“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
Such a great quote from Warren Buffett, highlighting the importance of investment time horizon when considering making an investment. In the short run, who knows what the stock market will do? A week or two after buying any given stock, could the entire stock market fall out of bed? Quite possibly! Should that happen, how would you react? It is an excellent question to think about before hitting the buy button.
For investors who take a multi-year time horizon, the important thing is not what happens in the next week or two, but what the result will be over the long haul. Today, we look at the result investors of the year 2002 experienced, who considered an investment in shares of Amazon.com Inc (NASD: AMZN) and decided upon a two-decade investment time horizon.
| Start date: | 04/22/2002 |
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| End date: | 04/19/2022 | ||||
| Start price/share: | $14.31 | ||||
| End price/share: | $3,162.31 | ||||
| Starting shares: | 698.81 | ||||
| Ending shares: | 698.81 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 21,998.60% | ||||
| Average annual return: | 30.97% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $2,208,404.32 | ||||
As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 30.97%. This would have turned a $10K investment made 20 years ago into $2,208,404.32 today (as of 04/19/2022). On a total return basis, that’s a result of 21,998.60% (something to think about: how might AMZN shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Here’s one more great investment quote before you go:
“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” — Warren Buffett
