Reading a new book, “Millennial Money: How Young Investors Can Build a Fortune\u201d, by Patrick O’Shaughnessy.<\/p>\n
Wanted to share a simple investing principle cited in the book; and something for us to consider, consuming vs. investing…<\/p>\n
\u201cIn October 2001, the cost of a shiny new, first generation iPod was $500. At the time, the same $500 would have bought you 64 shares of Apple stock. The 2001 iPod has been rendered obsolete ten times over, but the 64 shares are now worth $32,308. Investing is better than spending.\u201d<\/p>\n
Of course, Apple just announced their QUARTERLY profit of $18 billion; more than another business has ever earned in one quarter.<\/p>\n
The question is, if I had this information in 2001, would I have still bought the iPod? I almost certainly would have borrowed money to buy as much Apple stock as possible. This would make me feel much more comfortable in giving up the $32,308 for spending $500 and getting the utility of iPod in 2001. I believe that is a completely rational assumption.<\/p>\n
However, would you have bought the iPod with this information if you only had access to exactly $500? What is your opportunity cost of not having the iPod in 2001? There were other technologies available to listen to music back then remember. I actually think not having an iPod or other digital music device would be a much bigger obstacle.<\/p>\n
There are also so many factors that are important here, i.e., when would you have additional cash, how long would you have to “go without”?<\/p>\n
My guess is that I would have waited as long as possible and try to get by on my old Sony Discman!<\/p>\n
I still have my 2001 first generation iPod, do you think it worth any part of either the original price or the $32,000?<\/p>\n
We make trade-offs and long-term decisions every time we make any investment. The opportunity cost of our assets, cash, and liquidity is something to consider.<\/p>\n","protected":false},"excerpt":{"rendered":"
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