Apple is one of the best-known companies in the world. The maker of the ubiquitous iPhone also makes computers, iPads, peripherals and wearables like the Apple Watch. The company also has a highly profitable services division. As of October 2019, Apple was locked in a back-and-forth battle with competitor Microsoft for the title of largest company in the world, with a valuation of over $1 trillion. But does this mean that Apple is a good investment for you? Here’s a look at what you should consider before investing in Apple stock.
Apple Stock Price History Chart
Here’s a look at how Apple stock has performed over the years vs. the S&P 500. Note that while the long-term performance has been excellent, the stock chart has been, on average, more volatile than the market.
|What Apple Is Worth|
|Apple Stock Symbol||AAPL|
|Apple IPO Price||$22 per share|
|Apple 52-Week High||$230.44|
|Apple 52-Week Low||$142.00|
|All information on 52-week range is accurate as of Oct. 10, 2019.
- 6 Steps To Buying Apple Stock
- Does Buying Apple Stock Fit Your Portfolio?
- Deciding How Much To Invest
- Current State of Apple
- Should You Invest In Apple Stock?
6 Steps To Buying Apple Stock
You can’t buy Apple stock directly from the company, so you’ll have to open a brokerage account to do so. Here are the steps to get an account and buy Apple stock.
1) Choose a Broker
When it comes to brokers, investors are blessed with choices. You can work with a full-service advisor or buy your stock completely on your own using an online broker. Online brokers are cheaper, with some charging commissions as low as $0 for equity trades, whereas full-service brokers charge considerably more but also provide personalized service.
Check out GOBankingRates’ guide to the Best Online Brokerages of 2019-2020.
2) Open an Account
Wherever you open a brokerage account, you’ll need to provide the same basic information, such as your name, address, date of birth, Social Security number, investment objectives and investment experience. You’ll also have to provide a funding source for your account, such as your bank account number. You might also have to provide additional information, such as the name of a trusted contact person and your employment information.
3) Find Apple’s Ticker Symbol
A ticker symbol is typically three or four letters long and is the code you will use when you enter your order to buy stock. Apple’s stock symbol is AAPL.
4) Choose Your Type of Order
You’ll enter a market order if you just want to buy Apple stock at whatever price it’s currently trading.
Specifying a maximum price you’re willing to pay for the stock is known as a limit order. A limit order to buy Apple stock won’t execute until the share price falls to your limit price. For example, if Apple stock is trading at $225 per share but you only want to pay $220, you’ll enter a limit order at $220. You won’t own the stock unless the price drops that low, but if it does fall to $220, you’ll be executed at that price or lower.
A stop order indicates the price at which your order will become a market order. For example, if Apple is at $225 and you enter a stop order at $220, once Apple hits $220, your order will turn into a market order. You might end up buying the stock right at your stop price of $220, but if the market is falling rapidly, the next trade might not be until $219, for example, in which case that will be your execution price.
5) Enter Your Order
When you place your order, you’ll need to enter the ticker symbol, the number of shares you want to buy and the order type. For limit and stop orders, you’ll also need to enter a specific price.
6) Wait for Execution
For an actively traded stock like Apple, you can expect to have your market order executed almost instantaneously. A limit or stop order won’t get executed until the stock price hits your designated price, if ever.
Does Buying Apple Stock Fit Your Portfolio?
Even when the company in question is an all-star like Apple, you should never put your entire portfolio into a single stock. For starters, no company is immune to the business cycle. Apple, just like all other businesses, goes through both boom and bust times. In the event you bank your entire investment portfolio on Apple and it hits a lean time, you could lose a significant amount of your investment. How significant? In 1997, Apple was a hair away from having to file for bankruptcy. Plenty of other well-known companies have filed bankruptcy, from American Airlines and General Motors to Marvel, Lehman Brothers and Washington Mutual.
Apple is far away from bankruptcy now, with a record cash hoard of over $102 billion, but this doesn’t mean the stock can’t trade down significantly. In the second half of 2018, for example, the stock traded down from over $225 to below $150 — a loss of over one-third of its value.
That event taught investors two important lessons. The first is that unless you have an iron stomach, it can be hard to handle the volatility if you’ve got your entire portfolio in a single stock. The second is that the entry price when you buy a stock is an important factor in terms of your overall return. Apple is currently trading near its all-time high of $232.07, so anyone who bought the stock at $225 in mid-2018 doesn’t have much of a gain. But picking up shares near the bottom, at $150, would’ve earned you more than 50%.
Deciding How Much To Invest
Some analysts might coyly suggest that you should buy “as much as you can” when it comes to Apple. But you should only buy the amount that makes sense for your total portfolio. Generally speaking, you want to keep your positions limited to no more than 5% of your total investable assets. Thus, if you have a $50,000 portfolio, you might want to limit your Apple position to no more than $2,500. This is enough to give you exposure to the upside of Apple without taking on too much risk from having a concentrated position.
Ideally, you’ll contribute to your stock portfolio regularly over time, although this type of investment poses some structural challenges. For starters, many brokerage firms charge a commission every time you buy a stock. The commission could eat you alive if you contribute a modest amount, say $100 per month, to your account. Another potential landmine is the high share price. At over $200, it can be hard to make regular investments in Apple, especially if you are trying to keep your portfolio balanced.
The good news is that some brokerage firms, including M1 Finance, allow investors to own fractional shares of stock. This means an investor with only $10 to allocate toward their Apple position, for example, can buy approximately 0.045 shares at a time. Another revolutionary change arrived in October 2019, when some major online brokerage firms, including Charles Schwab and TD Ameritrade, announced they would eliminate stock commissions altogether. This will make it easier for smaller investors to make regular stock purchases.
Current State of Apple
There’s no doubt that Apple is currently firing on all cylinders. In the company’s most recent quarter, ending June 29, 2019, it reported quarterly revenue of $53.8 billion. This amounted to Apple’s biggest June quarter ever. For the next quarter, the company is projecting revenue of between $61 billion and $64 billion.
Wall Street analysts have a consensus recommendation of “strong buy.” But the average price target of $226.33 is not much above the Oct. 2, 2019, close of $218.96, and its price-earnings ratio is at the high end of its 10-year range. At the current share price, Apple stock is not a bargain, and short-term traders might want to consider if there will be a better entry point for Apple stock in the near future. Of course, regular investors who set aside money weekly, monthly or quarterly to buy Apple stock won’t have to engage in the guessing game of where Apple will trade over the short term.
Should You Invest In Apple Stock?
For long-term holders, Apple stock has proven to be a solid investment. No company is immune to the business cycle, but Apple has a long track record of innovation and strong management to capture current market trends and to fend off ravenous competitors. Although no one can predict short-term stock price movements — and the current share price is already near the consensus prediction by analysts — over the long run, Apple stock does seem like a good buy as part of a diversified portfolio.
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Methodology: The GOBankingRates Evaluation assesses a company’s net worth based on the company’s total assets, total liabilities, and revenue and net income from the last three years. Base value is established by subtracting total liabilities from total assets from the company’s last full fiscal year. Income value is established by taking the average of the revenue from the last three full fiscal years, plus 10 times the average of the net profits from the last three full fiscal years, and then calculating the average of those two figures. The final GOBankingRates Evaluation number is the sum of the base value and the income value.