Holding On

A 2,000+ acre ranch near Telluride, Colorado, was listed for sale this week for the astounding price of $67.75 million. This property has all the features of a piece of real estate worthy of that price. Vast acreage, multiple beautiful homes, and privacy, all conveniently located next to one of the country’s most desirable ski vacation areas.

This ranch is still owned by the original family that purchased the land in the 1940s for $130,000. If it sells for the full asking price, it will generate a return of 521 times its initial cost. Talk about being in the right place at the right time.

Is this one of the greatest investments of all-time?

The answer is actually no. When examined, the return may be fairly ordinary.

A $130,000 investment growing to nearly $70 million may sound otherworldly, but over almost 80 years, the math comes out to a compounded return of just 7.8% per year.

Not bad, but factor in decades worth of building costs, upkeep, and property taxes (which, according to Zillow, are $161,000 per year), and that annual return starts to look smaller and smaller.

By contrast, that starting amount invested into the S&P 500 in 1945 would have averaged 11.2% and grown to over $700 million. No wealthy cowboy buyer needed.

That is not to say this wasn’t a terrific investment. This family likely enjoyed owning the ranch while earning a solid return that outpaced inflation.

The amazing aspect of the story is they held onto this asset as long as they did. Multiple generations refused to sell during decades of wars, recessions, and dozens of election cycles that all seemed frighteningly uncertain for our country and economy. That should be commended.

Holding for that amount of time may seem like doing nothing, but this is true expert investor behavior. Warren Buffett’s partner Charlie Munger says, “The big money is not in the buying and the selling but in the waiting.”

The combination of patience and time can turn even ordinary investments extraordinary.

Likely, many of the assets and investments being accrued today by ordinary people will provide enormously for future generations if they are allowed a long enough time horizon. Patience and discipline can look like doing nothing in the short term but are often rewarded in the end.