“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a ten year period?
Today, let’s look backwards in time to 2010, and take a look at what happened to investors who asked that very question about Electronic Arts, Inc. (NASD: EA), by taking a look at the investment outcome over a ten year holding period.
| Start date: | 03/10/2010 |
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| End date: | 03/09/2020 | ||||
| Start price/share: | $17.89 | ||||
| End price/share: | $100.93 | ||||
| Starting shares: | 558.97 | ||||
| Ending shares: | 558.97 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 464.17% | ||||
| Average annual return: | 18.88% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $56,401.90 | ||||
The above analysis shows the ten year investment result worked out exceptionally well, with an annualized rate of return of 18.88%. This would have turned a $10K investment made 10 years ago into $56,401.90 today (as of 03/09/2020). On a total return basis, that’s a result of 464.17% (something to think about: how might EA shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more piece of investment wisdom to leave you with:
“People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.” — Peter Lynch
