“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 Dollar Tree Inc (NASD: DLTR) 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: | 09/11/2014 |
|
|||
| End date: | 09/10/2019 | ||||
| Start price/share: | $55.68 | ||||
| End price/share: | $109.93 | ||||
| Starting shares: | 179.60 | ||||
| Ending shares: | 179.60 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 97.43% | ||||
| Average annual return: | 14.57% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $19,740.34 | ||||
As shown above, the five year investment result worked out quite well, with an annualized rate of return of 14.57%. This would have turned a $10K investment made 5 years ago into $19,740.34 today (as of 09/10/2019). On a total return basis, that’s a result of 97.43% (something to think about: how might DLTR shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more investment quote to leave you with:
“The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.” — Warren Buffett
