“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a decade-long holding period for an investor who was considering NVIDIA Corp (NASD: NVDA) back in 2012, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 09/12/2012 |
|
|||
| End date: | 09/09/2022 | ||||
| Start price/share: | $3.40 | ||||
| End price/share: | $143.87 | ||||
| Starting shares: | 2,941.18 | ||||
| Ending shares: | 3,203.69 | ||||
| Dividends reinvested/share: | $1.30 | ||||
| Total return: | 4,509.15% | ||||
| Average annual return: | 46.69% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $460,838.97 | ||||
As shown above, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 46.69%. This would have turned a $10K investment made 10 years ago into $460,838.97 today (as of 09/09/2022). On a total return basis, that’s a result of 4,509.15% (something to think about: how might NVDA shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that NVIDIA Corp paid investors a total of $1.30/share in dividends over the 10 holding period, marking a second component of the total return beyond share price change alone. Much like watering a tree, reinvesting dividends can help an investment to grow over time — for the above calculations we assume dividend reinvestment (and for this exercise the closing price on ex-date is used for the reinvestment of a given dividend).
Based upon the most recent annualized dividend rate of .16/share, we calculate that NVDA has a current yield of approximately 0.11%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .16 against the original $3.40/share purchase price. This works out to a yield on cost of 3.24%.
Here’s one more great investment quote before you go:
“Never test the depth of a river with both feet.” — Warren Buffett
