Woulda, Coulda, Shoulda: Investing in Apple in 1997

Imagine if you had bought 100 shares of Apple Inc. (AAPL) at $17 per share in 1997. This hypothetical scenario might seem unbelievable, but it can provide a compelling case study on the power of long-term investments. Let's break down the investment and see how it has fared over time.

Initial Investment and Stock Splits

Assuming you bought 100 shares back in 1997, your initial outlay would have been:

$17 per share * 100 shares $1,700

Since then, Apple has undergone several stock splits, which have affected the number of shares you would hold today:

In June 2000, Apple had a 2-for-1 stock split. In February 2005, another 2-for-1 split occurred. A significant 7-for-1 split happened in June 2014. The most recent split took place in August 2020, this time a 4-for-1 split.

Now let's calculate the number of shares you would own today:

After the 2000 split: (100 times 2 200) After the 2005 split: (200 times 2 400) After the 2014 split: (400 times 7 2,800) After the 2020 split: (2,800 times 4 11,200)

So, your 100 initial shares would have grown to 11,200 shares as of today.

Current Value and Return on Investment (ROI)

As of August 2023, Apple's stock price was approximately $175 per share. The current value of your 11,200 shares would be:

$175 per share * 11,200 shares $1,960,000

Now, let's calculate the return on investment (ROI):

ROI (frac{$1,960,000 - $1,700}{$1,700} times 100 115,588.24%)

This astonishing ROI represents over 115,000 percent growth from the initial $1,700 investment to a current value of $1,960,000. If you had bought 100 shares in 1997, you would now own approximately 11,200 shares representing a nearly 2,000 percent increase in share count and a compounded return on your investment.

What If You Had Not Reinvested Dividends?

Even if you did not reinvest dividends, the financial impact would still be significant. Assuming you sold the 11,200 shares as of March 2024, the total value would be:

$175 per share * 11,200 shares $1,960,000

If you chose to sell the shares, you could net around $3.8 million. However, this sale would also trigger capital gains tax. Assuming a long-term capital gains rate of around 15% for federal tax, the tax liability would be:

$1,700 initial investment * 11,200 shares $1,960,000 - $1,700 $1,958,300 15% tax 0.15 * $1,958,300 $293,745

This calculation might be slightly simplified for state taxes, which can range from 0% (if you have no state income tax) to around 13% in some high-tax states, adding an additional $247,474 to the capital gains tax liability, making the total approximately $541,219.

Therefore, the net value after taxes would be approximately $3,800,000 - $541,219 $3,258,781.

Conclusion

This case study provides a vivid example of the power of long-term investments, especially in a strong, sustained growth company like Apple. The stock market can be unpredictable, but with patience and the right company, substantial returns can be achieved over decades.

Key Takeaways

Initial Investment: $1,700 in September 1997 Current Shares: 11,200 Current Value: $1,960,000 Return on Investment (ROI): 115,588.24%

Woulda, coulda, shoulda—buying Apple just one century ago could have changed your financial future dramatically. This exercise serves as a useful reminder of the potential rewards of long-term investing in strong, growth-oriented companies.