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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 Electronic Arts, Inc. (NASD: EA) back in 2015: 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: 08/21/2015
$10,000

08/21/2015
$21,896

08/20/2020
End date: 08/20/2020
Start price/share: $65.53
End price/share: $143.48
Starting shares: 152.60
Ending shares: 152.60
Dividends reinvested/share: $0.00
Total return: 118.95%
Average annual return: 16.96%
Starting investment: $10,000.00
Ending investment: $21,896.42

As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 16.96%. This would have turned a $10K investment made 5 years ago into $21,896.42 today (as of 08/20/2020). On a total return basis, that’s a result of 118.95% (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.]

Here’s one more great investment quote before you go:
“The individual investor should act consistently as an investor and not as a speculator.” — Benjamin Graham