Amazon Stock: The Clear Benefits Of Investing Early

Investing methodically in a stock like Amazon since the IPO would have been highly profitable. Here is how much of the gains in AMZN would have come from merely starting early.
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Plenty has been written about how much an investor would own today if invested in Amazon stock (AMZN) at the 1997 IPO price. I recently approached the topic from a different angle, and calculated that a mere $100 per month put into  (AMZN) - Get Report since inception would have grown to $2.7 million today.

But of course, turning back the clock to make an investment is impossible, rendering the backward-looking discussion meaningless. Still, there is a valuable lesson to be learned in the Amazon case study: the importance of investing early.

Figure 1: Amazon's HQ in Seattle, WA.

Figure 1: Amazon's HQ in Seattle, WA.

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Investing is for the patient

Compounded growth is an interesting concept that is not very intuitive. Think, for example, of the parabolic curve of cases registered during the early stages of last year’s pandemic. In a similar way, growing a nest egg usually starts slow at first. The growth pace only picks up noticeably over time.

Therefore, while dollars and cents can be made in the market trading stocks back and forth in the short term, wealth can only be built with patience and over time –with a few moonshot exceptions, of course.

Take the $100-per-month exercise once again. The chart below shows the present value of each monthly investment in Amazon since the 1990s. Clearly, the bulk of the gains came from the money put into the stock early on, especially prior to the bottom of the dot-com crisis.

Below is the breakdown of where the hypothetical $2.7 million portfolio would have come from (the three bullets below add to 100%). Those who “missed the boat” in the first decade of Amazon being a public company would have passed up on nearly the entire potential gains.

  • Investments made in the first two years as a public company (May ‘97-‘99): 49%
  • Investments made between May ‘99 and bottom of Great Recession (‘08): 48%
  • All other monthly investments in AMZN since ‘08: 3%
Figure 2: Present value of each $100 monthly investment.

Figure 2: Present value of each $100 monthly investment.

The key takeaway

The Amazon case may be a bit extreme, since this stock has grown at a dizzying pace of 32% per year since the IPO, with the first year alone registering gains of nearly 1,000%. Logically, investing as early as possible in a company that will eventually dominate e-commerce and cloud infrastructure is a great idea.

But the key takeaway here applies to any company that is likely to achieve long-term success, or to the broad market as a whole: investing as early as possible and patiently playing the long game is likely the best path to riches. This is an especially important concept in the age of instant gratification – think of the Dogecoin and meme stock manias, for example.

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(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 Amazon Maven)