The Power of Buying and Holding – Part 1

Personal example – NVIDIA stock.
Article written in November 2021 and edited in February 2022.

💡 Context:

I bought some NVIDIA Corporation shares (NVDA) on October 28th 2020. 5 months later, in March 2021, the price of the stock had barely moved.

Yet, company’s fundamentals were stronger than ever, and I decided to hold.
More than a year later (November 2021), Nvidia’s stock price has eventually taken off spectacularly, and I had about 150% return on my trade.

I think it’s much more difficult to achieve this kind of return by trying to guess the next market move and trading often the stock (open, close, open, close).

💡 What happens if the stock you bought and want to hold is continuously going down?

Well, that may happen. Example of a stock I am holding despite its drawdown: Alibaba (BABA). 
In this case, you need to evaluate if the stock still has potential to go up again, or if something has changed in its fundamentals.

If there is no change in the asset’s fundamentals, you need to be patient and hold longer. If some negative change occurred (critical shift in the regulatory or macroeconomic environment, the company strategy etc), consider closing the position.

💡 Mathematics are on your side:

I hold a few assets which valuations have gone down dramatically (Alibaba, Nano Dimension, Baidu, etc). 

But I also have a few assets which valuations grew beyond 100% return (Nvidia, AMD, Societe Generale, China Longyuan, Ethereum…)

For each asset going up 100%, you can have two holdings of the same weight going down 50%. So if you pick your assets reasonably well, the strategy of buying and holding is definitely a winning strategy!

I hope this post can inspire some of you to finetune your investment strategy. Trade safe and take care!

Nico