Backtest: Buy and Hold MSFT (Microsoft Corporation)

This analysis evaluates a buy-and-hold strategy over the past 39 years, providing a historical perspective on MSFT's performance from 1986-03-13 to 2025-07-03.

Note: This simulation uses adjusted close prices, meaning all historical prices have been retroactively adjusted for splits and dividends. To achieve similar results in practice, you would need to reinvest all dividends automatically as they are paid.

Performance Overview

Starting with an initial capital of $10,000.00, we purchased shares of MSFT on 1986-03-13, at a price of $0.06 per share (adjusted for splits and dividends). No trading, no adjustments — just a simple buy-and-hold approach.

We held the position continuously through every market twist and turn, never selling. As of 2025-07-03, the price of MSFT had risen to $498.84. While we didn't sell, we can still assess the performance by calculating the current value of the investment: $83,701,345.67 — a total gain of 836,913.46%.

This translates into an annualized return of 25.83% over the entire period. This is a very strong return — significantly above what is commonly seen in broad-market performance. It often signals a well-timed entry into a high-growth phase.

Drawdown and Risk

The maximum drawdown recorded during this period was 69.39%. This drawdown began after a peak price of $36.51 on 1999-12-27, and reached its lowest point on 2009-03-09 when the price fell to $11.18. The drawdown lasted for 3360 days.

The drawdown was substantial, though not uncommon for long-term equity strategies that span full market cycles. This level suggests exposure to significant corrections or crashes. The maximum drawdown lasted over three years — a very long decline that would have tested even the most patient investors. Such extended recoveries are rare but not impossible during major structural bear markets.

The Calmar Ratio — annualized return divided by maximum drawdown — was 0.37, reflecting the tradeoff between return and volatility.

A moderate return-to-risk profile. The strategy handled risk reasonably well while delivering decent returns.