Imagine it’s March 1986. You’re 25 years old and have just come into a $10,000 windfall from a wealthy uncle. As you ponder the possibilities—perhaps splurging on a flashy car or a boat—a more prudent thought crosses your mind. Before making any rash decisions, you reach out to your college buddy who’s now making waves as a stockbroker.

Your friend offers a piece of intriguing advice:

“There’s this small software company in Seattle going public this Thursday. I don’t quite grasp what they do, but the buzz around here is that this is the future. The company is called Microsoft. Invest the entire $10,000 in Microsoft stock as soon as it’s available.”

Taking his advice to heart, you decide to invest. On March 13, 1986, Microsoft, a modest software firm from Seattle, ventures into the stock market. The enthusiasm for Microsoft’s IPO was so electrifying that the initial share price surged from an expected $16 to $21 just moments before trading began. By the day’s end, the stock had climbed to $27.75.

This milestone not only catapulted Microsoft into the public eye but also created astronomical personal fortunes for its founders, Bill Gates and Paul Allen, along with early executive Steve Ballmer.

But let’s return to our hypothetical tale. Imagine the fortune you would have today if you had taken your broker’s advice, invested $10,000 in Microsoft shares at their IPO, and weathered the storm through the dot-com bubble, the 2008 financial crisis, and decades of technological advancement—all without selling a single share. What a fascinating journey that investment would have been!

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$10,000 Invested At IPO

Buying in at the initial offering price of $21 per share, your $10,000 would have netted you exactly 476 shares of Microsoft stock. However, today you would not be sitting on just 476 shares. Over the years, Microsoft has conducted NINE stock splits:

• Initial Purchase (March 13, 1986): Your $10,000 at the $21 IPO price buys you exactly 476 shares.
• Split 1 (September 21, 1987): A 2-for-1 split doubles your stockpile to 952 shares.
• Split 2 (April 16, 1990): Another 2-for-1 split brings you to 1,904 shares.
• Split 3 (June 27, 1991): A 3-for-2 split bumps your count to 2,856 shares.
• Split 4 (June 15, 1992): Another 3-for-2 split increases your holding to 4,284 shares.
• Split 5 (May 23, 1994): A 2-for-1 split doubles your stack to 8,568 shares.
• Split 6 (December 9, 1996): Another 2-for-1 split rockets your count to 17,136 shares.
• Split 7 (February 23, 1998): A 2-for-1 split brings you to 34,272 shares.
• Split 8 (March 29, 1999): Another 2-for-1 split doubles your holding to 68,544 shares.
• Split 9 (February 18, 2003): The final 2-for-1 split doubles your count one last time, landing you at a staggering 137,088 total shares.

Thanks to the magic of those nine splits, your original block of 476 shares would have ballooned into a staggering stockpile of 137,088 shares.

As I type this article, Microsoft is trading at around $404 per share. So your 137,088 shares, which you bought 40 years ago today for $10,000, would be worth $55,383,552.

But that’s not actually the full story.

Microsoft famously did not issue a dividend for its first 17 years as a public company. The company issued its first-ever dividend in 2003. Let’s pretend your hypothetical college buddy stockbroker called you up in 2003 and said:

“Hey, you know those Microsoft shares which you still own and are worth around $2 million today? First off, you’re welcome. Secondly, I just enrolled your account in a dividend reinvestment plan (DRIP). Going forward, whenever Microsoft issues a dividend, instead of receiving cash, you’ll use that money to automatically buy more shares. Cool? Ok, see you at the reunion! You owe me a beer!”

Fast forward to the present. If you held onto all of your shares and remained enrolled in the DRIP plan, today you would have roughly 220,000 shares of Microsoft. And at today’s price per share of $404, your $10,000 investment in 1986 would now be worth…

$88,880,000 

And actually, it gets better.

Because you now own ~220,000 shares, your quarterly dividend payouts on Microsoft’s current $3.64 annual rate would generate roughly $800,800 in completely passive cash every single year.

That’s $88 million in net worth and $800,000 in annual passive income, all from a single $10,000 investment 40 years ago.