“I buy on the assumption that they could close the market the next day and not reopen it for five 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 five year 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 5 years to 2018, investors considering an investment into shares of Amazon.com Inc (NASD: AMZN) may have been pondering this very question and thinking about their potential investment result over a full five year time horizon. Here’s how that would have worked out.
| Start date: | 11/02/2018 |
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| End date: | 11/01/2023 | ||||
| Start price/share: | $83.28 | ||||
| End price/share: | $137.00 | ||||
| Starting shares: | 120.08 | ||||
| Ending shares: | 120.08 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 64.51% | ||||
| Average annual return: | 10.47% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $16,452.12 | ||||
As we can see, the five year investment result worked out quite well, with an annualized rate of return of 10.47%. This would have turned a $10K investment made 5 years ago into $16,452.12 today (as of 11/01/2023). On a total return basis, that’s a result of 64.51% (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:
“If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.” — Bernard Baruch
