“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
Such a great quote from Warren Buffett, highlighting the importance of investment time horizon when considering making an investment. In the short run, who knows what the stock market will do? A week or two after buying any given stock, could the entire stock market fall out of bed? Quite possibly! Should that happen, how would you react? It is an excellent question to think about before hitting the buy button.
For investors who take a multi-year time horizon, the important thing is not what happens in the next week or two, but what the result will be over the long haul. Today, we look at the result investors of the year 1999 experienced, who considered an investment in shares of Cadence Design Systems Inc (NASD: CDNS) and decided upon a two-decade investment time horizon.
| Start date: | 11/08/1999 |
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| End date: | 11/06/2019 | ||||
| Start price/share: | $17.56 | ||||
| End price/share: | $67.14 | ||||
| Starting shares: | 569.40 | ||||
| Ending shares: | 569.40 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 282.29% | ||||
| Average annual return: | 6.93% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $38,214.70 | ||||
As we can see, the two-decade investment result worked out well, with an annualized rate of return of 6.93%. This would have turned a $10K investment made 20 years ago into $38,214.70 today (as of 11/06/2019). On a total return basis, that’s a result of 282.29% (something to think about: how might CDNS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more investment quote to leave you with:
“Twenty years in this business convinces me that any normal person using the customary three percent of the brain can pick stocks just as well, if not better, than the average Wall Street expert.” — Peter Lynch
