In investing, small decisions can ripple outward into huge consequences. Two people could buy their first stock on the exact same day, both starting with the same amount of money. Five years later, one could be staring at a doubled portfolio and a path toward early retirement, while the other is bag-holding a stock that’s worth a fraction of what they paid, wondering what went wrong.
To show how quickly fortunes can diverge, let’s compare two real companies over the same time frame. One is Royal Bank of Canada (TSX:RY), the country’s largest bank. The other is AMC Entertainment (NYSE:AMC), the American movie theatre chain that became a meme stock sensation in early 2021. Same market, same day of purchase, but wildly different outcomes.
The comparison
Let’s say our two hypothetical investors each put $10,000 into their chosen company on January 4, 2021, holding all the way until August 14, 2025. The RY investor reinvested all dividends along the way and ended up with a cumulative return of 100.8%, translating to a compound annual growth rate (CAGR) of 16.33%. Their $10,000 grew to $20,080.27 in just over four and a half years.
The AMC investor? They also started with $10,000, but after an initial meme-fuelled pump in early 2021, the stock collapsed. By August 14, 2025, they were left with just $1,613.06 for an 84.87% loss, or a brutal negative CAGR of 33.62% per year. The same $10,000 turned into a rounding error on a house down payment.
What happened?
AMC’s story is a textbook case of hype overpowering fundamentals, at least temporarily. For a brief moment, retail investors flooded in on social media-fuelled momentum, pushing the stock far beyond anything justified by the company’s actual business.
But AMC was structurally weak: declining theatre attendance, negative profit margins, heavy debt, and chronic cash burn. To stay afloat, management issued new shares multiple times, diluting existing shareholders and making it even harder for the stock to recover. In other words, there was no fundamental engine to sustain those meme stock prices.
Royal Bank of Canada, on the other hand, is a profit machine. It generates billions in annual net income, maintains strong capital ratios, and has an enviable record of returning cash to shareholders through both buybacks and steadily rising dividends.
Even without eye-popping growth, the combination of reliable earnings, reinvested dividends, and disciplined management quietly doubled investors’ money over the same period that AMC’s shareholders were virtually wiped out.
The Foolish takeaway
Yes, this is an extreme example, but it illustrates a critical truth: the quality of the business you own matters far more than the noise surrounding it. Stock prices can be driven by hype, social media trends, or market fads in the short term, but over the years, it’s earnings growth, cash generation, and shareholder returns that win out.
Your first stock purchase sets the tone for your investing journey. Pick something speculative and you might get lucky, or you might spend years digging out of a hole. Pick something fundamentally strong, and you stack the odds in your favour from the start.
It’s tempting to chase excitement in the market, especially when the crowd is cheering. But if your goal is to build wealth, you can rely on, focus on companies with durable businesses, healthy balance sheets, and a track record of rewarding shareholders.
