“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a five year period?
Today, let’s look backwards in time to 2019, and take a look at what happened to investors who asked that very question about Amazon.com Inc (NASD: AMZN), by taking a look at the investment outcome over a five year holding period.
| Start date: | 07/17/2019 |
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| End date: | 07/16/2024 | ||||
| Start price/share: | $99.60 | ||||
| End price/share: | $193.02 | ||||
| Starting shares: | 100.40 | ||||
| Ending shares: | 100.40 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 93.80% | ||||
| Average annual return: | 14.14% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $19,379.68 | ||||
As we can see, the five year investment result worked out quite well, with an annualized rate of return of 14.14%. This would have turned a $10K investment made 5 years ago into $19,379.68 today (as of 07/16/2024). On a total return basis, that’s a result of 93.80% (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.]
One more piece of investment wisdom to leave you with:
“Buy not on optimism, but on arithmetic.” — Benjamin Graham
