Making money

So here is an idea.

For some really popular, outstanding products that make you drool and want to buy them right away, you may occasionally also have the opportunity to earn more money by purchasing equity in that company. Two such companies come to mind: Apple and Tesla. They both make products that are experiencing massive demand and this only means good profits for the company.

I did a retrospective calculation where I listed every product of Apple that I have purchased so far and calculated what would happen if I had also purchased Apple stock worth the same money at the same time.

I started with my first Macbook (May 2008) and iPod (December 2008) all the way to my most recent one, an iPhone 5 (Dec 2012). I pulled out historical stock data from Google finance and figured that if I had also put in the same amount of money in purchasing Apple stock, the value of my stock today would be about 2.6 times that of the money I invested in.  It is roughly 17% IRR. If you’re really curious send me a note and I will send you the calculations.

So the point is this: Mortals (like me) who are not frequent investors in stock have this very good way to find out which stock is a good one: Just by observing demand in the environment around you. Does the Micromax A110 sell for a premium at the shop, or is there are several months worth of backlogs in the delivery of the latest Ford vehicle that just launched ? Buy that stock if you can!

I badly want to own a Tesla. I also am unable to afford it – unless, well I buy Tesla stock and it earns me enough to buy it!

Shhh! don’t tell anyone. 

 

Now for the disclaimers:

1) I am not suggesting that purchasing stock is an alternative to purchasing the product. The above is just a tool to measure

2) This doesn’t always work though as is the popular case of Oculus Rift, the company that raised its’ seed money on Kickstarter and later on sold out to Facebook for a couple of billion dollars while the original ‘seeders’ did not have any upside from those billions. (To be fair to Oculus, they did deliver on what they said they would to their initial backers, so no harm done by them deliberately – it just isn’t the right money earning forum for backers who should look elsewhere).