Moving money from Orange savings to Apple stock paid off big
As a compulsive saver who is increasingly frustrated by pathetically low interest rates, I’ve been driven to more drastic measures to earn a decent yield on my money.
In the past year, I’ve started tinkering with day trading, and I’ve been putting more of my cash in stocks.
I realize I’m taking on more risk, but if my only “safe” option is to earn 0.8%, then I’ll try juggling chainsaws if I have to.
When you consider inflation averages 3% annually, you are already losing money when you put it in a CD or savings account.
I don’t like to lose any money, but if I’m going to lose 2% right off the bat, I’ll take a chance on losing 10% if it means I can also have a chance to earn more.
So in another drastic measure and experiment, I invested some nonretirement, short-term cash in Apple stock in October.
I’m not a member of the Apple Cult, but as an investor, I’ve always viewed it as a great company with innovative products, millions of devoted followers that will pay any price for them and a solid balance sheet.
I’ve never bought Apple stock because I generally don’t like buying a stock when it’s at its all-time high.
Unfortunately -- or fortunately, depending on whether you’re buying or selling it -- Apple stock always seems to be near its 52-week high.
Even though he wasn’t CEO at the time, when Steve Jobs passed away on Oct. 5, 2011, I figured Apple’s share price would at least take a temporary hit.
So I took $3,000 of some money I had rotting away in my ING Direct Orange Savings Account earning 0.8% and bought some stock in Jobs’ beloved company.
To be exact, I bought seven shares at $424 per share for a total cost of $2,970.
My bet was wrong: Just as Wall Street hadn't cared less when Jobs stepped down as CEO in August, it didn’t even care much that he had died.
I bought anyway, and it didn’t matter. The stock grew at an even further pace, and Apple continued to report record-breaking quarters, continually beating analyst estimates.
Today, less than six months later, Apple is trading for over $625 a share. That makes the market value of my investment about $4,400.
It’s true that no stock gain can be considered official until you sell it and realize that gain. But if I were to sell off my position today, I’d net over a 40% return.
But I’m not naïve. I know that what Wall Street giveth, Wall Street can taketh away.
Over the past five years, Apple has generated a 500% return. Over the past 10 years, it has generated an average of 44% per year.
Everything seems good, but can it really sustain this growth? Is Apple stock a bubble that will eventually burst?
This isn’t a company that’s never going to be a poor performer, but can it continue to grow at this pace? What’s to say its growth won’t at the very least slow down over the next few years?
No one knows. Anyone who claims to know doesn’t even know enough. Billion-dollar portfolio managers don’t know; Jim Cramer doesn’t know.
They only make highly calculated decisions. If you or I think we know what a stock is going to do, we’re damn fools.
So, to protect myself against any downfall and stuff that I don’t know, I’ve put in a stop-loss order at $533 to protect not only my principal but a 25% return.
That means that no matter what happens, I’ll still walk away with 25%. That’s exponentially more than I’d earn in a CD or savings account.
Of course, things could have gone the other way and I could be griping about my loss, but the only thing I’ve regretted so far is that I didn’t start taking more risks with my money earlier on.
Pathetic 1% yields just aren’t going to cut it anymore. You’re going to have to venture down some dark alleys and think outside the box if you want to earn a yield these days.