“I buy on the assumption that they could close the market the next day and not reopen it for five 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 five year period?
Today, let’s look backwards in time to 2015, and take a look at what happened to investors who asked that very question about T-Mobile US Inc (NASD: TMUS), by taking a look at the investment outcome over a five year holding period.
| Start date: | 08/25/2015 |
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| End date: | 08/24/2020 | ||||
| Start price/share: | $38.13 | ||||
| End price/share: | $115.26 | ||||
| Starting shares: | 262.26 | ||||
| Ending shares: | 262.26 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 202.28% | ||||
| Average annual return: | 24.75% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $30,231.93 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 24.75%. This would have turned a $10K investment made 5 years ago into $30,231.93 today (as of 08/24/2020). On a total return basis, that’s a result of 202.28% (something to think about: how might TMUS 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:
“All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.” — Peter Lynch
