Investments in good stocks can pay off quickly. That's certainly been the case with digital-payments giant PayPal Holdings ( PYPL -1.25% ) in 2020. The COVID-19 pandemic has altered human behavior, favoring practices like e-commerce and cashless transactions, both of which benefit PayPal.
But make no mistake: The stock was performing well long before the coronavirus. The company was spun off from eBay in 2015, and has generated positive shareholder returns in each full calendar year since then. And barring any unforeseen setback, 2020 will be the stock's best year so far. As of the market close on Dec. 7, PayPal stock is up exactly 100% year to date.
If you invested $5,000 in PayPal stock on Jan. 1, you'd have $10,000 right now. Not bad for just one year. But top stocks compound returns for much longer than just a single year. Imagine if you had invested $5,000 in PayPal in any previous January.
|If you invested $5,000 on this date:||Here's its value now:|
|Jan. 1, 2020||$10,005|
|Jan. 1, 2019||$12,875|
|Jan. 1, 2018||$14,705|
|Jan. 1, 2017||$27,425|
|Jan. 1, 2016||$29,905|
PayPal's stock performance in 2020 is instructive in two ways. First, even large-cap stocks can provide stellar one-year returns when the situation is right. But more important, as the above chart shows, selling stocks after a good one-year run can be a terrible mistake. When you find a stock with a strong tailwind, large market opportunity, and well-run business, it's often best to just keep holding -- if not buying more. That certainly applies to PayPal.