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“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 Adobe Inc (NASD: ADBE) back in 2016. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 03/09/2016


End date: 03/08/2021
Start price/share: $85.27
End price/share: $421.20
Starting shares: 117.27
Ending shares: 117.27
Dividends reinvested/share: $0.00
Total return: 393.96%
Average annual return: 37.64%
Starting investment: $10,000.00
Ending investment: $49,399.59

As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 37.64%. This would have turned a $10K investment made 5 years ago into $49,399.59 today (as of 03/08/2021). On a total return basis, that’s a result of 393.96% (something to think about: how might ADBE shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

More investment wisdom to ponder:
“In investing, what is comfortable is rarely profitable.” — Robert Arnott