Is it possible that Apple could wind up paying for your new iPad or iPhone? That’s the question a reader asked Matt Krantz at USA Today Money.
Krantz’s reply: “While your question might sound outlandish, it’s not only true, but actually understated. It turns out that had you bought Apple stock at the end of 2011, you could have bought six iPads by mid-March.”
With most stocks, a plan like this would be ill-advised. Buying shares of a company, hoping to flip them in a few months to buy an expensive item would be definitely not recommended. Apparently though, several of Krantz’s readers are doing just that. They buy Apple stock, watch it soar, then cash out and use the profits to buy Apple gadgets.
A strategy like this would’ve worked like a dream this year. Krantz says, “Consider an investor who bought $10,000 of Apple stock on Dec. 30 when the shares were trading for $405 a share. The investor would have been able to buy 24 shares of the stock.
“Fast forward to March 16, 2012, the day the latest iPad was released for $499. Shares closed that day at $586, meaning those 24 shares would be worth about $14,000. Yes, you read that correctly. In just three months, the investor would have gained $4,000 on the $10,000 investment.”
End result: Investors who bought just $10,000 in Apple stock on Dec. 31 could buy six iPads, even after paying the government their pound of flesh.
Krantz does warn investors thinking of trying this strategy that there are pitfalls, “Remember that Apple stock can correct, especially considering how rapidly it’s risen. If there’s any disruption in the company’s business, a severe downturn in the stock would be expected. And that’s why using the stock market for quick gains, traditionally, has not worked out well and is not a good idea.”
Personally, I sell my old gadgets to help finance my new purchases. The stock market is a volatile place, and those dabbling in it would be well advised to get the advice of a professional before making any moves.