On June 29th, 2007, Apple released the first iPhone. The 4GB model was priced at $499.
If instead of buying the phone, you invested $500 into Apple stock on June 29th, 2007 – how much would you have today?
$29,079.14
It’s an astounding annual rate of return of 27.02%.
(source: Stockchoker, fueled by Yahoo! Finance data)
If instead of Apple stock, you had put it into shares of SPY, an S&P 500 ETF, you’d have just $2,519.14. The SPY had a pretty solid run too, an annual rate of return of 9.99% through several very tumultuous economic periods.
It just wasn’t the run that Apple had!
You will often see these comparisons because they support the idea that you should pick individual stocks.
They often fail to provide counterexamples.
Can you name the ten biggest companies by market cap in 2007?
- Exxon Mobile
- General Electric
- Microsoft
- Citigroup
- AT&T
- Bank of America
- Proctor & Gamble
- Wal-Mart
- Pfizer
- Altria Group
(for what it’s worth, Apple is 33rd on the list)
Want to know how much $500 in those companies would be worth today, had you invested it in June of 2007?
| Company | Total Return | Annual Rate of Return |
|---|---|---|
| Exxon Mobile | $1,190.03 | 5.24% |
| General Electric | $688.43 | 1.90% |
| Microsoft | $10,516.37 | 19.64% |
| Citigroup* | $82.72 | -10.05% |
| AT&T | $767.62 | 2.56% |
| Bank of America | $597.55 | 1.05% |
| Proctor & Gamble | $2,255.05 | 9.27% |
| Walmart | $3,040.85 | 11.21% |
| Pfizer | $1,133.42 | 4.94% |
| Altria Group | $2,940.17 | 10.99% |
Only Microsoft came close (a liberal use of the term) and it still only returned half what Apple returned.
Want an even more extreme example? $500 in Nvidia back then would be worth $107,330.59 today with an annual rate of return of 37.17%!
But back then you were buying a stock that cost $0.69 a share and you’d have to wait a long time before it even broke $1 in May of 2016.
And it was 640th on the Fortune 1000.
Someone invested in it but to believe you would’ve is ridiculous.
And to believe that if you had bought some stock picking service or worked with an investment advisor, you would’ve found it is a bit of wishful thinking.
Those incredible investment returns rely on outliers. Companies that very few people were paying attention to catching fire (or more accurately, a new wave of technology).
And outliers are far easier to identify after the fact. 🤣