Amazon turned a $1,000 investment into nearly half a million dollars over two decades. Its 49,000% return offers three practical lessons on how everyday investors might profit from the next big stock.
On top of free two-day package delivery, Amazon has been delivering for shareholders. The company recently marked 20 years as a publicly traded company and made headlines for its astounding 49,000% return since its 1997 initial public offering. Starting at $1.96 per share (adjusted for stock splits), the stock recently crossed $1,000. This 41% annual growth rate would have compounded a modest $1,000 investment into nearly a half-million dollars over two decades.
Amazon’s returns are phenomenal, and the situation offers some key lessons on how you might profit on the next big stock.
1 Amazon’s Success Is Rare — and Not Obvious
Amazon’s performance is exceptional. As Jason Zweig pointed out in the Wall Street Journal, “From 1926 through 2015, only 30 stocks accounted for one-third of the cumulative wealth generated by the entire U.S. stock market; Amazon was one.” Such massive winners don’t come around very often, but when they do, they’re game changers.
Part of the reason Amazon soared so high is that few investors expected this kind of performance. Certainly Amazon was a dotcom darling at the end of the millennium, but like much of the wreckage of the 2000 bust, it fell from favor.
At that time Amazon looked a lot like other ecommerce blowups — eToys.com, anyone? — losing money amid always expanding plans to offer more goods and services. It was never obvious — except maybe to founder and CEO Jeff Bezos — that Amazon would become the dominant force in online retail. If it were obvious, the market would have bid up the stock earlier, eliminating the outsized long-term gains.
Because it’s rare and not obvious, the next monster stock is difficult to find, even for the pros. You could end up chasing wild geese for years or decades. Instead, most investors are best served by buying index funds, or exchange-traded funds (ETFs) focused on a specific industry or company size, where the future Amazons of the world might be hiding.
While these funds won’t give you the same exposure as investing it all in a potential highflier, they will provide some ownership of the best companies, including those high achievers. Even in diluted amounts, those companies help your portfolio shine.
And if you still feel you have keen insight into the next hot stock, keep most of your portfolio in index funds and allocate a little bit to that would-be superstar. If it’s really the next Amazon, it won’t take much to make you rich.
2 Think Like an Owner of the Business
While finding Mr. Right Stock is hard enough, it can be even harder to hold on once you’ve found it. Two full decades is longer than many marriages. But it’s an absolutely key point: The only way to rack up Amazonian returns is by buying and holding great companies. That requires taking a long-term view on the company and especially the market, which will bounce the price around, sometimes regardless of how well the business is doing. It’s a simple prescription, but it isn’t easy to swallow.
Perhaps the easiest way to buy and hold is to think like an owner of the business, because you are an owner if you hold the stock. That requires time, energy and a willingness to keep up with the company. It means reading the quarterly and annual reports, studying the industry and watching the trends. In short, it means a lot of work. But that’s part of why the opportunity exists, too. Few are willing to make that kind of commitment.
By focusing on the business as a business — not just a piece of swerving electronic data that could make you money — it becomes easier to continue holding the stock even when the market moves against the position. This focus also gives a great company time to work its magic, and “time in the market” is one of the best predictors of overall returns.
3 Conquering Emotion Is Key
Thinking like an owner can help you focus on the long term, but humans aren’t wired to deal well with loss. While the logical part of your brain says the company is doing great, the emotional side is saying, “The market is selling and you’re crazy for holding on.” Owning any high-flying stock means dealing with loss from time to time, even as you’re on the way to superb long-term returns.
While the chart above shows Amazon’s whole history, the graph below focuses just on the early part of Amazon’s public life. Above, the bumps and twists of Amazon’s early years pale in comparison to the huge run-up in the stock over the last eight years or so. Look closer, though, and there were plenty of investors selling the stock, pushing it to massive losses in the wake of the dotcom bomb. What looks obvious now — Amazon’s dominance — was not so back then.
The stock was incredibly volatile in its early years. For example, on April 23, 1999, the stock closed at $105 per share, near its high for the year. By June 1, 1999, the stock had lost nearly half its value, tumbling to less than $53. A near 50% loss in just over five weeks. Then by Dec. 10, the stock was back above $106 per share, albeit briefly. That was before the market really began its downturn in 2000, taking the stock with it. The stock bottomed around $6 in late 2001. While this was still triple Amazon’s closing price on its IPO, it was cold comfort for investors who had been up more than 50 times on their money as recently as two years prior.
Most investors aren’t made for that kind of roller coaster. For this reason and others, many investors turn from individual stocks to Standard & Poor index funds, which still offer solid returns over time. During the same period Amazon spiked 49,000%, the S&P 500 turned in a much more modest but respectable 190%. And while it’s not unusual for a highflier to lose 50% of its value over the course of a year, it’s very unusual for an index to do so, even during a recession.
Still more emotionally satisfying, when an index falls, you have the safety of diversification, the knowledge that you’re investing in America’s best companies, and none of the uncertainty about whether your one stock pick will become the next Amazon or tank miserably.
James F. Royal, Ph.D., is a staff writer at NerdWallet,a personal finance website. Email: jroyal@nerdwallet.com. Twitter: @JimRoyalPhD.
Share:
Billshark · Bill Negotiation Experts Helping consumers and small businesses stop overpaying on recurring bills.
Frequently Asked Questions
How much did Amazon’s stock return since its IPO?
Amazon delivered an astounding 49,000% return since its 1997 initial public offering. Starting at $1.96 per share (adjusted for stock splits), the stock recently crossed $1,000. That works out to a 41% annual growth rate, which would have compounded a modest $1,000 investment into nearly a half-million dollars over two decades.
Why is the next big stock like Amazon so hard to find?
Amazon’s success was rare and not obvious. From 1926 through 2015, only 30 stocks accounted for one-third of the cumulative wealth generated by the entire U.S. stock market, and Amazon was one. Because such winners are rare and not obvious, even professionals struggle to find them, which is why most investors are best served by index funds or ETFs.
What does it mean to think like an owner of the business?
Thinking like an owner means treating the company as a business, not just a swerving piece of electronic data. It requires time, energy and a willingness to keep up with the company by reading quarterly and annual reports, studying the industry and watching trends. This focus makes it easier to keep holding through volatility and gives a great company time to work its magic.
How volatile was Amazon’s stock in its early years?
Amazon was incredibly volatile early on. On April 23, 1999, it closed near $105, then fell nearly 50% to under $53 by June 1. It climbed back above $106 by December 10, before the 2000 downturn dragged it to a bottom around $6 in late 2001 — still triple its IPO price, but cold comfort for investors once up more than 50 times.
How did Amazon’s gain compare to the S&P 500?
During the same period Amazon spiked 49,000%, the S&P 500 turned in a much more modest but respectable 190%. Index funds offer the safety of diversification and exposure to America’s best companies, and while a highflier can lose 50% of its value in a year, it is very unusual for an index to do so, even during a recession.
What You Can Learn From Amazon’s 49,000% Gain page context
What You Can Learn From Amazon’s 49,000% Gain is a Billshark resource with information and navigation relevant to recurring bills, consumer choices, and savings decisions.
Amazon's 49,000% gain since its 1997 IPO holds three investing lessons: rare winners are hard to spot, think like an owner, and conquer emotion. Read on.
Visitors can use this page to review Billshark information and continue to the route that best matches their savings, support, or account needs.
Billshark publishes this information to help visitors understand monthly expenses, provider choices, and practical next steps.
The page connects visitors with related Billshark resources when they need additional detail or a more specific next step.
Amazon turned a $1,000 investment into nearly half a million dollars over two decades.
On top of free two-day package delivery, Amazon has been delivering for shareholders.
Amazon’s returns are phenomenal, and the situation offers some key lessons on how you might profit on the next big stock.
Amazon’s performance is exceptional.
Part of the reason Amazon soared so high is that few investors expected this kind of performance.
At that time Amazon looked a lot like other ecommerce blowups — eToys.com , anyone?.
Because it’s rare and not obvious, the next monster stock is difficult to find, even for the pros.
While these funds won’t give you the same exposure as investing it all in a potential highflier, they will provide some ownership of the best companies, including those high achievers.
And if you still feel you have keen insight into the next hot stock, keep most of your portfolio in index funds and allocate a little bit to that would-be superstar.
While finding Mr.
Perhaps the easiest way to buy and hold is to think like an owner of the business , because you are an owner if you hold the stock.
By focusing on the business as a business —.
Thinking like an owner can help you focus on the long term, but humans aren’t wired to deal well with loss.
While the chart above shows Amazon’s whole history, the graph below focuses just on the early part of Amazon’s public life.
The stock was incredibly volatile in its early years.
Most investors aren’t made for that kind of roller coaster.
Still more emotionally satisfying.
James F.
Amazon delivered an astounding 49,000% return since its 1997 initial public offering.
Amazon’s success was rare and not obvious.
Thinking like an owner means treating the company as a business, not just a swerving piece of electronic data.
Amazon was incredibly volatile early on.
During the same period Amazon spiked 49,000%, the S&P 500 turned in a much more modest but respectable 190%.
Billshark negotiates your bills for you — no savings, no fee.
Billshark helps lower internet, wireless, cable, satellite radio, and other monthly bills.
Our experts handle providers for customers and share updates throughout the process.
Customers pay only when Billshark finds savings on eligible bills.
1 Amazon’s Success Is Rare — and Not Obvious.
2 Think Like an Owner of the Business.
3 Conquering Emotion Is Key.
Frequently Asked Questions.
How much did Amazon’s stock return since its IPO?.
Why is the next big stock like Amazon so hard to find?.
What does it mean to think like an owner of the business?.
How volatile was Amazon’s stock in its early years?.
How did Amazon’s gain compare to the S&P 500?.
Boost Your Credit Score: Simple, Fast Strategies.
Take the Smart Investor's Vow: to Buy and to Hold.
Smart Tips to Scatter Your Bank Accounts and Save More.
3 Common Medical Debt Mistakes to Avoid.
Value vs.
Money Management in Your 30s: Financial Success Tips.
Are You Afraid to Look at Your Finances?.
Happy Savings: Tips to Maximize Your Money Monthly.
After the Robots Take Over, What's Left for the Rest of Us?.
Save on the Bills You Just Read About.
All Negotiation Services.
Corporate / Business Billing.
Blog - All Categories.
to think like an owner of the business.
jroyal@nerdwallet.com.
Home Budgeting & Finance Boost Your Credit Score: Simple, Fast Strategies Michel Mora · May 24, 2017 · 3 min read Read article.
Investing Take the Smart Investor's Vow: to Buy and to Hold Brian Keaney · Jun 18, 2018 · 3 min read Read article.
Home Budgeting & Finance Smart Tips to Scatter Your Bank Accounts and Save More Michel Mora · Jun 23, 2017 · 4 min read Read article.
Savings Tips 3 Common Medical Debt Mistakes to Avoid Michel Mora · May 5, 2017 · 5 min read Read article.
Investing Value vs.
Home Budgeting & Finance Money Management in Your 30s: Financial Success Tips Carolyn Depoto · Apr 28, 2017 · 5 min read Read article.
Home Budgeting & Finance Are You Afraid to Look at Your Finances?.
Savings Tips Happy Savings: Tips to Maximize Your Money Monthly Steven McKean · Jun 16, 2017 · 7 min read Read article.
News After the Robots Take Over, What's Left for the Rest of Us?.
See more posts for other categories ›.
Estimate My Savings.
College tuition articles.
Entertainment articles.
NerdWallet articles.
Shark Tank articles.
Social media articles.
Uncategorized articles.
Fairpoint bill savings.
Spectrum bill savings.
Terminix bill savings.
This resource helps readers connect a recurring-cost question with the Billshark information that provides the most relevant detail.
Visitors can review the available page sections, compare related topics, and continue to a more specific guide when they need additional context.
Billshark organizes service information and educational resources to make common household-bill decisions easier to research and understand.
The information on this page supports practical questions about providers, subscriptions, account actions, consumer choices, and monthly costs.
Readers can use the navigation and related resources to move from a broad question into focused information that matches their situation.
The page is intended to support informed decisions by pairing concise explanations with paths to deeper Billshark resources.
Relevant links help visitors compare options, understand recurring charges, and identify the next action that fits their current need.
Billshark content is designed to help consumers recognize recurring expenses and consider practical ways to manage them more effectively.
Visitors can return to this resource when they need to compare a new question with earlier information about services, bills, or savings.
The content connects everyday provider and subscription choices with broader guidance about monthly budgeting and household expenses.
Each page section contributes context that helps readers decide whether they need service guidance, account support, or an educational article.
Readers can use the available information to prepare questions, review options, and continue toward a useful next step at their own pace.
Billshark maintains connected resources so visitors can discover related guidance without losing the context of their original question.
The route supports research by making it easier to identify relevant details before choosing a provider, service, subscription, or account action.
Practical consumer information can help visitors understand why recurring charges change and which details are useful to review before responding.
The page brings together information that supports clearer conversations about bills, service choices, recurring expenses, and savings opportunities.
Visitors can use related resources to compare common terms, understand tradeoffs, and find the information that best fits their monthly-cost question.
Billshark guidance focuses on practical consumer decisions and helps readers move from general awareness into a more specific resource when needed.
The resource is part of a broader collection that connects household cost questions with provider information, support materials, and educational content.
Readers can explore the page before taking action, which helps them understand available options and identify the most relevant follow-up information.
