Investing is rather like music. Music has a beat to it — and so has investing. There is a rhythm to the ups and downs of share prices. Tune into this rhythm, stay in sync, so that you buy at the dips and sell at the peaks, and you make money. If you are out of tune, and miss the beats, then you can just as easily lose money.
Apple (NASDAQ: AAPL) was one of those companies I was never quite in sync with. At the end of 2012 I tipped the business as a contrarian buy, when it was priced at a tad over $500, having fallen from $700. Some 18 months later, the shares stand at $633, with the trend clearly upwards.
Many a slip….
This sounds like another successful investment story. Except, for me, it wasn’t, because of what came in between then and now.
Now, if I was a machine, I could buy the shares, tuck them away as part of my portfolio, sit out the short-term fluctuations, and sell once the share price was comfortably in profit, collecting and reinvesting dividends as I go. After all, Apple was priced below the average P/E ratio of the US stock market, was the most cash-rich company in history, and had a key stake in the immensely strong long-term trend towards smart phones, tablets and mobile/wearable tech.
Easy peasy lemon squeezy — who ever said investing was difficult?
Emotions are the most difficult part of investing
Except, of course, I’m not a machine, but a human, and susceptible to all the hopes and fears that humans are prey to. And these emotions can make investing the most difficult thing in the world. And that’s why, to me, this company was the apple that fell from the tree.
I bought Apple shares at the end of 2012 at $530. But the share price kept falling. I baled out at $500, rather rattled by all the negativity surrounding the stock. The share price still kept falling. The shares eventually bottomed at $390. At this price (hindsight is just too easy) it was a screaming buy. But of course I didn’t buy.
Sometimes, if you just can’t get the rhythm of an album, you listen to a different CD instead. There are always other investment ideas and opportunities. If one falls through, you just try another.
So what have I learnt? What can I do better? Well, most investors, me included, are too impatient. As soon as I had the idea of buying Apple, I was just too eager to buy. As an investor you need the ability to have a great idea, and then to file that idea away, ready to try at the appropriate time. Think ‘watch lists’. Wealthy investors tend to be patient investors.
I still believe in the Apple story, with its key role in the trend towards a world of ubiquitous tech. But I just won’t be investing in this particularly story.