As a kid growing up watching legacy TV (where shows aired at specific times before the modern days of instant access Netflix & Chill), I tuned in to watch Regis Philbin on Who Wants to be a Millionaire? Easiest question to answer ever, I want to be a millionaire.
Watching the show, you saw contestants attempt to answer progressively more challenging questions in order to get to the million dollar question. The format was simple. Answer every question correctly and win a million bucks. Have you ever seen the John Carpenter moment? What an absolute nerd baller.
However many contestants would either fail by answering a question incorrectly or stopping short by not answering the question and walking away with money they’ve already won to “take profit.” There was too much risk in catastrophic loss by answering the question incorrectly which was weighed against the potential exponential growth in reward. A classic bout of risk vs. reward where the stakes get larger and larger.
It’s not that different in the finance market. You can take the methodical and safe route in investing by regularly contributing to an index fund. It is the simplest and near guaranteed method to becoming a millionaire over a long time horizon. The sooner you start and the longer you remain invested, the better your outcome in the end through compound interest.
However if you are like me and want to vastly outperform the market, you must be willing to take commensurate risk. This can mean losing a large portion if not all of your investment when wrong. Stock picking inherently means attempting to choose the asset that attains the greatest growth. This is the most important prerequisite to outperforming the market. To date, the market index $VOO is up 15% for the year. If you invested wholly in $NVDA instead, you’d be up >150%.1
So is that worth the risk? I absolutely think so. Let’s find out together - join me with the public portfolio!
Below is the S&P 500 market index VOO 0.00%↑ interlaced with NVDA 0.00%↑.