Forever Stock: Can You Handle It Tim Cook?

If you’re new to the blog, please read Steve Jobs Resigns: Why I Hated Apple to understand my struggles with Apple. I sang a familiar tune as I zigged when I should’ve zagged. Last year, I finally threw up the white flag. I surrendered to peer pressure, upgraded to an iPhone 5, and foolishly abandoned my stock sell discipline. I carved out a section of my retirement portfolio, bought some Apple stock, caved to Motley Fool, and classified it as my “forever stock”. I thought holding on to a stock forever was a simple concept. But more than a year later, I learned some valuable lessons.

Don’t Be Late To The Party

From 2007 to 2012, Apple stock was the place to be. If you bought AAPL on the debut of the iPhone, June 29, 2007 at $119.47 (adjusted), your investment would have ballooned almost six fold ($705.07) a little over five years later. Five years is almost a lifetime in this new Internet age. I got complacent and lazy.  I recall thinking, ok finally I’m on board the Steve Jobs train.  Let the good times roll!  iPhone 6, 7, ,8, AAPL $600, $700, $1000. I sounded like LeBron James after the Decision.  We saw how that worked out.  Fierce competition ate Apple’s monopolistic market share while dropping their stock price over 40% from their all time highs.  Ouch.  The cliche is true. If everyone is already in the party, there will be no more buyers left and the only thing left to do is sell.

Sell Disciplines Protect Your Downside

I was successfully using a 8% sell rule on all my stock purchases. Sadly, my selective memory focused on all the money I left on the table when my stocks moved higher after I sold.  I also convinced myself that Apple would never feel an 8% drop and I wanted to correct all my previous Apple misses.  Boy was I wrong.  Funny how we see what we want to see.  I should have recalled Mark Cuban dumping his Facebook shares after their IPO tanked. Now my once forever stock is down over 40% while the S&P is up over 10% for the year.

Holding On Is Not A Sign Of Strength

In reality, holding on after taking a bad beat is not a sign of strength. It is a sign of weakness, laziness, and stubbornness. Every bad drop in AAPL, I rebutted with “It’s not that bad. Things will turn around soon. Take it like a man.” I looked for any excuse for a possible turnaround. Apple bonds, iRadio, iOS 7, Blackberry tanking, etc. Don’t ignore the facts because numbers don’t lie. Logically speaking, isn’t a stock fundamentally broken if it is down over 40% from its high?

Final Thoughts

I am still long on Apple.  But I vow never to repeat these mistakes again.  I will never buy a stock that’s run up too high and too long.  In the future, if I miss the boat, no need to chase because other opportunities are always around the corner. I will never buy a stock without an additional sell order.  I’m a very emotional person and need a system to cut losses to prevent bigger damage. Finally, I will drop my dangerous notion that holding on is a sign of strength.  Due to my low self confidence I desperately grabbed at anything that resembles inner strength (threshold for pain). I now recognize that I was getting exponentially weaker while my stock was getting pummeled. Thank you Tim Cook for my great smartphone and some valuable lessons in the stock market.

Do you believe in forever stocks? Why or why not?

Stay Inspired!
Buck

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8 Responses

  1. krantcents says:

    I never bought Apple stock directly. I own very few (5) individual stocks. I like mutual funds for most of my investments. The only forever stocks for me are biotech.

  2. As my mom always told me nothing lasts forever, and forever is a very long time. I bought Apple but had my high and lows. If it hit my high I would sell off and take profit and buy back on the dip. If it went to my low I would sell off all shares. It hit I think 475 and I was out. Didn’t matter what others were doing I stuck to my guns. Same thing I am doing with P. I got in at 7.50 and have bought and sold and rode it up to 19$. You have to set guidelines can’t worry about what the stock did in the past and surely can’t deal with emotions.

  3. Stock Markets can be good for long term investment, if you buy a house do you check the price every day. No , that’s right because its a long term investment and price will appreciate with time. Same can applied for stocks, If you opt for long term then you can buy blue chips and hold on for long term, you will never regret

  4. I don’t believe in forever stocks because I got burnt twice that way. Unfortunately, my husband has a forever stock. It’s from the place that he worked at for a long time. He believes in the company and his loyalty is involved. Unfortunately the stock is about 30% down from our average buy price. The outlook for the company is bad with every investment analyst forecasting doom for the stock. My husband hangs on saying that it’s not a loss until we sell. I’m working on him to just take the loss and forget about it! The rest of our investments are in a fund geared to our stage in life. There are no guarantees, of course, but at least we are not emotionally attached to anything there!

    • Buck Inspire says:

      I can relate as I’ve been burned more times than I can remember. Guess we are just too emotionally tied to our stocks? That’s a recipe for losing money. It’s so logical, but once the emotions get involved, logic goes right out the window. Have you heard that women make better investors than men? Perhaps our male egos get in our way. Good luck with your future investments!

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