“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a five year holding period for an investor who was considering Electronic Arts, Inc. (NASD: EA) back in 2015, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 01/22/2015 |
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| End date: | 01/21/2020 | ||||
| Start price/share: | $49.36 | ||||
| End price/share: | $112.41 | ||||
| Starting shares: | 202.59 | ||||
| Ending shares: | 202.59 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 127.74% | ||||
| Average annual return: | 17.89% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $22,771.14 | ||||
The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 17.89%. This would have turned a $10K investment made 5 years ago into $22,771.14 today (as of 01/21/2020). On a total return basis, that’s a result of 127.74% (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.]
More investment wisdom to ponder:
“The best stock to buy is the one you already own.” — Peter Lynch
