“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a five year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Ulta Beauty Inc (NASD: ULTA) back in 2016: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.
| Start date: | 05/02/2016 |
|
|||
| End date: | 04/29/2021 | ||||
| Start price/share: | $210.72 | ||||
| End price/share: | $328.90 | ||||
| Starting shares: | 47.46 | ||||
| Ending shares: | 47.46 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 56.08% | ||||
| Average annual return: | 9.32% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,605.80 | ||||
The above analysis shows the five year investment result worked out well, with an annualized rate of return of 9.32%. This would have turned a $10K investment made 5 years ago into $15,605.80 today (as of 04/29/2021). On a total return basis, that’s a result of 56.08% (something to think about: how might ULTA 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:
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” — George Soros
