Patrick Christie: If only I’d picked that Apple
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Over the last few years you may have seen headlines telling you how much you would have made if you’d invested in Amazon, Apple, Microsoft etc. Companies like these have been coined ‘unicorns’; the term first used in 2013 by Aileen Lee (New York Times). A unicorn is a privately held start-up company valued at over $1 Billion.
Taking Amazon as an example, if you had decided to place $100 into Amazon in 1997 it would now be worth approximately $120k (Investopedia). Such gains can make it seem as though investing in start-ups or young, exciting companies may be worth it, after all the potential gains are so large.
So how likely is it that you will be able to pick the next Apple?
Let’s assume you are making your investment in a U.K. company and that the company you decide upon is delighted to accept your capital (many young companies would be unwilling to accept smaller investors).
Over the period 2000-2020, the chance of picking one of the U.K. unicorns was approximately 1 in 450,000 or 0.00022% (Companies house and CB insights). You’d have similar odds of:
- Being struck by lightning in the next 20 years
- Flipping a coin and guessing the result 19 times in a row
- Being killed in a ski accident during a 2 day trip to a ski resort
- Winning an Olympic Gold medal
- Buying 30 lottery tickets and one of them being the jackpot ticket
(Berkeley Stats)
The idea of making millions from investing in a new company is appealing, but when the chances of success are expressed by comparison to winning the lottery or being struck by lightning it should probably not form part of your investment strategy.
Patrick Christie is a graduate intern at Wealthflow
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