… were in attendance at the Apple Shareholders meeting a few days ago.
My question is are they millionaires only on paper? As written before, been there, done that. My personal quest besides having equity based assets valued at a million, that there is at least that amount in cold hard cash. What stock I still hold from pre-1998, I consider “invisible” and meant as the real nest egg. Since 2007, the goal is to turn whatever I’ve invested in, into funds which I can live off of for at least 10 years prior to reaching the 60-something age where I reach full retirement age.
As written in my investing adventures series, I could’ve been doing that now had I followed my original strategy; the total amount of shares I owned then, taken with the 2-for-1 splits in both 2000 and 2005, would be worth a mid-8 figure sum based on Friday’s $520 share close. It would have been easy to just sell 2000 shares and let the rest ride for at least a few more years.
As far as this article, the one tidbit I “liked” was the “beginning to spend lavishly” part. Unfortunately, that is the indulgence trap which can easily make $1 or 2 million disappear quite easily when one begins taking part in a upgraded lifestyle. This becomes a non-issue though if you’ve managed to get into the upper 8-figure crowd (where the value of money begins losing its intrinsic value).
First class travel all around, 5-star hotels, a nice new home in an exclusive community, the luxury cars, etc. in a day and age where a dollar does not go as far as before, means being a millionaire not necessarily equating to financial independence. I’m definitely not saying that one should be a scrooge and penny pincher either. That is the opposite end of what some self-made millionaires do where they cannot stand to see the value in their accounts drop. What I’m saying is taking a disciplined approach during the divesting process. It’s okay to treat oneself to the fruits of their efforts so long as one is mindful that they aren’t rapidly eating into their overall wealth by taking part in an continuous lavish lifestyle.
At the opposite end are those who spend like there is no tomorrow where they end up back where they started (not having enough to maintain their current lifestyle). I still remember during the dot.com boom, how a number of employees at various Internet startups were purchasing luxury vehicles and expensive homes around the Bay Area. There were some then twenty-something year olds at companies like Excite who were driving around in Ferrari’s and Lamborghini’s. The money was thrown around like it was going out of style. The problem is that many of them were being compensated mainly in the form of employee stock options which had vesting periods of 3-5 years from when they were granted. On paper, quite a number of these folks were multi-millionaires due to how their stocks were heading into the stratosphere. So they spent lavishly, hinging that the payday would be around the corner when they could cash in those options down the road onto easy street. When the bubble popped, so did the dreams of many of these employees. They had to sell those cars and property. Some basically faced bankruptcy. Sobering is an understatement.
Equities are no different. The gains are only on paper and aren’t locked in until they are sold. The person noted at the end of the article says he can’t bring himself to sell the shares. One important thing I learned from my own investing travails is to leave the emotions at the door. Loving a companies products and the company is one thing (myself, both are at times, love/hate affairs). When one is investing in that company, loving the company stock to the point where you can’t part with it isn’t what I’d call prudent (more so when like myself, am knowingly overweight in AAPL). One needs to have clear goals which includes a time frame, an exit strategy, and contingency plans based upon various (micro/macro) circumstances (I have these what/if scenarios going on all the time).
Apple is currently a very well executed machine BUT that doesn’t mean there can’t be roadblocks and potential stumbles in the future. These things, I am all too familiar with, and know that the bigger they are, the harder they fall… and that what goes up, eventually has to come down. My own targets are in the $700 per share range or 2015, whichever comes first (at which point, I’ll evaluate my objectives based on the information available at that particular time).
As for some investors not being happy about the lack of news about what Apple plans to do with their cash hoard, one word… perspective. I jokingly posted about not seeing a sizable buying opportunity dip after the lack of such news. I failed to provide a serious opinion on why that huge dip didn’t occur. Two words; Tim Cook. He brings a sense of stability and rationality to the table by his words. The street gets that, which is why the reaction was muted. The key is that management is saying they are seriously looking at various options and taking their time to decide the best course of action. Yes, it makes sense to do something with a portion of that growing cash hoard, but only if the decision is well thought out. Apple will announce their intentions on their time, not what a few Wall Street analysts want. I have absolutely no problems with that since patience can be a virtue. Furthermore, we’re (investors) seeing our money grow as it is based on the way they’ve been doing things.
Personally, I don’t care about a dividend (going to get taxed on it) though I do understand the rationale that it could cause the share price to appreciate even higher as investors and funds who prefer dividend bearing equities, purchase it. I really don’t care if they don’t split the stock since it really is mostly meaningless. Myself, I’d have no issues with a share repurchase program, mainly during those times the stock is taken down due to external factors. Regardless, we’ll all just have to wait and see what Apple will eventually decide to do with their cash balance.
