I received the following story from a client the other day:
Hi Corey! I hope all is well with you and your family. I had to share this story with you about my mom. She is 92 and is currently in an apartment in an assisted living home that she has lived in for 14 years. She is requiring a bit more care now and in order to do that, the home required a new financial statement. My mom has very little assets but was always very proud of her Apple stock shares. No one was quite sure how much she had but in completing the required forms, we found some really interesting info!
Mom only purchased Apple stock one time, 20 shares on July 26, 1991 at a cost of $.326 per share for a total investment price of $6.52. On June 20, 2000 it split 2 for 1, giving Mom a total of 40 shares. Another 2 for 1 split on Feb 25, 2005 resulted in Mom having 80 shares. When she went into the home in 2008, those 80 shares were worth just $6,800. A June 2014 split of 7 to 1 resulted in Mom having a total of 560 shares. And the Aug 28, 2020 split of 4 for 1 resulted in Mom’s current holding of 2,240 shares, worth today $332,147*.
Needless to say, the home is planning on raising her rent!
This is a fun story and fantastic to read but there’s one main point. Owning good companies for a long period of time gives you a greater chance to create wealth. Period.
Think about what has happened since 1991. We’ve had 5 Presidents, 2 of them Republicans and 3 of them Democrats. The 10-year treasury has yielded as high as 8.12% and as low as 0.59%. There have been a dozen civil wars around the world and the U.S. military has strapped on their own battle helmets to participate in 11 conflicts. Four times since 1991 the S&P 500 has finished the year down double digits. 17 of those years you experienced a double digit decline at some point throughout the calendar year and four times you had to suffer through a 30% or greater decline during the calendar year.
And yet a tiny investment 30 years ago grows to more than the current median value of a home in the U.S. Why?
She waited and was patient. That’s easy to do in hindsight. It’s much more difficult in the day to day of real life. There were opportunities to sell. Plenty of opportunities. Actually, the market was open approximately 7,500 days since 1991. Scary headlines showed up in her mailbox and there were definitely significant pullbacks in the stock price over time. She held her shares.
Apple continued to grow their earnings and she was an owner. This didn’t happen every second of every day, but over time they grew a great business. Median U.S. income was $55,992 in 1991. It’s now closer to $68,000. Inflation adjusted per capita net worth was $88,000 in 1991. It has grown to $121,000 today. Apple had a product as wealth increased that people wanted to buy. Apple made a profit. That profit was shared amongst the owners of the company. She was an owner.
Warren Buffett has been quoted as saying "Someone's sitting in the shade today because someone planted a tree a long time ago."
Owning good companies for a long period of time usually creates wealth. Period. The hard part is figuring out who those good companies are. We’re here to help.
*Based on closing price from 11/14/2022
**This is not a recommendation to buy, hold, or sell Apple.
***The experience sited here is for illustrative purposes only. This is not an offer or solicitation of an offer to buy or sell any securities, products, or services. This is not the experience of all clients. Each investor's situation is unique, and there is no guarantee of the same or similar results. All investments carry some level of risk, including loss of principal.