Self-insuring for Apple products by buying AAPL stock instead of Apple Care + ?

[Tozovac]

This question has been bouncing in my head for a week ever since buying an AW 3 and upping my AppleCare One payment for my wife's MBA.

What if, since day 1 of my entering into Apple products in 2005, I would have put my monthly or annual Apple Care+ payments into buying AAPL stock and just holding on to it & reinvesting...then pull out funds from it anytime I needed a repair or replacement, which was pretty seldom.

I did buy Apple Care + for at least 5-6 computers, 5-6 iPads, 3-4 phones, and various AirPods-type accessories for me and my family over the past 20 years, so there was a consistent outlay over time that I could have been using to dollar-cost-average buy AAPL shares over time.

I no longer have the free time to download AAPL stock history and play the game of "here are my approximate historical monthly/annual payments to Apple Care +" and see how the last 20 or 10 or 5 years would have treated me with price/value accumulation, but given that I don't see AAPL tanking anytime soon, I wonder often if I should stop my $30/month AppleCare One and start buying shares over time.

Anyone else ever think about this? Or look into it? (hint hint). Of course past stock performance is no guarantee of future performance, and who knows if the next 5 Apple products I buy will be lemons or gold. But given that I see another 20 years of Apple products for me, it's an interesting question to ponder, and see how the last 20 years might have played out as a rough example.

 

[maflynn]

I would have put my monthly or annual Apple Care+ payments into buying AAPL stock and just holding on to it & reinvesting...then pull out funds from it anytime I needed a repair or replacement, which was pretty seldom.

Applecare one costs 20 dollars a month. A single share of apple is around 277 (probably higher since you're buying a single share). It will take 14 months of applecare one to cover the cost of a single share, not including fees related to buying the stock.

Here's a what if scenario, you do just that and you buy a single share of apple as your self insurance, and then the next day you drop the phone and it gets smashed. Apple states it will cost you 500 dollars for the repair. You're basically in the hole for 223 dollars (500-277) - maybe more as you may have to pay fees to sell that single share of apple.

Now what happens if you drop your phone and your wife is so shocked at your clumsy behavior she starts laughing uncontrollably (because that's what wives do) and she drops her phone and it gets smashed. Now you're potentially looking at 1000 dollars of repairs (in this fake scenario) but have invested only 277 dollars to cover that

The applecare subscription covers multiple devices, so the out of pocket expense for two broken devices will be a lot cheaper with the sub then you trying to self insure.

 

[KaliYoni]

This question has been bouncing in my head for a week ever since buying an AW 3 and upping my AppleCare One payment for my wife's MBA.

What if, since day 1 of my entering into Apple products in 2005, I would have put my monthly or annual Apple Care+ payments into buying AAPL stock and just holding on to it & reinvesting...then pull out funds from it anytime I needed a repair or replacement, which was pretty seldom.

I did buy Apple Care + for at least 5-6 computers, 5-6 iPads, 3-4 phones, and various AirPods-type accessories for me and my family over the past 20 years, so there was a consistent outlay over time that I could have been using to dollar-cost-average buy AAPL shares over time.

I no longer have the free time to download AAPL stock history and play the game of "here are my approximate historical monthly/annual payments to Apple Care +" and see how the last 20 or 10 or 5 years would have treated me with price/value accumulation, but given that I don't see AAPL tanking anytime soon, I wonder often if I should stop my $30/month AppleCare One and start buying shares over time.

Anyone else ever think about this? Or look into it? (hint hint). Of course past stock performance is no guarantee of future performance, and who knows if the next 5 Apple products I buy will be lemons or gold. But given that I see another 20 years of Apple products for me, it's an interesting question to ponder, and see how the last 20 years might have played out as a rough example.

I make my living from financial markets. Here are some quick thoughts, assuming you are located in the US:

• It usually is not a good idea to invest in an asset you aren't willing or able to research and track yourself.
• Anonymous advice from strangers on a free online message board can be dangerous in personal finance. Don't forget, if you follow a bad or incorrect recommendation, nobody here is accountable or liable.
• If I were thinking about a similar decision, I would view the money I'm setting aside more as insurance than an investment. Insurance is meant to give you a guaranteed amount of funds to use in an emergency. An investment is meant to, if all goes well, grow the money you put into the investment by assuming some level of risk.
• When setting aside money that might be needed sometime between immediately and a couple of years in the future, most professional financial advisors would tell you to consider an asset that is highly liquid (i.e. quick and easy to withdraw funds), has a low level of risk, and provides some, but not maximum, levels of return. That typically would be a bank savings account, a bank CD, or a brokerage money market fund, not individual stocks.
• As of the writing of this post, many FDIC-insured online banks offer savings accounts that pay 3.5% or more in annual interest. As long as you don't exceed the FDIC limit at any one bank, such accounts have zero risk of losing or suffering a reduction in your initial investment (the interest rate may vary over time, however).
• Stocks are volatile. Think about how your personality would affect your feelings about seeing AAPL's price drop 2% in a day. How about 5%? Or 10%? What if a drop happened at the same time you needed to fix one of your devices?

Finally, try to always keep this classic rule about investing in mind: Past performance is not a predictor of future performance. There's a reason why this disclosure is required by government regulators of financial markets.

 

[SnowPenguin]

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