One of the best ways to grow your wealth is by investing with a long term view.
This is because by investing patiently over a long period of time, investors are able to benefit from compound interest.
This is interest on top of interest or, in the case of investing, returns on top of returns.
It explains why a $10,000 investment earning a 10% annual return will be worth $11,000 after one year and then almost $26,000 after ten years.
The millionaire maker stock
One of the best examples of how successful buy and hold investing can be is Dicker Data Ltd (ASX: DDR).
Over the last 10 years, this computer hardware and software distributor's shares have generated a mouth-watering average total return of 51% per annum.
This means that anyone lucky enough to have invested $25,000 into Dicker Data shares 10 years ago, would now have amassed a small fortune worth $1.5 million.
I chatted with Dicker Data's Co-Founder and Chairman, David Dicker, recently. Given the incredible returns they have generated, he appeared surprised that the company's shares were not more widely held and remained somewhat of a secret in the investment community.
Mr Dicker also noted that he's been adding to his significant stake over the last few years. In fact, the chairman was buying shares on market last year. This saw him increase his holding by 50,000 shares to a total of 60,740,000. That's a $646 million stake based on the latest Dicker Data share price.
What about the future?
While Mr Dicker acknowledges that the near term is hard to forecast because of COVID-19 uncertainty, he appeared confident on the future. Particularly given its new state of the art distribution centre which opened in February.
This centre increased its available warehouse space by over 80% to 22,965 square metres. This provides space for increased inventory holding and future technology portfolio diversification, giving Dicker Data significant room for growth in the future.
And with industry tailwinds such as cloud computing, the internet of things, and remote working driving increasing demand for computer software and hardware, that excess capacity is likely to be needed eventually.
Whether or not the Dicker Data share price is as successful over the next 10 years, only time will tell.
But given the strength of its business and favourable industry tailwinds, you wouldn't bet against it.
