“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 2020, investors considering an investment into shares of Netflix Inc (NASD: NFLX) 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: | 03/24/2020 |
|
|||
| End date: | 03/21/2025 | ||||
| Start price/share: | $357.32 | ||||
| End price/share: | $960.29 | ||||
| Starting shares: | 27.99 | ||||
| Ending shares: | 27.99 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 168.75% | ||||
| Average annual return: | 21.89% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $26,876.29 | ||||
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 21.89%. This would have turned a $10K investment made 5 years ago into $26,876.29 today (as of 03/21/2025). On a total return basis, that’s a result of 168.75% (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.]
One more investment quote to leave you with:
“I make no attempt to forecast the market; my efforts are devoted to finding undervalued securities.” — Warren Buffett
