“I buy on the assumption that they could close the market the next day and not reopen it for five 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 five year holding period for an investor who was considering Netflix Inc (NASD: NFLX) back in 2018, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 12/19/2018 |
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| End date: | 12/18/2023 | ||||
| Start price/share: | $266.77 | ||||
| End price/share: | $486.12 | ||||
| Starting shares: | 37.49 | ||||
| Ending shares: | 37.49 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 82.22% | ||||
| Average annual return: | 12.75% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $18,221.44 | ||||
As shown above, the five year investment result worked out quite well, with an annualized rate of return of 12.75%. This would have turned a $10K investment made 5 years ago into $18,221.44 today (as of 12/18/2023). On a total return basis, that’s a result of 82.22% (something to think about: how might NFLX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Another great investment quote to think about:
“The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate.” — Benjamin Graham
