How Much Apple Stock Is Safe To Own?
By Michael Vaughn, CFP®
Few could imagine Apple’s wild success before 2001 when it released its iPod. Founded in Steve Jobs’s garage in 1976, Apple has enjoyed exponential growth over the last two decades, releasing a seamless stream of devices to the public that has continued to be instant hits with consumers, including the iPhone, Mac, Apple Watch, and Apple TV. (1)
Given the enormous historical success of the company, Apple may seem like a foolproof investment. However, Big Tech has fallen under Congressional scrutiny in recent years, and Apple, in particular, faces pushback from regulators over the App Store’s high commission rate, among other issues. (2) So how much Apple stock is actually safe to own?
The answer to this depends on the individual, their financial situation, and their wealth management strategy. It also could depend on external risks that Apple is facing. But those regulatory concerns aside, here are three major points that we at Pinnacle Financial Advisors encourage our investors to adhere to when considering investing in “hot” stocks such as Apple.
1. Investing Comes With Highs And Lows
Any company, no matter how “hot” it may seem, will go through periods of negative performance. This is just the nature of the stock market. In this specific example, certain Apple product lines are maturing, such as the iPhone, and investors are wondering what new product will drive Apple’s next growth period. Luckily for Apple, the company has been on the frontlines in its production of wearable technology, but what if consumers do not favor next year’s prized product line?
When you are investing, it’s important to remember that all stocks will go through peaks and valleys. Play the long game when it comes to investing and don’t drop a stock just because it has hit a period of rocky performance.
2. Don’t Rely On One Asset
Another point to remember is that the value of diversifying your risks is muted when one stock makes up a significant portion of your overall portfolio. Relying on one “hot” stock will not help you build stability in your wealth management plan. This is because holding one stock or only certain stocks from a particular industry can go through prolonged low periods, and if you are overinvested in this company or industry, this can negatively affect your portfolio and wealth management plan.
3. The Dangers Of Company Stock
The aforementioned problem may be compounded if you work at the same company in which you are investing. For example, if you work at Apple and hold stock options, everything will probably be stable for a while, but what would happen if the company had to start laying off employees? And consider what your options would be if the stock price plummets because of this.
Considering its success, it is difficult to think about this becoming a reality for Apple. But remember, the same was thought about the newspaper industry throughout the 20th century. Then, with the rise of the internet, fewer people relied on newspapers, and companies’ stock, including the stock options held by employees, plummeted. The ramifications of this are still felt by people who built their careers in the newsroom and tied their portfolio and retirement to the industry.
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If you are considering updating your portfolio, or if you have questions about whether your portfolio will result in your desired outcome, please reach out to us. Schedule your complimentary introductory meeting by emailing me at [email protected], calling (417) 351-2942, or using my online calendar.
Michael Vaughn is a Certified Financial Planner™ (CFP®) and Vice President at Pinnacle Financial Advisors (PFA) with 20 years of industry experience. Before joining the PFA family, he served clients with investment management and retirement planning at The Mutual Fund Store for 14 years. Michael graduated from Missouri State University with a bachelor’s degree in business administration and management and earned his CFP® designation in 2004. He also served 20 years in the Missouri National Guard, retiring in 2007 as a Major. He currently volunteers on the board of directors for Good Dads and Fellowship of Christian Athletes. Michael is married to Lori and they have two daughters. To learn more about Michael, connect with him on LinkedIn.