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The Street’s Jim Cramer has consistently offered what I consider good advice regarding Apple. I will paraphrase him: “own Apple for the long term, don’t trade it”.

So, I decided to add some numbers to the statement above by looking at historical data. Sure, Apple stock looks very richly valued today, as the chart below suggests: P/E and EV-to-EBITDA have not been this high since the early days of the iPhone and iPad. But I was curious to know: through good times and bad times, low valuations and high valuations, how have Apple investors done over longer periods of five years since the Cupertino company went public, in 1980?

Apple: buy and hold vs. trade

The chart below depicts the 5-year return distribution of an investment in Apple since the 1980s. It counts the annual returns in “buckets” of 10 percentage points, starting from each month since the company’s IPO. Here are some quick observations:

  • in 86% of the cases, a 5-year investment in Apple produced positive returns.
  • in 68% of the cases, a 5-year investment in Apple produced annual returns above 10%.
  • in only 7% of the cases, a 5-year investment in Apple produced annual loss of worse than -10%.

Let me put it this way: historically, a long-term Apple investor managed to rake in market-beating returns in the double digits (i.e. 10% or more) over two-thirds of the time. The odds have clearly been stacked in favor of buy-and-hold shareholders.

The few times when holding Apple for five years did not pan out and led to annual losses of -10% or worse were all concentrated around the late 1990s. That was around the time of Apple’s decline and restructuring, when the Cupertino company narrowly avoided bankruptcy —something that is unthinkable nowadays – before Steve Jobs took over the company once again.

Here is some added encouragement for investors today. In the past 12 years, Apple’s valuations were as high as they are now only in the first half of 2008, then again in the second half of 2009. Investors that jumped in, bought shares at those peak valuation levels, and held on for five years were gifted with annual returns of 67% on average! Once again, the figure is annualized, not cumulative.

When it comes to trading, the story is different. Here are some important observations:

  • Apple shares have historically bounced around quite a bit. Annualized volatility since the IPO, measured at month-end points, has been an outsized 45%.
  • The maximum drop from peak to trough has been a whopping 80%.
  • Corrections can be vicious and offer little warning. Within a period of only 9 months in 2000, Apple shares declined by more than 70%.
  • Drops of 50% or worse from the peak have happened several times over the past few decades: in 1985-1986, several times throughout the 1990s, during the dot-com correction and the Great Recession of 2008-2009.

Therefore, I would feel much more comfortable allowing Apple’s stock “time to work” rather than trying to time entries and exits. At least history has shown this to be the best strategy.

Explore more data and graphs

The data used in this report was provided by Stock Rover. I have been impressed with the breadth and depth of information on markets, stocks and ETFs that this platform provides. Stock Rover also helps to set up detailed filters, track custom portfolios and measure their performance relative to a number of benchmarks.

To learn more, check out stockrover.com and get started for as low as $7.99 a month. The premium plus plan that I have will give you access to all the information that went into my analysis and much more.

(Disclaimers: 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)