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“I buy on the assumption that they could close the market the next day and not reopen it for five years.”

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a five year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of First Solar Inc (NASD: FSLR) back in 2018. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 06/25/2018
$10,000

06/25/2018
  $35,535

06/22/2023
End date: 06/22/2023
Start price/share: $52.64
End price/share: $187.08
Starting shares: 189.97
Ending shares: 189.97
Dividends reinvested/share: $0.00
Total return: 255.40%
Average annual return: 28.90%
Starting investment: $10,000.00
Ending investment: $35,535.34

As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 28.90%. This would have turned a $10K investment made 5 years ago into $35,535.34 today (as of 06/22/2023). On a total return basis, that’s a result of 255.40% (something to think about: how might FSLR 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:
“A risk-reward ratio is important, but so is an aggravation-satisfaction ratio.” — Muriel Siebert