“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a five year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Netflix Inc (NASD: NFLX) back in 2014: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.
| Start date: | 05/30/2014 |
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| End date: | 05/29/2019 | ||||
| Start price/share: | $59.69 | ||||
| End price/share: | $349.19 | ||||
| Starting shares: | 167.53 | ||||
| Ending shares: | 167.53 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 485.01% | ||||
| Average annual return: | 42.37% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $58,491.46 | ||||
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 42.37%. This would have turned a $10K investment made 5 years ago into $58,491.46 today (as of 05/29/2019). On a total return basis, that’s a result of 485.01% (something to think about: how might NFLX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Here’s one more great investment quote before you go:
“Value investing is at its core the marriage of a contrarian streak and a calculator.” — Seth Klarman
