Photo credit:

“I buy on the assumption that they could close the market the next day and not reopen it for five years.”

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a five year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Live Nation Entertainment Inc (NYSE: LYV) back in 2015. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 12/02/2015


End date: 12/01/2020
Start price/share: $25.19
End price/share: $68.11
Starting shares: 396.98
Ending shares: 396.98
Dividends reinvested/share: $0.00
Total return: 170.39%
Average annual return: 22.00%
Starting investment: $10,000.00
Ending investment: $27,041.81

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 22.00%. This would have turned a $10K investment made 5 years ago into $27,041.81 today (as of 12/01/2020). On a total return basis, that’s a result of 170.39% (something to think about: how might LYV 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:
“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.” — Warren Buffett