Pilbara Minerals Ltd (ASX: PLS) shares have been under pressure recently due to falling lithium prices, but that doesn't take away from their remarkable long-term performance.
Investors who had the foresight to buy and hold the stock over the past decade have enjoyed truly extraordinary returns.
A decade of wealth creation from Pilbara Minerals shares
Ten years ago, lithium was barely on the radar for most investors, and Pilbara Minerals shares were trading at just 4 cents apiece. At that time, a $10,000 investment would have secured 250,000 shares in the emerging lithium miner.
Fast forward to today, and despite the recent downturn, Pilbara Minerals shares closed at $1.90 on Friday. This means that those 250,000 shares are now worth an impressive $475,000. That's a staggering 4,650% return on investment in just a decade.
Even bigger gains were possible
While the current valuation is already impressive, investors who timed their exit well could have made even more.
Pilbara Minerals shares reached a 52-week high of $4.58 in the past year. Had an investor sold at that peak, their $10,000 investment would have ballooned to an astonishing $1,145,000. Hindsight is a wonderful thing!
Lessons from Pilbara Minerals' rise
The phenomenal gains delivered by Pilbara Minerals highlight the power of long-term investing and compounding returns.
While mining stocks can be highly volatile and influenced by commodity price fluctuations, they also have the potential to generate enormous wealth when the right macroeconomic tailwinds are in place.
The importance of diversification
While Pilbara Minerals shares have been a huge success story, not all mining stocks deliver such outsized returns.
Lithium prices, for example, have been extremely volatile in recent years, and many stocks in the sector have seen significant declines. This underscores the importance of maintaining a balanced and diversified portfolio rather than concentrating too much in a single industry or sector.
Foolish takeaway
Investing in high-growth sectors like lithium can be incredibly rewarding, but it also comes with risks.
Pilbara Minerals' journey from a penny stock to a multi-billion-dollar company is a prime example of the opportunities that exist for patient, long-term investors.
But it is worth remembering that for every Pilbara Minerals, there is likely to be multiple ASX mining shares that don't make it.
Nevertheless, Pilbara Minerals' history serves as a powerful reminder that identifying emerging trends early can lead to life-changing returns.
