A Great Reason to be Investing
March 22, 2012
Quick poll: You received a $500 windfall. Do you add the extra dough to your IRA or buy the new iPad?
While three million consumers seem to have already made that decision, perhaps the “iPod index” may change your mind.
A year ago, I illustrated the power of investing by comparing buying the company’s products versus owning Apple stock. The idea came from UC Berkeley graduate Kyle Conroy whose blog was picked up by The New York Times. Kyle listed the price of Apple products over the years and then figured out how much that money would be worth if the consumer had invested in AAPL instead.
For example, the most powerful laptop from Apple in November 1997 cost $5,700. A year ago, you could purchase an identical PowerBook G3 250 on eBay for about $50.
If you had invested that $5,700 in Apple stock instead, which closed at $602.50 yesterday, your portfolio would be worth more than $750,000 today.
With the dramatic climb in stock price over the past few years, the Financial Times puts this idea of the “iPod index” in graphical form. The newspaper shows how an investment of $399 in AAPL (instead of the original iPod) would be worth $26,000 in March 2012. Read FT’s “Apple downloads $45bn to shareholders now”. Password required.)
I believe this illustration gives you only one great reason to be investing today because AAPL isn’t the only company worthy of your IRA. In the S&P 1500 Index, about half of the companies are growing their revenues at more than 10 percent, faster than the U.S.’s overall GDP.
Also, remember that Apple doesn’t fall far from the global resources tree. The company relies on many energy, materials and utilities businesses around the world for its continued success.
If you’re still trying to decide how to spend your $500, remember that you have until April 17 to contribute to your IRA for tax year 2011. At U.S. Global Investors, we make it easy to invest—you can open an IRA account online or call us at 1-800-873-8637.
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The S&P 1500 Composite is a broad-based capitalization-weighted index of 1500 U.S. companies and is comprised of the S&P 400, S&P 500, and the S&P 600. The index was developed with a base value of 100 as of December 30, 1994.
The following securities mentioned were held by one or more of U.S. Global Investors Fund as of 12/31/11: Apple, AT&T, Google.