“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a five year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Booking Holdings Inc (NASD: BKNG) back in 2016: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.
| Start date: | 03/01/2016 |
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| End date: | 02/26/2021 | ||||
| Start price/share: | $1,295.92 | ||||
| End price/share: | $2,328.51 | ||||
| Starting shares: | 7.72 | ||||
| Ending shares: | 7.72 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 79.68% | ||||
| Average annual return: | 12.45% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $17,968.76 | ||||
The above analysis shows the five year investment result worked out quite well, with an annualized rate of return of 12.45%. This would have turned a $10K investment made 5 years ago into $17,968.76 today (as of 02/26/2021). On a total return basis, that’s a result of 79.68% (something to think about: how might BKNG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” — Mark Cuban
