People holding stock of Apple (AAPL) are wondering what the heck is going on. The stock has plummeted from a high of over $705 to a low of $435 in a period of 4 months. Wow.
Apple was the darling of all stocks just a while ago, touted by most financial analysts and stock pickers. Now they are questioning the stock and whether or not the company will rebound.
Consider that most financial planners will tell you that you cannot time the market; you need to buy and hold. If you are going to buy a stock with the intentions of selling it when it gains a few points, then you are a trader – not an investor. An investor buys with the intention of holding for a period of years, not days.
That being said, what if you had listened to the stock pickers that were telling you to buy Apple just a few months ago, when the stock was just under $700?
Let’s assume you had $10,000 to invest back in September of 2012. Listening to the talking heads, you decided to jump on the Apple bandwagon. You plop down your $10,000 on Sept. 10th when the stock was trading at $662.74. You are now the proud owner of a whopping 15 shares.
You feel smug as you watch the stock climb to $702.10 just 9 days later.
Four months later, you check the stock price and you are stunned to see it trading at $439. Your original $10,000 investment is now worth $6585 – a loss of $3415 in 4 short months.
After you take some antacid tablets, you ponder what to do with the stock. The talking heads on television and radio are saying that Apple has seen its best days and that the sales of the iPhone 5 were disappointing. The mystique of Steve Jobs is gone and the company is now being headed by a bunch of conservatives.
What do you do?
What you don’t do is panic and sell. The company is still financially super strong and has so much cash that it is beyond comprehension. Last quarter alone the company had over $54 Billion in sales and over $13 Billion in profit.
Smart investors – note I said investors, not traders – will double down on Apple and buy it now at these low levels. After you buy, put it out of your mind and concentrate on some other company that has been beaten down – then buy that too.
You see, it is really quite simple; successful investors always buy great companies when they are being beaten down. They put the stock in their portfolios and forget about it.
Amateur investors buy a stock when the media is gushing about it, and then sell it in a panic when it heads south. Don’t fall into that trap.
In the case of Apple, consider that we have just seen the clock rolled back in time, and we are seeing a great opportunity – if we do two things:
- Ignore the news on Apple
- Hold the stock for ten years
Make Apple a ten year plan, meaning buy it with the intention of holding it for ten years.
Had you bought Apple in January, 2003, ten years later in January 2013, you would be realizing a 12,945% increase and you would be popping champagne corks instead of antacid tablets.
That’s the way to invest.