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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
Warren Buffett’s observation underscores a central discipline of equity investing: the time horizon often matters more than the entry point. Over a few days or weeks, returns are dominated by sentiment, flows, and headlines. Over decades, business fundamentals and compounding tend to dominate.
For any investor, the uncomfortable but realistic question is straightforward: if the market were to fall sharply in the weeks after you buy a stock, how would you respond? A clear view of one’s own risk tolerance and time horizon is essential before pressing the buy button.
For investors prepared to think in decades rather than months, the more relevant question is not what the next quarter may hold, but what disciplined ownership of high-quality businesses can achieve over the long haul. Tyler Technologies, Inc. (NYSE: TYL) offers a useful case study of how a relatively modest investment in a niche software company can grow when held through multiple market cycles.
Tyler Technologies is a leading provider of software and technology services for the public sector, focusing on solutions for local and state governments, courts, public safety agencies, and schools. Its portfolio spans enterprise resource planning, property appraisal and tax systems, justice and public safety platforms, and citizen engagement tools. The company operates in a space with high switching costs and typically long-term contracts, characteristics that can support recurring revenue and resilient cash flows.
Below, we examine what a $10,000 investment made in 2006 and held for approximately 20 years would have produced for a long-term shareholder.
| Start date: | 03/31/2006 |
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| End date: | 03/30/2026 | ||||
| Start price/share: | $11.00 | ||||
| End price/share: | $341.15 | ||||
| Starting shares: | 909.09 | ||||
| Ending shares: | 909.09 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 3,001.36% | ||||
| Average annual return: | 18.73% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $310,328.87 | ||||
As we can see, the twenty-year investment result worked out exceptionally well, with an annualized rate of return of 18.73%. This would have turned a $10,000 investment made 20 years ago into $310,328.87 as of 03/30/2026, based solely on price appreciation and assuming no dividends. On a total return basis, that is a gain of 3,001.36%.
For context, that annualized return meaningfully exceeds the long-run historical total return of the broad U.S. equity market. Over long periods, the S&P 500 has typically delivered on the order of 8%‑10% annually including dividends. While precise comparisons depend on the exact dates and benchmarks used, TYL’s approximate 18.7% annualized performance over this period illustrates the potential impact of owning a company that compounds value at a rate well above the market for an extended stretch.
It is important to emphasize that this path was not linear. A shareholder who bought in early 2006 would have held through the 2008‑2009 global financial crisis, the 2020 pandemic-related selloff, and multiple periods of volatility in technology and growth stocks. At several points, the short-term price action would have tested investors’ conviction. The eventual outcome reflects both the company’s fundamental progress and the discipline of staying invested.
The absence of dividends in this example is also noteworthy. Some investors focus heavily on current income; Tyler Technologies, by contrast, has historically emphasized reinvestment in its business rather than cash distributions. The entire return profile in this case study is driven by capital gains, underscoring that income is not the only route to attractive long-term returns. For investors who require income, a name like TYL might instead be held alongside higher-yielding securities to balance total return and cash flow objectives.
Looking ahead, the more interesting question is forward-looking rather than backward-looking: how might TYL shares perform over the next 20 years? That outcome will depend on a range of factors, including the pace of digital transformation in the public sector, competitive dynamics within government software, Tyler’s ability to integrate acquisitions, and broader macroeconomic conditions such as interest rates and public budgets. Past performance does not guarantee future results, but long-run track records can help investors assess how a management team has historically allocated capital and navigated cycles.
From an investment-process perspective, this twenty-year case study reinforces several enduring themes:
- Owning durable businesses in specialized niches can compound capital meaningfully over time.
- Multi-decade holding periods can allow investors to look through short-term volatility, provided the investment thesis remains intact.
- Returns driven by underlying business growth can be substantial even in the absence of dividends, though that profile may not suit every investor’s cash flow needs.
- Discipline, patience, and alignment between time horizon and strategy are critical when targeting long-term equity returns.
These figures were computed using the Dividend Channel DRIP Returns Calculator, which allows investors to examine how hypothetical investments would have performed over specified periods under different dividend reinvestment assumptions.
Here is one more widely cited investment reminder that aligns closely with the experience of long-term equity ownership:
“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.” — John Bogle
The Tyler Technologies example shows both sides of that observation. Long-term shareholders would have experienced multiple drawdowns well in excess of 20% along the way. Yet for investors prepared to endure that volatility, the eventual reward for staying the course proved substantial in this specific instance.
