What would you do if you won the lottery? C’mon, everybody thinks about it and some even believe they can ‘pick’ the right company stock that will go to the moon and be a mini lottery jackpot. The crazy part is, one company pretty much just won the Lottery?!
People invest to create money, and some invest to hit it BIG! Some investors pull it off. Take, for example, the people who were early investors in companies like Apple, Amazon, Microsoft, or Google. A relatively small investment in those companies, when young, would be worth a fortune now. Now we’re seeing the next generation of companies that are on pace for massive stock growth. There is No better example than Nvidia.
Nvidia is a chipmaker and has been around for decades. Remember that it has been around for decades before you call it an ‘overnight successes. Its stock first started trading on the stock market way back in 1999 — some of you probably hadn’t even been born yet! But it wasn’t until the past few years that the stock saw significant appreciation.
Consider this: Nvidia’s shares were trading for around $4 in 2018. Then, by early 2021, they were up to around $18. Today? They’re trading for more than $130. Nvidia stock is up more than 2,600% in five years. It’s grown 184% over the past year. And since January 2024, it’s up 170%.
Think about it this way: If there was ever a stock that was close to a lottery ticket, this is it.
But it’s always important to consider why Nvidia’s shares have seen so much appreciation over a short amount of time. Broadly, Nvidia is benefitting from a massive amount of demand for its chips—everyone and their brother is trying to incorporate artificial intelligence into everything, and they need processing power to do it. Nvidia is one of the primary benefactors of that increase in demand but again it has taken 20 years to find that kind of demand.
What’s also impressive is that Nvidia is close to becoming the most valuable company in the world. Apple currently wears the crown, but if Nvidia’s stock continues to rise in price, it could soon take its place. Again, this is remarkable given that the company stock was selling for $4 six years ago!
While daydreaming about picking the next Apple or Nvidia stock, and reaping massive returns as a result, is fun, it’s also critical that we keep our expectations in check. Likely, you’re not going to pick the next homerun stock. You’re not going to win the lottery, either. So, you should stick to a financial plan or investment strategy that has a higher rate of success for long-term investors like us.
Here it comes “be Average = Index”, investing broadly in index funds and ETFs. You know, go for the market average—the market increases around 10% every year. It’s not lotto ticket growth, but over time it’s reliable!
You should not put all your eggs in one basket, either. Yeah, we just talked about ONE company that is going crazy, but that is one in thousands of companies, the rest are not that lucky. You’ll be better off diversifying your portfolio.
Nvidia’s having a heck of a run. But it won’t last forever. Just look at some of the biggest stocks from years past: Boeing, General Electric, Tesla…. they all ran out of steam at some point.
Show people you speak money and Be average. Index!
