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“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 twenty year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Monster Beverage Corp (NASD: MNST) back in 2002. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 03/11/2002
$10,000

03/11/2002
$1,125,043

03/10/2022
End date: 03/10/2022
Start price/share: $0.67
End price/share: $75.39
Starting shares: 14,925.37
Ending shares: 14,925.37
Dividends reinvested/share: $0.00
Total return: 11,152.24%
Average annual return: 26.62%
Starting investment: $10,000.00
Ending investment: $1,125,043.97

The above analysis shows the twenty year investment result worked out exceptionally well, with an annualized rate of return of 26.62%. This would have turned a $10K investment made 20 years ago into $1,125,043.97 today (as of 03/10/2022). On a total return basis, that’s a result of 11,152.24% (something to think about: how might MNST 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:
“If you’re prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won’t get bored.” — Peter Lynch