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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 O’Reilly Automotive, Inc. (NASD: ORLY) 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: 03/21/2016


End date: 03/18/2021
Start price/share: $269.61
End price/share: $482.18
Starting shares: 37.09
Ending shares: 37.09
Dividends reinvested/share: $0.00
Total return: 78.84%
Average annual return: 12.34%
Starting investment: $10,000.00
Ending investment: $17,881.14

As shown above, the five year investment result worked out quite well, with an annualized rate of return of 12.34%. This would have turned a $10K investment made 5 years ago into $17,881.14 today (as of 03/18/2021). On a total return basis, that’s a result of 78.84% (something to think about: how might ORLY shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Here’s one more great investment quote before you go:
“October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” — Mark Twain