Here's a crazy turn of events. Apple (NASDAQ:AAPL) debuted its new iPhone 6 and iPhone 6 Plus on Sept. 9, and 24 hours after the products launched, more than 4 million of the devices were sold. Heavy demand is making for delivery delays and waiting lists. In response, many people are buying iPhones on eBay for more than twice their going rate. Apple's listed prices for the iPhone 6 and iPhone 6 Plus range from $199 to $499 -- and that's assuming the phones are subsidized by a wireless provider who can lock the buyer into a contract. So what are folks willing to pay for these clever devices on eBay? Well, some have coughed up $1,000, $2,000, or even more.
This probably sounds irrational to you -- and it should. Yet these hasty iPhone buyers actually exemplify the kind of poor decisions many investors make all the time.
The iPhone 6 situation corresponds to the stock market, where stocks are frequently bought at inflated prices well above their intrinsic value. That happens most often with penny stocks, which will trade at seemingly "cheap" prices of less than $5 per share but are often not worth much at all, because the underlying companies are fundamentally weak. It happens with blue-chip stocks, too. Microsoft, for example, is worth hundreds of billions of dollars, but its current and forward P/E ratios are both well above its five-year average of 13.4, and the company is expected to grow by single-digit percentages over the coming five years, which makes it seem overvalued at recent prices.
The cost of impatience
These purchases of overvalued iPhones and stocks reflect how irrational we can sometimes be when it comes to spending our hard-earned dollars -- and it's often due to impatience. Some of the people selling these overpriced iPhones don't even have the phones yet and are simply promising to ship them as soon as they arrive. This means some buyers are paying a huge premium for a higher place on the waiting list, willingly spending hundreds of dollars in order to get their hands on the latest iPhone a few weeks earlier.
Regarding impatience in the realm of stocks, Warren Buffett has quipped, "The Stock Market is designed to transfer money from the active to the patient." Here are a couple of ways in which impatience hurts us in investing -- note how similar they are to the iPhone situation:
- We see a stock we'd love to own, and we buy it, no matter how overvalued it might be, instead of waiting for a pullback. We want it now.
- We don't like to hold large sums of cash in reserve for when a great stock temporarily tanks and offers a bargain -- even though that's a smart strategy.
As Buffet put it, "You don't have to swing at everything -- you can wait for your pitch." Patience pays, both as a consumer and as an investor. Those with the strength to be patient can build great wealth in investing through compounding over time. A single $10,000 investment growing at 10% annually will become $67,300 in 20 years and $174,500 in 30. Investors who start early and wait a long time can do exceptionally well. And patient folks with rational financial mind-sets can also end up with an iPhone 6 that costs hundreds of dollars less than those on eBay today. And the money you save on the phone can be spent on a terrific stock opportunity!
Longtime Fool specialist Selena Maranjian, whom you can follow on Twitter, owns shares of Apple, Microsoft, and eBay. The Motley Fool recommends Apple and eBay. The Motley Fool owns shares of Apple, Microsoft, and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.