Broker Check

Something extraordinary happened in the market did you see it?

| May 31, 2023

While many were fretting over the debt deal negotiations, Nvidia created nearly 200 billion dollars in wealth overnight.  This was among the biggest one day wealth creations in the history of the stock market.  How did they do it?  Largely due to their endeavors into artificial intelligence under CEO Jensen Huang's leadership.  Did you participate?  Are you watching and doing the right things?

These are valuable lessons for investors.

Are you watching the right things? 

If investors were focusing too much on debt ceiling worries and even got out of stocks over those fears they would’ve missed this rare but monumental wealth event.  If you are concerned about building wealth instead of following the latest political theater it may better to pay more attention to wealth creators like Tim Cook, Jensen Huang, Satya Nadella, Mark Zuckerberg, or Elon Musk.

Are you doing the right things?

Wealth creators don’t necessarily stop innovating and growing based on Washington DC politics.  The government does play a very important role in wealth creation and policies do effect business.  However, just like any other timing scheme, trying to time in and out of the stock market based on politics is doomed to fail.  Witness recent events, you would’ve been better off paying attention to trends in Artificial Intelligence and not Washington DC.  Investors who grew too pessimistic couldn't see the forest through the trees and may have missed out if they sold stocks based on political winds.

Did you participate in the wealth creation? 

We preach not picking winners and losers because picking stocks is difficult at best, a fools errand.  In this example if you did invest in Nvidia would you have been able to stomach and hold through a ~70% decline before it went on this historical run? However broad index based funds that hold all investable stocks see comparatively less volatility, thus are easier to hold, and will contain the winners.  Like I often say to our clients, instead of trying to buy the needle in the haystack lets just buy the entire haystack and the winner is in there somewhere.  One of the top holdings in our index funds is Nvidia so investors in this fund did participate in this wealth event.