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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

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a five year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of DaVita Inc (NYSE: DVA) back in 2016. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 10/14/2016


End date: 10/13/2021
Start price/share: $62.85
End price/share: $109.96
Starting shares: 159.11
Ending shares: 159.11
Dividends reinvested/share: $0.00
Total return: 74.96%
Average annual return: 11.84%
Starting investment: $10,000.00
Ending investment: $17,497.89

As we can see, the five year investment result worked out quite well, with an annualized rate of return of 11.84%. This would have turned a $10K investment made 5 years ago into $17,497.89 today (as of 10/13/2021). On a total return basis, that’s a result of 74.96% (something to think about: how might DVA 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:
“Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.” — Benjamin Graham