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In recent weeks, I’ve been asked by several friends if and by how much am I invested in NVDIA. Well, overall I have about a 5% position, similar to that of the broadest market index funds. The typical response is, “Is that all? Why not more?” Many of them have devoted anywhere from 20-50% of their savings to the stock and are blithely delighting in their wisdom. Of course, the answer depends on very many factors—age, risk-tolerance and capacity and so forth —but I always advocate the virtues of diversification and warn of the extreme risk they are taking with their money.
But for many people, that word doesn’t have the pinache of a tech stock wildly promoted on CNBC and the 6 :00 news. They have the sense they have (finally) found the road to easy riches and are bouyed by their knowledge that they are more than keeping up with their insufferable neighbor Mr. Jones.
A few are incredulous at my refusal to share in their excitement and I think hastily revise their opinion of my market savvy. At this point I am lost. Do I heatedly persist? And how do I know my obvious contempt is not somehow rooted in my envy of their lucky short-term windfall or even eventual complete financial makeover?
“Irrational Exuberance”?
Of course, Barron’s sometimes gets it wrong, like the old article in Amazon’s development—“Amazon.Bomb.” But take a look. In the new issue of Barron’s, we find “Nvidia’s Growth Has Been Stunning. Now It’s Time to Worry.”
A great way to describe the phenomenon. Wish I had thought of that.
Tell them you just shorted it.
I wish I were as quick-witted as you! Truth be told, being newbies to the market they are very easily influenced by anyone they think knows something about it. If I told them to short it, they would probably ask how they could do it.
Steve, look back at your history as an investor and replace NVDIA with the high-flyer of the time. A few may still be at altitude–for now–but haven’t most lost their original luster, or disappeared altogether? And who knew which way they would go?
I don’t for a moment think the company will turn out to be another BlackBerry or Polaroid, but maybe an IBM rather than another Apple.