Photo credit:

“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 Inc (NASD: AMZN) back in 2018. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 01/23/2018


End date: 01/20/2023
Start price/share: $68.13
End price/share: $97.25
Starting shares: 146.78
Ending shares: 146.78
Dividends reinvested/share: $0.00
Total return: 42.74%
Average annual return: 7.39%
Starting investment: $10,000.00
Ending investment: $14,277.41

As shown above, the five year investment result worked out well, with an annualized rate of return of 7.39%. This would have turned a $10K investment made 5 years ago into $14,277.41 today (as of 01/20/2023). On a total return basis, that’s a result of 42.74% (something to think about: how might AMZN shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Here’s one more great investment quote before you go:
“Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.” — Charlie Munger