Apple Could Have Made You Rich, But You Couldn’t Handle it

Last week, Apple marked yet another milestone, becoming the first publicly traded US company to hit a US$1 trillion valuation – making headlines all over the world.

Since topping US$1 trillion, the world wide web has been inundated with analysis, research, and commentary on the company, and my favourite, here’s how much you would have made if you invested US$1,000 following Apple’s listing. To cure your curiosity, I’ve crunched the numbers for you.

The company (AAPL) listed on the NASDAQ market at $22 per share. After taking into account stock splits and dividends, the company’s share price closed at US$0.02 following a successful listing on 12 December 1980 (according to Yahoo). Most recently, the stock closed at US$207.99 (see below chart).

Source: Thomson Reuters

If you had invested US$1,000 in Apple when it first listed, and you didn’t sell the stock (more on this later), your small investment (which is around US$3,058 today) would be worth about US$8,937,886 – an 893,789% return.

The entire problem with this analysis is that most people would not have been able to sit in their seat for the ride Apple took investors during the last 38 years. Here why:

  • In 1983 the stock fell 69%
  • In 1987 the stock fell 50%
  • In 1991 the stock fell 37%
  • In 2000 the stock fell 78%
  • In 2003 the stock fell 44%
  • In 2006 the stock fell 40%
  • In 2008 the stock fell 40% and 59%
  • In 2012 the stock fell 17% and 45%
  • In 2015 the stock fell 32%

These numbers are staggering. A stock with this much volatility would see more than just a few investors jumping for the life boats.

Investors as a group are a funny bunch. Constantly talking about the great winners with the benefit of complete hindsight, encouraging more and more investors to simply pick the handful of winners and voalá, you’re rich.

Unfortunately it’s not that simple (according to Longboard Asset Management).

  • 18.5% of stocks lose at least 75% of their value
  • 39% of stocks lose money
  • 64% of stocks underperform the index
  • Only 25% of stocks are responsible for all the market’s gains

Not only are the odds significantly stacked up against you, the ride these suckers will take you on are rough enough to scare the pants off even the most seasoned investor.

Unfortunately, it’s the winners that write the history books, yet few know what it took to get there.