“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a decade-long holding period potentially?
For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 10 years to 2012, investors considering an investment into shares of Carmax Inc. (NYSE: KMX) may have been pondering this very question and thinking about their potential investment result over a full decade-long time horizon. Here’s how that would have worked out.
| Start date: | 05/31/2012 |
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| End date: | 05/27/2022 | ||||
| Start price/share: | $28.21 | ||||
| End price/share: | $100.29 | ||||
| Starting shares: | 354.48 | ||||
| Ending shares: | 354.48 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 255.51% | ||||
| Average annual return: | 13.53% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $35,547.12 | ||||
As shown above, the decade-long investment result worked out quite well, with an annualized rate of return of 13.53%. This would have turned a $10K investment made 10 years ago into $35,547.12 today (as of 05/27/2022). On a total return basis, that’s a result of 255.51% (something to think about: how might KMX shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Here’s one more great investment quote before you go:
“Spend each day trying to be a little wiser than you were when you woke up.” — Charlie Munger
