growth that may have occurred along the way.
Put differently, a buy-and-hold investor from 2006 would today own more shares than they started with, those shares would be trading at a higher price, and each share would be paying a dividend that represents a significantly higher percentage of the original entry price. That combination of capital appreciation, a growing income stream, and the mathematics of reinvested dividends underpins the core logic of long-term, income-oriented equity investing.
Of course, no backward-looking analysis can guarantee future results. Morgan Stanley’s prospects over the next 20 years will depend on a range of factors, including the trajectory of interest rates, global capital markets activity, regulatory developments for systemically important financial institutions, competition in wealth and asset management, and management’s capital allocation decisions with respect to dividends and share repurchases. Valuation at any given entry point also matters: an investor buying at a materially higher or lower earnings multiple than in 2006 could experience very different long-run returns, even if the underlying business performs comparably.
Nonetheless, the results outlined here highlight the potential benefits of pairing quality franchises with patience and discipline. Staying invested through multiple cycles, allowing dividends to compound, and avoiding the temptation to trade in and out based on short-term headlines can, over time, produce outcomes that are difficult to match via frequent tactical shifts.
One more piece of investment wisdom to leave you with:
“Sometimes buying early on the way down looks like being wrong, but it isn’t.” — Seth Klarman
For long-term investors evaluating financial stocks today, the Morgan Stanley example underscores why the entry price, the resilience of the business model, the consistency of capital returns through dividends, and the power of time all deserve close attention before committing capital.
