“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a five year holding period potentially?
For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 5 years to 2016, investors considering an investment into shares of Amazon.com Inc (NASD: AMZN) may have been pondering this very question and thinking about their potential investment result over a full five year time horizon. Here’s how that would have worked out.
Start date: | 07/05/2016 |
|
|||
End date: | 07/01/2021 | ||||
Start price/share: | $728.10 | ||||
End price/share: | $3,432.97 | ||||
Starting shares: | 13.73 | ||||
Ending shares: | 13.73 | ||||
Dividends reinvested/share: | $0.00 | ||||
Total return: | 371.50% | ||||
Average annual return: | 36.43% | ||||
Starting investment: | $10,000.00 | ||||
Ending investment: | $47,145.53 |
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 36.43%. This would have turned a $10K investment made 5 years ago into $47,145.53 today (as of 07/01/2021). On a total return basis, that’s a result of 371.50% (something to think about: how might AMZN shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more piece of investment wisdom to leave you with:
“Those who do not remember the past are condemned to repeat it.” — George Santayana