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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

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 Varian Medical Systems Inc (NYSE: VAR) 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: 11/14/2014
$10,000

11/14/2014
$16,215

11/13/2019
End date: 11/13/2019
Start price/share: $76.80
End price/share: $124.54
Starting shares: 130.21
Ending shares: 130.21
Dividends reinvested/share: $0.00
Total return: 62.16%
Average annual return: 10.15%
Starting investment: $10,000.00
Ending investment: $16,215.21

As we can see, the five year investment result worked out quite well, with an annualized rate of return of 10.15%. This would have turned a $10K investment made 5 years ago into $16,215.21 today (as of 11/13/2019). On a total return basis, that’s a result of 62.16% (something to think about: how might VAR 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 stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher