“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a five year holding period for an investor who was considering Carmax Inc. (NYSE: KMX) back in 2014, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 06/13/2014 |
|
|||
| End date: | 06/12/2019 | ||||
| Start price/share: | $44.19 | ||||
| End price/share: | $82.04 | ||||
| Starting shares: | 226.30 | ||||
| Ending shares: | 226.30 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 85.65% | ||||
| Average annual return: | 13.17% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $18,563.36 | ||||
As shown above, the five year investment result worked out quite well, with an annualized rate of return of 13.17%. This would have turned a $10K investment made 5 years ago into $18,563.36 today (as of 06/12/2019). On a total return basis, that’s a result of 85.65% (something to think about: how might KMX 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:
“Calling someone who trades actively in the market an investor is like calling someone who repeatedly engages in one-night stands a romantic.” — Warren Buffett
