Welcome to the Chart of the Week.
The Chart of the Week highlights Nvidia’s earnings from Q4. Everybody is talking about Nvidia, due to their role providing microchips used in processing lots of data for AI companies. Nvidia didn’t disappoint, and reported fourth-quarter revenue of $22.10 billion, beating estimates of $20.62 billion.
Given the hype leading up to Nvidia’s earnings release this week, investors wondered how to play the news. Instead of trying to predict the instant reaction to the numbers, it may be wiser to react to the volatility afterwards. If there is a significant selloff, buy more, if you still have conviction in the investment. If the stock takes off, pare back the position to bank some profit. Investors are better served to ignore short-term noise and focus on long-term potential. Some basic rules help to put things into perspective and rationalise how you perceive risk, which reminds me of my weekend:
My sister and her family were visiting over the weekend, which meant mayhem around the house, as there were now four kids to entertain, so there was only one thing for it – Legoland.
Most of the rides at Legoland require a minimum height of 90 cm. My youngest is almost three and is 89 cm tall! We decided to go on the Merlin ride, which spins round and round and up and down.
The attendant agonised over trying to measure a wriggly toddler, but finally said sorry, she’s not tall enough and suggested a couple of other options. The rest of us piled on!
Rightly so, as there is a difference between the level of risk you are willing to take and the level of risk you are able to take.
When it comes to investing, most people know what to expect, but every so often, someone doesn’t fully appreciate the risk warning, only to question if they have the stomach for it.
Like a roller coaster, there will be ups and downs and dips along the way, along with highs and higher highs.
After all is said and done, most people come away with a different perspective of risk, having experienced something genuinely worthwhile.
In investing, if you overreact to the perceived risks you will inevitably miss out on the higher highs, as the chart above demonstrates.
Takeaway: To benefit from investing you need to rationalise risk.
Did you know: Elon Musk says Neuralink’s first human patient can control a mouse using the brain implant. Click here.
Marlborough Podcast: This week we discuss inflation, UK economic data and earnings surprises. Click here.
Source: Marlborough Multi-Asset Investment Team, App Economy, Schroders (Duncan Lamont), BBC news.
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