Unless you live on another planet, you’re aware that Apple now has a market capitalization of $1 trillion. That’s a stunning achievement, especially for a company that almost went bankrupt in the 1990s.
The financial media is all atwitter with this news, replete with anecdotal stories of investors who held on to their Apple shares and reaped returns of 50,000 percent, or more. This quote from one of those lucky shareholders is typical: I was just part of that cult that just loved Apple.
I also love Apple. I am typing this blog on an iMac. I have an iPad and an iPhone. But I don’t own shares of Apple stock, other than what’s in my mutual funds.
Why is that? Do I have some special insight into the future of Apple or the direction of its share price?
My crystal ball
I don’t have a clue whether Apple will continue it’s rapid rise or fall into the same dustbin with other distinguished companies that flamed out. Enron and Lehman Brothers are the most recent notable examples.
Here’s what I do know.
No one else knows either.
Pundits may say they have special insight into the future of Apple or other stocks, but they don’t. If they guess right, they’re exhibiting luck and not skill.
All information about Apple is in the public domain. Millions of traders assess this information every minute of every day. The current price of Apple stock is fair. It’s not a “buy” or a “sell.” It just “is what it is.”
The risk of “loving” a stock
Your level of emotional attachment to a stock is not a good reason to hold it. Many people don’t identify with “sin” stocks, which are engaged in gambling, gun manufacturing, and brewing alcohol. Yet, from 2002 to 2017, sin stocks generally outperformed socially responsible stocks.
A better plan
Of course, you could get lucky and buy the next Facebook or Apple at its low and ride it to riches. It’s more likely you won’t beat the returns of the index to which your selected stock belongs – and you will be taking considerably more risk.
Instead of looking for a needle in the haystack, buy the haystack.
Resource of the week
This video should convince you not to take another bite.