A lot of Britons steer clear of the stock market. Viewing shares as too risky, they opt to put their money into Cash ISAs or savings accounts instead.
This is a real shame, in my view. Because while shares do have their risks, the stock market really can change your life.
£435,000 from a £1,300 investment
There’s probably no better example of this than Nvidia (NASDAQ: NVDA) shares. The largest business in the world today, Nvidia’s a US company that designs high-powered computing hardware (GPUs) for artificial intelligence (AI ) applications.
Ten years ago, shares in this company were trading for just $0.64 when we account for the stock splits that have taken place over the last decade. However today, they trade for $188.
That means that someone who had put $2,000 into the stock as an investment a decade ago (around £1,300 back then), and just left it to grow, would now have around $588,000 (about £435,000), ignoring fees and taxes. For most people, that’s a life-changing amount of money.
Of course, Nvidia wasn’t a mainstream stock in 2015. Back then, it was mainly a video game hardware company and quite niche. However, had someone held an interest in the stock market at that point, they may have heard about its potential. Note that CNBC host Jim Cramer has been talking up the tech stock for over a decade now (he actually named his dog ‘Nvidia’ in 2017).
He was recently saying that these days, people in the street come up to him and tell him they’ve made a million dollars or more from that stock alone, thanks to his mentions.
Now, I’m not saying that Nvidia is a strong Buy to consider today. I still like it for the long term due to its dominant position in the AI industry, but it has had an incredible run over the last few years and could be due a pullback in the near term.
Note that it’s very much a higher-risk stock as it operates in a highly cyclical (up and down) industry. Anyone who has made a fortune from it has most likely had to tolerate some enormous, gut-wrenching (50%+) share price swings along the way.
Many opportunities in the market today
I should also point out that shares like Nvidia are quite rare. Most stocks don’t perform anything like this (low-quality companies often provide lousy returns).
There are plenty of great stocks in the market that could be worth checking out though. Today, we’re in the middle of a powerful technology revolution that is creating incredible opportunities for investors.
Within industries such as cloud computing and data, AI, e-commerce, semiconductors, cybersecurity, and digital payments, there are many companies growing at breakneck speed. And a lot of these are generating great returns for investors in the process.
To my mind, the key is to find companies with high revenue growth, strong competitive advantages (ideally they offer products or services that competitors can’t easily replicate), great management teams, and solid financials. And then build a diversified portfolio to reduce stock-specific risks.
If you’re looking for investment ideas, you can find plenty right here at The Motley Fool.
