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Investors may be able to achieve superior returns with less volatility from investments in NVDIA stock by timing their investments over a long period rather than investing all their funds immediately. Dollar-cost averaging, a popular strategy for timing investments, generally leads to slightly lower returns compared to investing a lump sum. However, investors who use this strategy also experience less volatility. Dollar-cost averaging can be especially effective in volatile or declining markets. Investors who want to put money into NVDA can base the decision about whether to time their investment or do it all at once on their assessment of the company’s long-term competitive strength and ability to continue its stellar returns for an extended period. Consider speaking with a fiduciary financial advisor for help managing your portfolio and market turbulence.
NVDIA (NVDA) has a globally dominant position when it comes to supplying the brains of the artificial intelligence revolution. After getting its start in the early 1990s selling graphics cards for computer gaming, NVDA increasingly began selling high-performance processing chips to companies building computers specialized for AI.
As worldwide demand for these systems mushroomed, NVDA’s fortunes followed suit. Over the last decade, its shares have returned more than 20,000%. Today, the company is valued at approximately $2.7 trillion.
It has not been a smooth ride. The company’s shares, while generally trending sharply upward, have experienced notable periods of volatility. Recently, NVDA has been trading at more than 30% below its 52-week high. The downward trend has been driven by concerns over prospects for a falloff in investments in AI hardware, increasing competition from other chipmakers, trade restrictions and other forces.
However, NVDA is still far and away the leader in sales of chips for AI applications. It also has robust markets in robotics, cryptocurrency and, although no longer its chief business, gaming. Analysts generally consider its future bright, with continuing strong increases in sales and profits for the foreseeable future.
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Investors may wonder how they can get on board while managing the volatility that comes with putting money into the company’s shares. One popular strategy is dollar-cost averaging. This method calls for investing a set amount of money at fixed intervals. For instance, you could put $1,000 into NVDA on the first of every month.
Dollar-cost averaging means you’ll buy more shares when prices are lower and fewer shares when prices peak. This lowers the average price of shares over time compared to lump-sum investing.
Dollar-cost averaging doesn’t usually mean higher returns. If maximizing earnings is the goal, investors can, on average, best serve it by immediately putting all their money in the stock or other security they want to buy. This is because, over time, markets generally trend upwards and, on average, the least expensive time to invest is today.
This may not always be true when it comes to stocks that exhibit greater volatility than the market. But, as a rule of thumb, dollar-cost averaging will lower returns while also dampening volatility.
Dollar-cost averaging an investment in NVDA can produce impressive returns. An analysis by a specialized dollar-cost averaging calculator indicates that investing $1,000 in the company’s shares every month starting April 3, 2023, would by March 21, 2025, have produced $228,996.88 in gains for a cost of $24,000. That’s a return of 954.15% over slightly less than two years.
NVDA stock today is up about 300% compared to two years ago. That means if you had put $24,000 into NVDA two years ago, you would have a relatively modest $72,000 now. In this historical example, you could supercharge your returns by dollar-cost averaging because the volatility in NVDA stock would have allowed you to buy shares for an average price of much less than they were trading for two years ago. Consider matching with a fiduciary financial advisor if you’re interested in discussing your investment strategy and execution.
In addition to dollar-cost averaging and all-at-once investing, you can try to time your investments by, for instance, watching for developments that may affect NVDA’s stock price. For example, if you anticipate an earnings release that will be more positive than everyone is expecting you could buy shares now. Or, if you expected earnings to disappoint, you could wait until after the release in the expectation that share prices will have dropped temporarily. This strategy relies on your having the ability to out-guess the market, however.
One effective way to invest is through a tax-deferred retirement account, such as a 401(k). This allows you to dollar-cost average because you put money into the account every payday. It also provides a tax benefit by allowing earnings to accumulate tax-free. And, due to restrictions on early withdrawals, you will likely be discouraged from taking profits instead of staying fully invested. Studies show staying fully invested at all times generally is the most effective way to build long-term wealth.
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Timing NVDA investments can increase returns and dampen volatility if you use the dollar-cost averaging method. This reduces the average cost of shares and is an especially effective method of investing when prices are subject to significant fluctuations, as is the case with NVDA. The company’s long-term future prospects are generally highly regarded, despite its stock price retreating from recent highs. So whether investing all at once with a buy-and-hold strategy or purchasing shares with dollar-cost averaging, NVDA remains one of the most popular and valuable companies to invest in.
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