Nvidia and the haystack problem

🔸 Plus: Barcelona will ban Airbnb 🔸 Shein may not go public in London after all 🔸 Drug trial shows total protection from HIV 🔸

Your 2-minute guide to demystifying money and making you richer

Photo by Kyryl Levenets on Unsplash

The markets, year-to-date

• S&P 500: 5,464.62 ⬆️ 15.22%

• FTSE 100: 8,237.72 ⬆️ 6.69%

• Bitcoin: $62,622.00 ⬆️ 41.66%

• GBP to USD: $1.2661 ⬇️ 0.52%

• GBP to EUR: €1.1815 ⬆️ 2.46%

Nvidia, the needle in the haystack

The last time shares in Nvidia were worth less than $1 was the year 2016. Since then, Nvidia stock has risen an astonishing 3,239%. If you draw the timeline all the way back to 1999, then Nvidia has gone up 316,325%:

2016 was a clear opportunity to make a vast amount of money — for anyone able to spot the needle in the haystack.

Yet how many people had even heard of Nvidia eight years ago? And if you had, did you realise that the maker of chips for video games was perfectly poised to take advantage of a sudden demand for equipment powerful enough to handle artificial intelligence, which is why Nvidia is suddenly the hottest stock on the planet?

Unlikely.

Don’t go looking for needles

Back in 2008, I was doing a postgrad course at business school. A small group of us lucky students got to have dinner with the late Jack Bogle, the legendary investor and founder of the Vanguard financial empire.

Credit: BillCramer - CC BY-SA 4.0.

Bogle, famously, invented the index fund in the late 1970s — a financial device that allows anyone to buy one stock of each company in an entire index of stocks and thus own the whole market at once. His invention democratised stock investing, giving individual retail investors the same tools as banks, and cutting their trading costs to near zero. Anyone who has benefited from an S&P 500 exchange-traded fund has Bogle to thank.

Bogle, born in 1929, was 78 at the time of our meal. He’d already had one heart transplant. He looked fragile.

But he remained feisty about his life’s work. Index investing, he believed, put an end to the idea that the best way to make money was to do endless, difficult research to find individual companies, like Nvidia, and then gamble on them.

• People who bet on individual stocks usually fail to beat the market as a whole.

‘Just buy the haystack’

Anyone who has invested their savings in an S&P 500 ETF — via their pension plan or a SIPP or an ISA — has already owned Nvidia for a while. If you had followed Moneyin2’s advice, investing regularly each month, you would already be feeling the benefit of Nvidia’s needle in the S&P haystack.

Here’s what the contribution of the “magnificent 7” tech stocks (Nvidia, Apple, Microsoft, Meta, Alphabet, Amazon, and Tesla) have done for the S&P 500 over the past five years. The S&P is up 106%. Without those stocks it would be up “only” 69%, according to Axios:

If your question is, which is the one stock I should buy today so that years from now I end up like someone who stumbled onto Nvidia in 2016? Then remember Bogle’s oft-repeated advice:

• “Don't look for the needle in the haystack. Just buy the haystack!”

And for dessert …

Photo by Florian Wehde on Unsplash

• Barcelona will ban Airbnb completely after rent there rose 68%. The hotel industry will doubtless be overjoyed.

• Shein is rethinking whether to stage its IPO in London because the Chinese don’t like the criticism they’ve received over the way the company treats its workers.

• Some stock indexes are smaller than their names suggest. The Wilshire 5000 only has about 3,500 stocks in it. The Russell 3000 is really the Russell 2,689.

• Only 25.7% of UK economists are women. Economics is “one of the most adverse disciplines for women”, according to The Royal Economic Society.

• Four members of Britain’s richest family have been convicted in a Swiss court of treating three of their domestic servants like slave labour.

• Drug trial shows twice-yearly injection provides total protection from HIV. Astonishingly good news.

More from Moneyin2:

• What Instagram influencers really earn

• “r > g”: What separates the rich from the rest of us

• The worst-case scenario for over-40s

• The time I lost £50,000

• The difference between rich and poor

• Angst over the Magnificent 7

• The ETF ‘bubble’

• The win rate of stocks

• 'What if my pension is crap?'

• Do not take investment advice from Love Island

• The 9.5% bond scam

Do you want Moneyin2 to recommend your Substack?

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