“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
A key lesson we can learn from Warren Buffett, is about how to think about a potential stock investment in the context of a long-term time horizon. Every investor in a stock has a choice: bite our fingernails over the short-term ups and downs that are inevitable with the stock market, or, zero in on stocks we are comfortable to simply buy and hold for the long haul — maybe even a five year holding period. Heck, investors can even choose to completely ignore the stock market’s short-run quotations and instead go into their initial investment planning to hold on for years and years regardless of the fluctuations in price that might occur next.
Today, we examine what would have happened over a five year holding period, had you decided back in 2016 to buy shares of Netflix Inc (NASD: NFLX) and simply hold through to today.
| Start date: | 01/27/2016 |
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| End date: | 01/26/2021 | ||||
| Start price/share: | $91.15 | ||||
| End price/share: | $561.93 | ||||
| Starting shares: | 109.71 | ||||
| Ending shares: | 109.71 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 516.49% | ||||
| Average annual return: | 43.85% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $61,656.94 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 43.85%. This would have turned a $10K investment made 5 years ago into $61,656.94 today (as of 01/26/2021). On a total return basis, that’s a result of 516.49% (something to think about: how might NFLX 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:
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” — Benjamin Graham
