“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a five year holding period potentially?
For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 5 years to 2014, investors considering an investment into shares of Electronic Arts, Inc. (NASD: EA) may have been pondering this very question and thinking about their potential investment result over a full five year time horizon. Here’s how that would have worked out.
| Start date: | 10/17/2014 |
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| End date: | 10/16/2019 | ||||
| Start price/share: | $34.28 | ||||
| End price/share: | $96.22 | ||||
| Starting shares: | 291.72 | ||||
| Ending shares: | 291.72 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 180.69% | ||||
| Average annual return: | 22.93% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $28,073.04 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 22.93%. This would have turned a $10K investment made 5 years ago into $28,073.04 today (as of 10/16/2019). On a total return basis, that’s a result of 180.69% (something to think about: how might EA 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:
“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
