My Apple Mistake

The stock market can be highly lucrative for some while very detrimental to others. In some ways it could be compared to playing a casino slot machine. It is not quite the same as gambling in Vegas but there are some properties of the stock market that are comparable. Investing in single stocks is perhaps the riskiest way of playing the stock market. We could argue that there are individuals who consistently make profits through stock investment. Warren Buffett comes to mind. But, unlike Warren, most people do not have the knowledge, resources and time to adequately research a company’s underlying worth and future trajectory.

Myself, I have been investing in the stock market through mutual funds since the year 2000 at which time I was in 10th grade. Because, my investments were made in the heart of the tech bubble and later went through the housing bubble, the growth was less than favorable. With loaded funds, high expense ratios and little to no experience, I received a full out spanking from the stock market. In fact, the roller coaster ride back to my initial investment was nearly 10 years. Thankfully, by that time I was a tad bit smarter. I realized even though I could not control market volatility, I could control expenses. This is why I now invest in the stock market through index funds with extremely low expense ratios.

As I stated before, the stock market can be profitable. However, it is a little bit of a guessing game for the vast majority of “investors”. When you make money in the stock market, you may assume you have superior skills or perhaps psychic powers. I once fell into this line of thinking when I purchased Apple stock. In the end, I was left with regret and considerable reflection of my choice to sell.

 

The Apple Purchase

The year was 2007 and at the time I was in my final year of my college education at Minnesota State University, Mankato. At the time, I was at the peak of my financial prowess. I knew the most I had ever known regarding finance and investing principles. Along with this knowledge was an uncharted understanding and desire to dive into stock investing. Sure I had invested through mutual funds in the past but now I wanted to try buying individual stocks. Of course, my time in economics and other business classes had prepared me for this. After all, I was getting a minor in business administration. How hard could this be? Buy, sell, money in the bank. It all seemed so easy.

On January 9th, 2007, Steve Jobs took the stage in his black turtleneck and announced the existence and the future release of the Iphone. The Iphone was revolutionary because it was much more than just a phone. In fact it would change the way users interacted and utilized a mobile device forever. In anticipation for the release of this game changing phone, I decided to invest a sizeable amount of money in Apple stock.

On January 10th, 2007, I did exactly what a broke college student should not do. I bought 10 shares of Apple stock. The price at the time was roughly $94.50/share. If you happen to glance at the recent Apple price, you will quickly realize what a bargain this was. In fact, it was a steal. Along with the purchase came a rush of endorphins. Frankly, I was eager to play the stock market. Unfortunately, the excitement would later wear off as anticipation of a decline loomed.

 

The Apple Sell Off

This is a not a story of how I lost all my money by buying high and selling low. Quite the contrary, Apple stock was in an upward trajectory when I sold it in July 2017. There was a primary factor that drove my decision to retreat from owning the stock. I was done with college and soon headed off to graduate school. Along with this transition came a steep increase in tuition costs. Also, because graduate school started about a month earlier, it would cut my summer job short. Summer was the time I used to prepare myself financially for the coming school year. Up until then, I had managed to stay relatively unscathed by student loan debt.

My mind became clouded by looming tuition costs and the mind numbing thought that perhaps Apple’s rally would soon end disastrously. I needed the money and it was sitting right there for the picking. In the end I decided to sell my Apple stock on July 26th, 2017 for $147/share. I had made a sizeable capital gain of $52.50/share, 56% of the original purchase price. Not too shabby. Much like a gambler, I was high on my recent win. There was no reason to be other than excited.

 

The Actual Cost of My Sell Off

I made a mistake. But Nate, you might say, didn’t you make money by selling? Yes, I did happen to cash in nearly $560 by selling my Apple stock. I was certainly happy about that but as the months and years past, I continued to watch as Apple share prices climbed further and further with each new product release. I definitely began to regret my decision. A list of “what ifs” began to pop up in my mind. What if I would have kept it for longer? What if I would have put more money into Apple? What if, what if, what if?

The decision had been made and carried out and there was no going back now. The best thing to do was to simply forget about it and move on. However, for your entertainment, let’s look at how much my 10 Apple shares would have been worth today. Until now, I have not actually sat down and done any sort of calculation, so this could get extremely depressing.

The current Apple stock price as of August 18th, 2017 is $157.50/share. If you look at the price only, you would think I chose a decent time to sell. I did sell at $147/share after all. It turns out the price does not completely reflect the overall change in value. In 2014, in response to a nearly $700/share price, Apple imposed a 7-to-1 split, meaning instead of having 10 shares, I would now have 70 shares. Let’s do the math, so now my original $945 investment would be worth $11,025 (70 x $157.50). That’s a $10,080 capital gain or a nearly 28% annual rate or return over 10 years.

It gets worse because the share price only accounts for capital gains. What about additional cash flow through dividends? We could make a fancy table and count all the dividends but I don’t want your eyelids to get heavy. The dividend payouts for the Apple stocks I owned would have totaled $526 from 2007 to present date. That is over half of my initial investment in dividend payments alone.

 

Summary

Looking back, I ask myself, why did I not keep my shares of Apple stock? Let’s be honest, in the grand scope of things, what difference would it have made to keep it? What difference did $560 actually have on my life? If I recall correctly, that was about what rent cost me for my studio apartment.

Hindsight is always 20-20 but as humans we naturally tend to remember the wins more than the losses. Sure, I can sit here and act like I should have kept my Apple stock because it would have been the wise decision. Here it is, I will say it: I was stupid. But at the time, I made money and got out so my stupidity is only based on unknown future events. And as we all know, there is no accurate way to predict the future.

Everyone has made a mistake and will ultimately look back on it with a non-positive recollection. My experience with Apple stock taught me that the markets are not predictable. It can be downright risky. Fortunes can be both made and lost in the stock market. Not only did I learn of the riskiness of the markets but it is what drew me to gain more financial knowledge. Experience is an excellent driver of learning; there is nothing better. It helps you adapt and change.

When investing in the stock market, some people will choose to invest exclusively in single stocks. Some simply need the adrenaline rush. To each his/her own I guess. The final decision is up to you. My experience has led me to invest in low cost index funds so I can get my fair share of the market returns. Sure if there is a stock I am drawn to I will invest solely in it but it will be a small portion of my overall portfolio. I would suggest to those who have the knowledge and desire, don’t fight it but be wary of the possibility of failure.

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