“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a five year holding period potentially?
For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 5 years to 2016, investors considering an investment into shares of T-Mobile US Inc (NASD: TMUS) may have been pondering this very question and thinking about their potential investment result over a full five year time horizon. Here’s how that would have worked out.
| Start date: | 01/27/2016 |
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| End date: | 01/26/2021 | ||||
| Start price/share: | $38.50 | ||||
| End price/share: | $131.41 | ||||
| Starting shares: | 259.74 | ||||
| Ending shares: | 259.74 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 241.32% | ||||
| Average annual return: | 27.81% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $34,128.42 | ||||
The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 27.81%. This would have turned a $10K investment made 5 years ago into $34,128.42 today (as of 01/26/2021). On a total return basis, that’s a result of 241.32% (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 piece of investment wisdom to leave you with:
“Value investing means really asking what are the best values, and not assuming that because something looks expensive that it is, or assuming that because a stock is down in price and trades at low multiples that it is a bargain.” — Bill Miller
