Apple Stock In Trouble: Here’s Exactly What To Do

  • Apple stock took a dive on the first day of trading in 2023 as the supply chain rumor mill kept churning.
  • Get ready to come across a plethora of opinionated articles either arguing that AAPL is a stock (1) to avoid on weakness or (2) to buy on the dip.
  • I think it is much better to set aside our defective crystal balls and be more strategic about the investment approach.

Figure 1: Apple Stock In Trouble: Here’s Exactly What To Do

Unsplash

(Read more from the Apple Maven: 7 Fun Facts About Apple Stock In 2022)

What To Do About Apple Stock

If having lost 27% in 2022 was not enough, Apple stock spent most of the first trading session of 2023 down somewhere between 3% and 4%.

Bulls and bears are probably a step further apart on what they think should be done about Apple trading at around $125 apiece – the lowest levels since the first half of 2021. Sell the stock to avoid even more pain, or buy this dip?

Honestly, I don’t know with certainty which route is the best to take. Even more honestly, nobody does, since the future can not be predicted with much precision or consistency. Instead, I suggest that every AAPL investor does the following next:

#1. Ask Yourself: What’s The Goal?

I have too often fielded a few versions of the question: “should I buy XYZ stock today?” To be frank, I think that this is a bad question. The better ones are: “what am I trying to achieve, and what investment move is most appropriate for me given my goals and risk tolerance?”

So, I urge Apple stock investors (and potential investors) to know thyselves first. Are you trying to make a quick buck over the next few days, weeks or even handful of months by trading Apple shares? Or are you looking to create wealth, possibly slowly, over very long periods?

#2. Brace For Impact In The Short Term

Apple traders should know the kind of game that they are playing. Buying and selling stocks quickly in an attempt to properly time entries and exits is a zero or near-zero sum game.

Here’s one way to illustrate the point:

  • Since Apple’s IPO in 1980, the stock NEVER produced negative returns over any 20-year period. That is to say: historically, and given a time horizon of two decades at least, it has been impossible to lose money on AAPL. And keep in mind that, between the early 1980s and the early 2000s, Apple investors witnessed several recessions, a bankruptcy scare, and a tech-stock meltdown.
  • But over any given 90-day period, Apple stock gained as much as 153% in 1982 and lost as much as (are you ready?) 77% in 2000! In other words: virtually anything can happen (and almost everything HAS happened) over short periods.

So, over the next few weeks and months, investors should understand that Apple stock can rally or crumble – and they must be mentally prepared to face either outcome.

If the risk tolerance is too low to weather the potentially sharp ups and downs, then investors should rethink how much Apple stock they own in their portfolio.

#3. Expect Superior Returns In The Long Term

Having said the above, buying and holding Apple stock for the very long haul makes even more sense when shares are bought on weakness – as is the case now.

This is a point that I have made many times on this channel. The chart below shows that, since 1980, buying AAPL during a 30%-plus dip from the all-time highs has produced average 12-month gains that are nearly 15 percentage points better than historical average.

Figure 2: Average one-year return on AAPL, by strategy.

DM Martins Research

As I type this sentence, Apple stock trades below $125, which represents a 31% discount to peak January 2022 prices. Consider buying this dip if (1) your time horizon can be measured in several years and (2) you don’t mind incurring (sometimes sharp) paper losses along the way.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Apple Maven)