You’ll Always Own The Beasts

If you don’t follow investment news, you would have missed a rather staggering story in 2024. In June, a relatively unknown company, NVIDIA, became the biggest listed company in the world. Yes, that’s right, it overtook both Apple and Microsoft to claim the top slot.

Started in 1993, the company’s main product is the graphics processing units (GPUs) traditionally used in gaming computers. In 2001, its steady growth resulted in it entering the S&P 500 by replacing Enron. The real growth, however, only started in the last few years when its products became sought after for mining cryptocurrency and, more recently, for powering the new wave of Artificial Intelligence (AI) engines.

Its growth over the last five years has been staggering. In 2019, it traded at $4 per share. At one point in June 2024, the share price was $126. Naturally, much media coverage has fixated on the remarkable wealth investors could have made by picking this stock before its rise in popularity. However, smart investors know that predicting which companies will become these market leaders is incredibly difficult. With hindsight, it seems obvious—how could Amazon not be huge, how could Tesla not be a beast?

A Better Way

Stock-picking can be risky, often leading to missed opportunities and heightened anxiety. If you didn’t own NVIDIA directly, there’s likely no need to despair. If you are invested in a global equity fund, you likely already own NVIDIA shares.

As an investor, nothing could be better news: Owning a global equity fund that tracks an index like the S&P 500 (or other large index) means you’ll always own the shares of the biggest companies. As companies like NVIDIA rise to dominance, they are promptly included in these indices, guaranteeing their presence in your investment portfolio. NVIDIA, for example, would have been held since 2001.

Companies that make the news for exponential growth almost always experience periods where they lose more than half of their value over short periods of time. For example, in 2022, Amazon lost close to 60% of its market value while the market as a whole only declined 25%.

A global fund gives you the growth exposure of the stocks that fly while also giving you the protection of a diversified portfolio.

As a result, you won’t need to worry about missing out on the next big thing. Whether it’s an emerging tech giant or a company revolutionising an industry, being part of a diversified global equity fund ensures you’re always in the mix.

Ignore The Noise

While the above good news seems common sense, you’ll seldom read about it in the financial media. Growing wealth slowly over time does not make for exciting headlines. A story about the latest stock to explode makes for a better story, which is why you will always wonder if you’re losing out to others.

There are numerous reasons to own index funds, and the data shows that they tend to outperform actively managed funds over meaningful periods. One key advantage of index funds is that they always include the market’s dominant companies. It’s impossible to predict which sector will dominate the top 10 spots. But the good news is, you don’t need to guess because you’ll own a small slice of it regardless.

Some stocks die, some stocks fly, and some stocks really soar. Trying to pick these winners in advance is a fool’s errand. By owning a broad global equity fund, you’ll be a part-owner in the market’s dominant companies, even those no one could predict with foresight. This approach allows us to benefit from the growth of these giants without the stress and uncertainty of trying to pick individual winners.