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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 Netflix Inc (NASD: NFLX) 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: 12/02/2016


End date: 12/01/2021
Start price/share: $120.81
End price/share: $617.77
Starting shares: 82.77
Ending shares: 82.77
Dividends reinvested/share: $0.00
Total return: 411.36%
Average annual return: 38.59%
Starting investment: $10,000.00
Ending investment: $51,128.08

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 38.59%. This would have turned a $10K investment made 5 years ago into $51,128.08 today (as of 12/01/2021). On a total return basis, that’s a result of 411.36% (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.]

Another great investment quote to think about:
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” — Benjamin Graham