“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 two-decade holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Charles River Laboratories International Inc. (NYSE: CRL) back in 2004. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:
| Start date: | 06/10/2004 |
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| End date: | 06/07/2024 | ||||
| Start price/share: | $45.52 | ||||
| End price/share: | $214.79 | ||||
| Starting shares: | 219.68 | ||||
| Ending shares: | 219.68 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 371.86% | ||||
| Average annual return: | 8.06% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $47,150.22 | ||||
As shown above, the two-decade investment result worked out well, with an annualized rate of return of 8.06%. This would have turned a $10K investment made 20 years ago into $47,150.22 today (as of 06/07/2024). On a total return basis, that’s a result of 371.86% (something to think about: how might CRL 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:
“Thousands of experts study overbought indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money supply…and they can’t predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack.” — Peter Lynch
