Your Investment Went Up 10,000%, Now What Should You Do, Sell or Let it Ride?

Stock picking is hard.

But boy is it sweet when you find a winner, let it ride, and make 100x your initial investment…

Source: Data: FactSet; Chart: Axios Visuals

Who Is Nvidia And Why Did It Go Up So Much?

Nvidia NVDA designs and manufactures the GPUs (graphical processing units graphics cards) used in AI research, gaming, data centers, automotives, etc. In other words, Nvidia is "selling the shovels" used in the AI race.

The story with this company has mostly always been strong but now it’s on steroids. Massive demand for their chips is to be expected as the AI fantasy stories have completely taken over Wall Street.

Not to mention they crushed their latest earnings:

• Q1 revenue of $7.2 billion, analysts were expecting around $6.5 billion.
• Nvidia released guidance expecting Q2 revenue to be $11 billion plus or minus 2%. Analysts were expecting $7.2 billion…

These analysts sure know their stuff working 60+ hours a week…

Should you have an investment that goes up 100x, you may be asking yourself, “now what do I do?”

You may feel confident that the story will play out and the stock will continue to rise. Trading momentum is certainly a thing and Nvidia is a great company, positioned extremely well, that actually makes money!

Also, there is real power in holding onto an investment over a prolonged period of time, especially a growth stock. So often we sell our winners too early, and hold onto our losers just to “wait for it to come back.”

Jason Zweig wrote about this in a recent Wall Street Journal Article:

"One lesson from these new clubs is old: the astonishing power of letting your winners run for as long as possible. You can’t lose more than 100% on even your biggest losers (unless you bought them with borrowed money), but the potential gains on your biggest winners are boundless.

From the beginning of 1993 through this Feb. 28, for instance, 58 stocks gained more than 10,000% apiece, according to the Center for Research in Security Prices. Ten returned more than 25,000%."

But remember: these types of companies and success stories are rare. Nvidia almost went bankrupt, and they took massive risks that ended up paying off.

You may live your whole life and never see these types of gains again.

Rather than hoping the story continues to play out, think, “how does this fit into my long-term plan?”

When expectations are so high, and a company doesn’t meet or exceed those expectations, their share price typically gets slaughtered.

Not to mention current valuations for Nvidia may be a bit stretched…

The story can change so quickly and then you wonder, “why didn’t I sell some?”

Just look at Tesla TSLA.

At its peak in November 2021, the stock was up 19,000% over the previous decade. And then BOOM, about 10,000 percentage points disappeared in under 12-months.

A good tactic when you hit a home run with an individual company is to sell your initial investment amount and then play with the houses money.

Or you can implement a stop loss or stop limit order.

The mental struggle with these decisions is real.

That is why I’ve semi-retired from investing in individual stocks. The mind games I would play with myself weren’t worth the stress. Then you see gains like this and question everything…

But before you chase into a company like Nvidia after it has had such a great run, ask yourself, “how likely is it that we continue to get these strong gains?”

The odds can be stacked against these companies as they try to outpace the rest of the market for another decade.

It’s another reason why I have most of my money in index funds. By doing so, I’m improving my chances of holding the best performers in the index (Nvidia has been a key contributor for the S&P 500 index gains year-to-date).

The investment in Nvidia may look obvious now, but investors dealt with several 50% drawdowns and it’s really hard to pick winners in advance.

I’ve mentioned before, there are so many ways for you to play the investment game.

Finding winners can be life changing, as long as you have a general plan of how to capitalize on this opportunity…

Disclosure: This material is for general information only and is not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing includes risks, including fluctuating prices and loss of principal.