Photo credit: commons.wikimedia.org

“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 Verisign Inc (NASD: VRSN) 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: 09/24/2014
$10,000

09/24/2014
$33,773

09/23/2019
End date: 09/23/2019
Start price/share: $56.21
End price/share: $189.82
Starting shares: 177.90
Ending shares: 177.90
Dividends reinvested/share: $0.00
Total return: 237.70%
Average annual return: 27.56%
Starting investment: $10,000.00
Ending investment: $33,773.23

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 27.56%. This would have turned a $10K investment made 5 years ago into $33,773.23 today (as of 09/23/2019). On a total return basis, that’s a result of 237.70% (something to think about: how might VRSN shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Another great investment quote to think about:
“There is nothing riskier than the widespread perception that there is no risk.” — Howard Marks