“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 two-decade holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into NVR Inc. (NYSE: NVR) back in 2000: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full two-decade investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
| Start date: | 04/17/2000 |
|
|||
| End date: | 04/16/2020 | ||||
| Start price/share: | $52.75 | ||||
| End price/share: | $2,750.06 | ||||
| Starting shares: | 189.57 | ||||
| Ending shares: | 189.57 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 5,113.38% | ||||
| Average annual return: | 21.85% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $521,736.50 | ||||
As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 21.85%. This would have turned a $10K investment made 20 years ago into $521,736.50 today (as of 04/16/2020). On a total return basis, that’s a result of 5,113.38% (something to think about: how might NVR shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Here’s one more great investment quote before you go:
“In investing, what is comfortable is rarely profitable.” — Robert Arnott
