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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

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 Netflix Inc (NASD: NFLX) 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: 09/27/2016


End date: 09/24/2021
Start price/share: $97.07
End price/share: $592.39
Starting shares: 103.02
Ending shares: 103.02
Dividends reinvested/share: $0.00
Total return: 510.27%
Average annual return: 43.64%
Starting investment: $10,000.00
Ending investment: $61,026.04

As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 43.64%. This would have turned a $10K investment made 5 years ago into $61,026.04 today (as of 09/24/2021). On a total return basis, that’s a result of 510.27% (something to think about: how might NFLX 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:
“If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.” — Bernard Baruch