“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 T-Mobile US Inc (NASD: TMUS) 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: | 09/28/2016 |
|
|||
| End date: | 09/27/2021 | ||||
| Start price/share: | $46.81 | ||||
| End price/share: | $127.78 | ||||
| Starting shares: | 213.63 | ||||
| Ending shares: | 213.63 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 172.98% | ||||
| Average annual return: | 22.24% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $27,293.97 | ||||
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 22.24%. This would have turned a $10K investment made 5 years ago into $27,293.97 today (as of 09/27/2021). On a total return basis, that’s a result of 172.98% (something to think about: how might TMUS shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Another great investment quote to think about:
“You can get in much more trouble with a good idea than a bad idea, because you forget that the good idea has limits.” — Benjamin Graham
