Over the course of the last year, we have seen tech companies dominate returns, especially with Nvidia driving the force of returns for investors. This has caused many investors and spectators to abandon their ships and try to climb aboard the full-speed-ahead Nvidia ship.
This story isn’t new, and Nvidia isn’t the first siren call that people have fallen for. Jumping into the sea with the allure of beautiful returns, compared to their minuscule gains, as they watch the shiny ship moving past them. However, it’s important to remember the whole picture.
People who invested in Nvidia at the right time, if they were smart, sold some off the top. Those who look to it now for profit or to the next hopeful Nvidia in the future are often timing the market for the next big play. I decided to do neither of those.
For one, I didn’t know much about the company other than that it is a microchip company. Two, I don’t want to play the market because I am not a wizard of prediction.
For the first time, I have come to accept that sometimes my portfolio will be lagging behind others, as will the investment fund, and other times it will be ahead of others, as will the investment fund.
I suggest if you ever choose to become a serious investor, to choose a strategy and understand that you won’t always be on top of the market, with the market, or behind the market.
Reflecting on Investment Decisions: The Value of Strategy
I thought I had missed out on Nvidia because it was less than $200 per share when I first came across it, but at the time I didn’t know enough about it to invest, so I left it alone.
When Nvidia hit above $1,000 per share, I questioned myself and whether I knew what I was doing all along. The point? It is easy to question your decisions when the market or a sector turns the tide against your favor.
However, this is where most people steer off course; they panic and start to ‘invest’ outside their circle of competence. I admit I have fallen into this trap myself, but it didn’t last long as I continued to go back to the basics to remind myself that, one, most who invested in a roaring company, Nvidia for example, got lucky.
Two, there are a handful of people who work in the sector who had an idea of how well the company was going to do. Three, only a handful are going to sell some at the top for profit.
Others will make the mistake under the assumption that Nvidia will continue to produce such returns. Don’t fall into the trap of the shiny stocks out there.
Because the other side of the coin would have been Nvidia down 50%, losses for 95% of investors, and panic in the market.
It’s easy to rewrite history and narratives when you think things are going well, to forget history or the other side of the coin when you make a rational decision in the moment that doesn’t seem so rational looking back through the blinders of the present.
But if you do that, then you’ll never find a strategy that works for you in the long term, and you’ll continue to chase after the next bullish stock, industry, or sector.
For example, Nvidia has delivered significant returns for investors, but it’s worth noting that this level of performance wasn’t widely predicted. While some analysts and industry insiders may have seen potential in the company, the dramatic rise in its stock value has caught many off guard.
This highlights the unpredictability of the market and reinforces the importance of not chasing after the next big success story based solely on the past performance of another company, industry, or sector.
Looking back, it would have been nice to have garnered some of the returns from this investment if I had been part of it. However, looking back, I also slept better at night knowing where my capital was invested, and that’s what I was taught when I first started learning about investing.
The Investor’s Game: Accepting Missed Opportunities
One of my favorite value investors mentioned that he has missed out on big returns in his investing career, but it all boiled down to being okay with missing out because he respected his strategy.
He knew he needed to sleep well at night, knowing where and what his capital was invested in. He understood that there will always be money left on the table; that its just a natural part of the long game of being an investor.
You have to be okay with someone else making 20% returns on their portfolio while you’re making 10% on yours for the year. Warren Buffett’s number one rule is to never lose money, and number two is not to forget rule number one.
This isn’t to say that returns don’t matter, but if you’re making money in the market, you have a great chance of improving as an investor over time and garnering significant returns. Speaking of Warren, he too hasn’t always beaten the market or aligned with it. At times, he has lagged behind.
Again, it’s the investor’s game. Peter Lynch, another legendary investor, has missed out on some top flyers. Putting the whole picture together, if I were locked in a room with legendary investors whom I admire, I would say there wouldn’t be much empty space.
Each one has their own strategy, and every single one of them has lost money at some point or missed out on an investment. However, each and every one of them is doing fine. So what does that tell you? Having a strategy in the long term beats trying to jump ship every time you see a new one passing by.
The Broke College Student 
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