What If I Bought Apple...

At over $650 billion, Apple is the most valuable company in the world. It is also the most popular. Apple's product launches are global events. A best-selling book and Hollywood movie (coming out in a few weeks) mythologize its origin story. Dr. Dre is an employee. Apple is the business version of the 90s Bulls. Apple's popularity isn't limited to its products. There are equally zealous fans of its stock. Owning Apple has been a rewarding experience. Over the last 5 years, Apple investors have tripled their money. Investors in the S&P 500 index have merely doubled theirs.

There is a tendency, even among those who have owned Apple, to daydream about having jumped on board even earlier: "But what if I had bought Apple right after its IPO in 1980?!"

The chart above is truly what investors' dreams are made of. A $1,000 investment in September 1981 would have turned into nearly $500,000 today, a 50,000% return!!!

What an easy playbook. Buy Apple stock, hold for 35 years, write a 1-page how-to guide about the greatest investment strategy of all time.

But the real story is not that simple. Let's zoom in on the first half of the chart.

If you invested $1,000 in Apple stock on the day it IPO'ed and held it through 1997, you would have been left with $846.15. That's a 17-year hold!

Much more stomach churning than that though, is imagining a few of the following slides.

Over two-and-a-half months in 1991, you would have lost 43%.

Over two months in 1993, you would have lost 51%.

And the biggest nauseator: when the dot-com bubble burst in late 2000, you would have lost 77%.

In other words, if you look longingly at the first chart, you also have to consider how many days, months, and years you would have spent kicking yourself for not selling or for even buying in the first place.

You most definitely would not have sat there in December 2000 calmly telling yourself: "just be patient, within 10 years Apple will reinvent how people listen to music, use phones, and access the internet, all with products that have insane profit margins that people will sleep overnight outside Apple retail stores to buy."