“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
Such a great quote from Warren Buffett, highlighting the importance of investment time horizon when considering making an investment. In the short run, who knows what the stock market will do? A week or two after buying any given stock, could the entire stock market fall out of bed? Quite possibly! Should that happen, how would you react? It is an excellent question to think about before hitting the buy button.
For investors who take a multi-year time horizon, the important thing is not what happens in the next week or two, but what the result will be over the long haul. Today, we look at the result investors of the year 2010 experienced, who considered an investment in shares of Netflix Inc (NASD: NFLX) and decided upon a ten year investment time horizon.
| Start date: | 11/23/2010 |
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| End date: | 11/20/2020 | ||||
| Start price/share: | $26.82 | ||||
| End price/share: | $488.24 | ||||
| Starting shares: | 372.86 | ||||
| Ending shares: | 372.86 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 1,720.43% | ||||
| Average annual return: | 33.66% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $181,976.19 | ||||
As shown above, the ten year investment result worked out exceptionally well, with an annualized rate of return of 33.66%. This would have turned a $10K investment made 10 years ago into $181,976.19 today (as of 11/20/2020). On a total return basis, that’s a result of 1,720.43% (something to think about: how might NFLX shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more investment quote to leave you with:
“To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.” — Benjamin Graham
