Should you sell your shares in Apple?
My mother asked me this question a couple of days ago. Shares in Apple dropped 10%. Tim Cook admitted iPhone sales in China were poor.
Before this day, Apple shares had already dropped 35% from its high of $233.
Apple… No Longer a Great Investment?
For investors, Apple has for a long time been a great company. People covet their products. Sales are great. Earnings are even better. Year after year after year.
It’s this predictability of growth that puts a smile on the face of investors. It’s been years since Apple has encountered any challenge to its business. There’s been concern about iPhone sales before but the last real time was 2011, when Steve Jobs died.
Then, like now, fear overwhelmed reason.
Fear Grips the Apple Investor
If you’re like my Mom, fear sets in when watching your investment go from a 4-bagger to a 3-bagger in a few months.
Psychologists call it loss aversion. The feeling you get when you see your money disappearing. It’s a challenge but this is when you need to breathe deeply and recall why you invested in the first place.
A good investor has a thesis that supports their decision to invest. For Peter Lynch, it started by putting his investments into categories. “Fast Grower” or “Value Play” made it easy to recall why he invested in companies.
My Mom, like many others, didn’t have an investment thesis. She bought the shares because of my suggestion. As a result, fear overwhelms reason and the urge to panic sell begins.
Patience is your Ally
To be a good investor, it’s important to cultivate patience. There are many reasons to cultivate patience but one is to avoid overreacting.
I read Guy Spier’s book on investing and he has a great rule that forces patience. Let’s say a company has bad news and it challenges his investment thesis. He waits at least one financial quarter before selling.
Lots of people sold their Apple shares immediately after Tim cook’s warning. Perhaps they’re right and this is the beginning of the end for Apple. No one knows for sure.
One thing I do know is that this is not the first time fear has circled Apple. I remained calm in the past and kept my shares. Can you guess my reward?