“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 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 decade-long holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Chipotle Mexican Grill Inc (NYSE: CMG) back in 2011: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full decade-long investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.
Start date: | 07/14/2011 |
|
|||
End date: | 07/13/2021 | ||||
Start price/share: | $324.63 | ||||
End price/share: | $1,607.29 | ||||
Starting shares: | 30.80 | ||||
Ending shares: | 30.80 | ||||
Dividends reinvested/share: | $0.00 | ||||
Total return: | 395.11% | ||||
Average annual return: | 17.34% | ||||
Starting investment: | $10,000.00 | ||||
Ending investment: | $49,526.93 |
The above analysis shows the decade-long investment result worked out exceptionally well, with an annualized rate of return of 17.34%. This would have turned a $10K investment made 10 years ago into $49,526.93 today (as of 07/13/2021). On a total return basis, that’s a result of 395.11% (something to think about: how might CMG shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Another great investment quote to think about:
“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” — Albert Einstein