“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a decade-long holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Dollar Tree Inc (NASD: DLTR) back in 2011: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full decade-long investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.
| Start date: | 04/27/2011 |
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| End date: | 04/26/2021 | ||||
| Start price/share: | $29.06 | ||||
| End price/share: | $113.98 | ||||
| Starting shares: | 344.12 | ||||
| Ending shares: | 344.12 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 292.22% | ||||
| Average annual return: | 14.64% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $39,236.20 | ||||
As we can see, the decade-long investment result worked out quite well, with an annualized rate of return of 14.64%. This would have turned a $10K investment made 10 years ago into $39,236.20 today (as of 04/26/2021). On a total return basis, that’s a result of 292.22% (something to think about: how might DLTR shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Another great investment quote to think about:
“Your success in investing will depend in part on your character and guts and in part on your ability to realize, at the height of ebullience and the depth of despair alike, that this too, shall pass.” — Jack Bogle
