Living in Canada has one benefit that even Americans don’t have. Canadian investors can invest in U.S. stocks through their Tax-Free Savings Account (TFSA) and withdraw their income from investing anytime tax-free. While the U.S. has the Roth IRA, similar to the TFSA, its withdrawals come with conditions. One condition is that tax-free withdrawals are only allowed at age 59 ½. I am pointing this tax break out because Apple (NASDAQ: AAPL) is a no-brainer stock any investor would love to hold for decades. And a Canadian investor can hold it in their TFSA and make it a part of their core portfolio.
Now, here’s more on why I am keen on holding Apple stock in a TFSA.
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A $10,000 investment in Apple in 2013 is…
Let’s look at the timeline. Apple has been making and breaking records since Steve Jobs. It is a tech company you cannot ignore. And after a lot of back and forth, Apple’s growth stabilized in the early 2000s with the iPhone launch. If you had invested US$10,000 in Apple stock in January 2013 when iPhone 4 was trending, today you would have $104,366 in your TFSA. It is tenfold growth for a one-time investment.
And because it is in your TFSA, you can withdraw the entire amount tax-free, irrespective of your age and income. Those who invested through a Roth IRA might have to wait till they turn 59 ½.
What drove Apple’s stock price in the last 10 years?
The last decade was remarkable for Apple. It became the world’s first trillion-dollar company in 2018 on the success of its iPhones and the premium price they command. But it knew that it cannot thrive on iPhone growth alone. The competition was catching up, and it needed another trillion-dollar opportunity.
And Apple found that opportunity in the world’s then-most populous country China and Apple services and wearables segment. It hit the $2 trillion-dollar mark within two years (September 2020). Those who thought Apple was too expensive in September 2018 and has little scope for growth missed the fast growth of 100% in two years.
And it continued its two-year trend to become the first $3 trillion company in January 2022 and continues to grow even now. Once again, investors who thought the $2 trillion market cap was expensive missed the 72% growth in 22 months.
What drove this growth was service revenue. Apple launched Apple TV, Apple Pay, and many more services to get more average revenue per iOS user.
Should you buy Apple stock at its current high?
If you are still of mixed mind about whether or not to add Apple stock to your core portfolio, you could be losing out on an opportunity to double your money in the next five years, or sooner. The next trillion-dollar opportunity for Apple comes from India, which overtook China to become the most populous country.
Many Wall Street analysts believe India is to Apple what China was five years back. Apple earns around US$6 billion in revenue from India. Morgan Stanley analyst Erik Woodring expects this to grow to US$40 billion over the next decade as more consumers buy Apple products. He expects India alone to account for 20% of Apple’s installed base growth in the next five years. And this is just the hardware we are talking about.
Once Apple adds more people to its iOS ecosystem, it would monetize the ecosystem for services. It is already working on bringing Apple Pay to India. India’s opportunity could drive Apple’s stock another 100% even at its gigantic valuation of $3 trillion.
Investor tip
Value investor Warren Buffett has added Apple to his core portfolio. He keeps buying more Apple shares when the stock crashes and selling some shares at its peak.
Like Buffett, you can keep adding to your Apple shares pool whenever the stock falls. The iPhone maker has many more growth trends up its sleeves – autonomous cars and foldable screens. If any of the upcoming products replicate even 20% of iPhone’s success, it could add to Apple’s long-term growth.
