Don’t Let Today’s Volatility Rob Your Future Wealth

Don’t Let Today’s Volatility Rob Your Future Wealth

Today, Microsoft and Apple are the two largest companies in the U.S. by market cap.

Their combined value is nearly $6.5 trillion. That’s greater than the GDP (gross domestic product) of every other country in the world, save China and the United States.

But the climb to the top of the mountain wasn’t straight or fast. Both companies experienced incredible volatility in their early years.

From 1987 to 1988, Microsoft saw plunges of 36% and 82%, respectively. And Apple experienced crashes as much as 69% in 1982 and 71% in 1984.

Since going public, Microsoft is up 413,172% and Apple 181,346%. That’s enough to turn $1,000 into $4.1 million and $1.8 million, respectively.

If you were an early investor in these two companies, the volatility was gut-wrenching. But to stay in for the long haul, all you needed to know was one thing.

They were about to see mass adoption.

For Microsoft, it was the exponential growth of the personal computer. For Apple, it was our ravenous appetite for music players and smartphones.

When I bought Microsoft stock in 1990, only 15% of homes had a computer. Today, 75% have at least one.

To make money on Microsoft, you didn't need an accounting degree or to be an expert in behavioral finance.

All you had to know was that Microsoft had a monopoly on the operating systems that powered personal computers and that personal computers would go from a small, niche market to a large, global market.

That was it.

As for Apple, I first recommended shares in 2003, when the stock was trading at a split-adjusted level of just $1.34.

It’s hard to believe it today… But at the time, many people thought Apple would file for bankruptcy. Back then, the stock was down about 83% from its all-time high.

What drew me to Apple was the iPod. It was the best digital music player I’d ever used. I loved it. But it was only available to folks who had Apple computers.

But I read in one of Apple’s quarterly reports that the company was planning to launch a version compatible with non-Apple PCs. This was a classic case of going from a small, niche market to a massive market.

To me, it was a no-brainer that Apple had to make a boatload of money selling its high-margin music player to PC owners hungry for an easy-to-use mobile music solution.

I was 100% correct in my assessment, but the journey higher was not an easy one.

Apple’s legendary founder, Steve Jobs, grew disgusted with the stock performance. In an effort to get his stock options repriced, he canceled millions of them. He feared that Apple’s stock would never recover to where his original options were priced.

This news spooked then-shareholders and the stock dropped as much as 16% from its 2003 highs. That’s after the stock had already fallen 80% from its highs in 2000.

Can you imagine the phone calls I had to field from my clients? They wanted to know why we were still in a stock that even the founder had clearly lost faith in.

I explained to them that I couldn’t speak for Jobs… But nothing could stop the global adoption of the iPod.

And I was right.

The next year, Apple shipped 4.4 million iPods. Over the next three years, it would go on to sell 52 million.

The company then followed that up with the iPhone in 2007 (another global adoption story)... Since then, the stock has been up as much as 5,490%.

Here’s the thing…

The opportunity to make those types of gains in Microsoft and Apple are long gone.

It’s true. Since their 2022 lows, Microsoft is up 89% and Apple is up 77%. That’s an incredible run for multitrillion-dollar companies.

But the days of returning 100x, 50x, or even 10x gains are long gone for these behemoths. You’ll never see life-changing gains from them again.

Which is why we should be looking at something else today for that opportunity…

Investing in the Future Is Never Easy