“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 Monster Beverage Corp (NASD: MNST) 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: | 11/28/2014 |
|
|||
| End date: | 11/26/2019 | ||||
| Start price/share: | $37.38 | ||||
| End price/share: | $59.64 | ||||
| Starting shares: | 267.52 | ||||
| Ending shares: | 267.52 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 59.55% | ||||
| Average annual return: | 9.80% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,955.13 | ||||
As we can see, the five year investment result worked out well, with an annualized rate of return of 9.80%. This would have turned a $10K investment made 5 years ago into $15,955.13 today (as of 11/26/2019). On a total return basis, that’s a result of 59.55% (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.]
More investment wisdom to ponder:
“I learned early that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. I’ve never forgotten that.” — Jesse Livermore
