Warren Buffett always believe in Long-Term Investing. Three of his longest holdings are shown below:
- American Express (AXP): 1st purchase in 1964
- Coca-Cola (KO): 1st purchase in 1988
- Wells Fargon (WFC): 1st purchase in 1989
“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”
This quote shows Warren Buffett thinks in long-term investing and investing time frames of at least 5 years. But his holding period is preferably much longer…
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes”
These quotes show that a 10 year holding period is really what you should look for when examining stocks to buy. Even 10 years is too short a time period for outstanding businesses.
“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
“Time is the friend of the wonderful company, the enemy of the mediocre.”
You should not buy any business and hold it for the long-run. Businesses with strong competitive advantages and quality managements are preferred long-term holdings.
Great businesses withstand the test of time. Time itself has been very favorable to the stock market.
“Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a fly epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”
The quote above shows the powerful tailwind of economic progress that pushes stable businesses to ever greater heights.
One advantage of buy & hold investing is lower taxes. When you don’t sell your holdings, the money you would have paid in capital gains tax is left compounding in your investment.
“Charlie and I would follow a buy-and-hold policy even if we ran a tax-exempt institution.”
Tax advantages are not the primary reason why Warren Buffett (and Charlie Munger) prefer to hold great businesses for the long run. The compounding effects (the ‘snowball effect’) of business growth are reward enough, irrespective of tax advantages.
The 4 quotes below use analogies and metaphors to explain the power of long-term investing.
“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
“Calling someone who trades actively in the market an investor is like calling someone who repeatedly engages in one-night stands a romantic.”
“Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.”
“Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market.”
The quote about not producing a baby in a month by getting nine women pregnant is especially poignant. It drives home the point that several mediocre short-term investments are not the same as one well-timed long-term investment.
This brings up another aspect of Warren Buffett’s success:
Only investing when the best opportunities present themselves – and ignoring everything else.