I had a chance to review the investment portfolio of an older relative last week.
I was shocked to see that she had a whopping 27% of her retirement portfolio in a single stock. That???s not the kind of bet size you see in your average 78-year-old retiree???s portfolio.
The stock was none other than the world???s most valuable company, Apple Inc. (AAPL). Keeping 27% of your portfolio in a single stock breaks the conventional rules of portfolio diversification.
Yet, it???s easy to see how she got into this position.
As it turns out, she has held Apple stock since it came out with the first iPhone.
Over that period, Apple???s stock has risen from less than $10 to about $175 today.
That???s an average annual rate of return of just under 33% per year — a better performance than George Soros in his prime.
Yet, her investment strategy was both simpler and more straightforward than that of the world’s best speculator: ???Never sell Apple stock.???
The Secret of Apple???s Success
Reviewing her portfolio also got me thinking about why Apple’s stock has been so successful.
Sure, it???s partially the brand, the innovation, the product design and Apple???s ecosystem that lock in Apple users like me.
But as I thought more about it, I realized that Apple’s most significant single asset isn???t on its balance sheet.