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“I buy on the assumption that they could close the market the next day and not reopen it for five years.”

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a five year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Monster Beverage Corp (NASD: MNST) back in 2014. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 07/11/2014
$10,000

07/11/2014
$27,473

07/10/2019
End date: 07/10/2019
Start price/share: $23.67
End price/share: $65.03
Starting shares: 422.48
Ending shares: 422.48
Dividends reinvested/share: $0.00
Total return: 174.74%
Average annual return: 22.40%
Starting investment: $10,000.00
Ending investment: $27,473.06

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 22.40%. This would have turned a $10K investment made 5 years ago into $27,473.06 today (as of 07/10/2019). On a total return basis, that’s a result of 174.74% (something to think about: how might MNST 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:
“Sentimentality about an investments leads to lack of discipline.” — Sam Zell