Why the End of the Apple Bubble Is Bad for Everyone
Apple's tanking stock doesn't just mean a lot of lost money for Apple employees and tech traders, but the rest of us, too. It is very likely that either you or your 401k has some Apple shares.
Apple's tanking stock doesn't just mean a lot of lost money for Apple employees and tech traders, but the rest of us, too. It is very likely that whatever you have in your your 401(k), the run-up of Apple shares over the last few years has been powering your gains. So, with stock down more than 10 percent because of yesterday's "record breaking" earnings report, a lot of retirement funds and financial cushions are taking a hit, too. And, as the bubble continues to deflate, which investors expect will happen, so too will your retirement savings.
More than 5,000 mutual funds, closed-end funds and exchange-traded funds have a stake in Apple, with Fidelity Contrafund, Vanguard Total Stock Market Index and Power Shares QQQ as some of the biggest holders. "If you don’t own Apple outright, your 401(k) probably does," explains Nightly Business Report's Diane Easterbrook. That Fidelity fund, for example, is a popular one for retirement plans. And mutual funds aren't the only big holders. Calpers, the California state retirement fund, for example, held 2.7 million shares, according to June data, reported USA Today. Apple is "by far" the biggest stock held by individual traders, too, according to CNBC's Matt Krantz.
Perhaps more troubling, those who do own Apple stock, tend to own a lot of it. "I don't want to diversify that much when I have one stock doing just fine," Matt Loud, a 28-year-old who has upwards of 38 percent of his retirement accounts in Apple, told Krantz, echoing a larger trend in the trading world. Online forums like The Proboards' Apple Finance Board and the Braeburn Group are filled with people who admit to having all of their retirement money in Apple, according to CNN Money's Jon Birger.
Nearly 17 percent of all individual investors own Apple shares, which is three times the percentage of investors who own Google, another popular stock, according to data from the portfolio monitoring site SigFig. That's partly because Apple is so ginormous—it accounts for 10 percent of the entire Nasdaq and 5 percent of the S&P 500. Even investors who caution against Apple stock for a dividend portfolio, admit to owning some. It's hard to avoid.
But, in the past, it has also paid off. The Berkshire Focus mutual fund has had the largest percentage of its total assets in Apple of any mutual fund, according to Krantz. That fund, for years and years, has also made a lot of money.
That was the past, though. Today Apple's stock has taken a turn and in the case that it does not recover the fund lots of mutual and retirement funds will hurt. The end of Apple's stock mayhem doesn't just hurt the fanboys' hearts, but your wallet, too.