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Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
Welcome to how to retire on time, a show that answers your questions about all things retirement, including income taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire on Time, which you can grab today on Amazon, or you can go to www.howtoretireontime.com. My name is Mike Decker. I'm the author of the book, How to Retire on Time, but I'm also a licensed financial advisor, insurance agent, and tax professional, which means when it comes to financial topics, we can pretty much talk about it all. Now that said, please remember this is just a show.
Mike:Everything you hear should be considered informational as in not financial advice. If you want personalized financial advice, then request your wealth analysis from my team today by going to www.yourwealthanalysis.com. With me in the studio today is my, esteemed colleague, mister David Fransen. David, thanks for being here.
David:Yes. Thank you for having me here.
Mike:David's gonna be reading your questions, and I'm gonna
Mike:do my best to answer them. You can send your questions in right now or anytime during the week. Just save this number, (913) 363-1234. Text them in, (913) 363-1234, or you can email them to heymike@howtoretireontime.com. Let's begin.
David:Hey, Mike. Should I sell my NVIDIA stock? Might be on someone's mind right now. Jump ship.
Mike:Okay. Fair question. Yeah. Very fair question. Because of the deep seek and the breakthroughs that have been happening.
Mike:Mhmm. Because of and I would say for lack of a compliment. This is not a backhanded compliment, but Sam Altman is the the CEO of of OpenAI
David:Right. Right. I've heard of
Mike:chat GPT. Yes. He's very open and transparent with his thoughts and feelings about things, for better or for worse. There are a lot of unknowns with this.
Mike:So the questions to really ask, did DeepSeek the new AI that really shook up the market, were they actually able to build that model for the price that they did in the way that they claim. Mhmm. It is still unclear if that is the case. That said, there's something called creative destruction, and that means the first person that figures something out and does it really, really well, like OpenAI, I would say is the first legitimate person to do Mhmm. What we call AI.
Mike:Okay? They're the biggest. They're the most successful so far. Doesn't mean that they will always be that way. I mean, gosh, look at Kodak.
Mike:They had the camera market Right. And they kind of died. Blockbuster
David:Oh.
Mike:Didn't innovate and kinda died. So
David:Yeah.
Mike:There is no guarantee that number one will stay number one. There's an expression about innovators. Innovations create destruction. Destruction meaning those who are not keeping up or maybe innovating in the wrong ways could fall behind. My point being is NVIDIA is a chip company that makes chips for very complex large language model AI systems.
David:Mhmm.
Mike:If you don't need complicated chips to support large language models, NVIDIA is less valuable.
David:Right.
Mike:If this is a ruse or there's reason to have complex chips or maybe not the current version of AI, maybe we can do it on simpler chips, but the next round of AI is going to need more complicated chips, then maybe they have value. The answer to the question is no one actually knows because we're still trying to figure out what AI is and what resources, chips, are needed to support the product. Right. ChatGPT and all these other things. Yeah.
Mike:Right now, this standard is we need these chips, which is why Nvidia is so popular. Yeah. But once we don't need Nvidia anymore, they've gotta innovate and create simpler chips that are still higher quality or something else.
David:Right.
Mike:But this is risk of having an over concentrated position on a single company. I recognize a lot of people have made a lot of money on Nvidia. Mhmm. I would just point you to the tech stocks in the nineties. Look at Oracle.
Mike:Look at IBM. Look at Amazon. Go to chat GPT.
David:Oh, yeah. Yeah. Alright.
Mike:And just say, what were the big tech stocks in the nineties? And then look at what they did from February on and all the time it took to digest the understanding of what it is and how are we supposed to price it. Nvidia may be experiencing the same thing. They may not be. When you focus on one stock, you increase your risk because you're putting all your chips into that being the right decision.
Mike:This is what diversification is intended to be. Am I saying you should sell your Nvidia stock? No. First off, I can't give you financial advice. This is a show.
Mike:No. I haven't actually spoken with you. If 100% of your assets are in Nvidia, maybe you ought to consider diversifying a little bit. If over 50% of your assets are in Nvidia, maybe consider diversifying a little bit. Sure.
Mike:The Magnificent Seven, which are the major players of the AI uprising. So you've got Nvidia, Tesla, Microsoft, Apple, Amazon. I mean, all these companies. Who are the other two?
David:We got
Mike:yeah. Google and Meta?
David:Alphabet and Meta. Yeah.
Mike:So they, they're benefiting from the AI rush. It's the new gold rush, but it's also kind of the new cold war now that we're competing with China.
David:Yeah.
Mike:If DeepSeek in fact does send data to China, then it's another TikTok conundrum. What's the political risk associated with that? Mhmm. It's a very complex question. But as a general rule, going too heavy into any stock may not be the best thing.
Mike:But holding on to some new video, I don't see any problem with that. We just don't know the future.
David:Yeah. Yeah. Yeah.
Mike:Are you okay with the risk that you're taking? That said, I think there's another conversation that needs to be had here. So the question is, should I sell my Nvidia?
David:Yeah. That's the question.
Mike:How do you quantify that? I think that's the more appropriate question because everything I just said was completely speculative. Uh-huh. Notice how I didn't actually have an answer? Right.
Mike:I just talked in circles about how chips work and how AI and all this speculation. Right. Right. Right. So my point being in admitting the speculation is because no one knows the future of the market.
Mike:No one knows the future of a stock. How do you quantify your investment decisions? So for me personally, I like to look at price or price action or jargon terms of basically what's the stock selling or being traded at in any given moment.
David:Okay.
Mike:That stock or price, the action of the price going up and down tells a lot. On a daily basis, price is kinda like a voting machine. This is based on Benjamin Graham. Benjamin Graham was kind of the mentor to Warren Buffett. So it's a voting machine.
Mike:It's kinda like waves in the ocean. A lot of noise, but you don't really know which way the tide is going or or coming in.
David:Okay. Okay.
Mike:The reason why I say that is if you look back a little bit greater, so over a couple of months, you can start to maybe see some trends or some patterns. I like to quantify trades by solidifying the opinion or the trade based on price and behavior of that price.
David:Okay.
Mike:So examples are if the stock, let's say, is trending above a certain moving average and has exhibited certain patterns that that can be in there. I'm really struggling to try to keep this simple Mhmm. Yeah. Because we can get so technical so fast. But just think of behavioral patterns.
Mike:That's the best way to look at it. We can then quantify probability of success based on historical price, allowing us to make educated decisions on if we think that the stock has momentum moving forward or not.
David:Okay.
Mike:Another way to say all of that is basically if it seems like it's becoming popular, people are catching on to it, we might hold it for three, four months, and then we'll sell it and reevaluate and look at other stocks or other positions. And the reason why I think it's so important to trade it more objectively, to have a system that looks at positions in some sort of mathematical way and not a speculative opinion is you can quantify your winning ratio. So this algorithm, how many times with real money, not not the hypothetical back tested stuff, but with real money, how many times are you actually making winning trades and losing trades?
David:Okay.
Mike:How great is the winning trade? You could start to create a system and trade based off of the system and not a sentiment. For example, I know based on current data that if we were to buy UnitedHealthcare, we're gonna hold the position for about, sixty days or so.
David:Okay.
Mike:Then Then we're gonna reassess because we can find a trend, and that stock tends to be around there. Now if we hold Tesla, it's around ninety days. Because around forty five to sixty days, based on what we have noticed on the behavior of a stock, it can get a little bit squirmy in a certain period of time, and then new news comes out or people get excited about it or people say, oh, it's a good time to buy, whatever it is, but then it has a history in certain conditions that it might go up.
David:Okay.
Mike:I'm not saying that if you buy and hold Tesla for ninety days, that it's always gonna go up. That is not true. We're buying in based on certain conditions being met. This is complex stuff. Yeah.
Mike:The guy asked the question or the gal asked the question. Yeah. So I wanna answer it. Right? But we use systems to curb emotions.
David:Okay. You're looking at, like, historical price movement action Yeah. Amongst some other things, and then you stay within that. You don't ever ignore that data.
Mike:No. You stick to your systems, not sentiment.
David:Yeah. Yeah. Yeah.
Mike:And so when we buy a stock or a position, it's because we have high probability based on our internal mathematics that the stock should go up over the next predetermined period of time. Mhmm. Whether it's thirty days, sixty days, ninety days, whatever that time is. It's a system. Yeah.
Mike:Systems keep emotions at bay. It's not speculating AI is gonna revolutionize the world. No. And the reason why I'm bringing this up is we buy Nvidia all the time. Yeah.
Mike:We also sell Nvidia all the time. Yeah. But we're buying in when we believe Nvidia is on an uptick, and there's momentum there, and we think it's a good time, and we'll hold it for x amount of period of time, and then we'll sell it and reevaluate.
David:So regardless of any deep seek news, we're we're gonna stick to our system and not get emotional.
Mike:Yeah. That's it. It's extremely complicated. Yeah. I mean, we've got massive amounts of servers that run these algorithms every night
David:Mhmm.
Mike:Then put out a report and then keep on with the system. There's no black swan event or something we need to be aware of. These are complicated systems. Not all the trades are winners. Right?
Mike:Nothing's perfect. But in my mind, that is a better system to quantify should you buy or sell something as opposed to try and make an emotional decision.
David:And the
Mike:reason why I say this is there's a lot of emotional investing. Hey. Trump really wants to drill, baby, drill. Let's buy a bunch of energy. Mhmm.
Mike:Well, sorry to break it to you, but all of that hype is already priced in to the current energy sector. Oh, AI is gonna revolutionize the world. Sorry. All that hype, all of that excitement has already been priced in based on our current information. That's why when the news came out that maybe a large language model dipped a little bit, the video went down because there was new information and that got priced in.
Mike:So all in all, the big thing I'm trying to reiterate here is find a system and stick to that system. Don't let sentiment overtake you. Don't make emotional investments. It just these things matter. And by the way, the thing that I just referred to, they're called absolute return models.
Mike:You can Google it. Yeah. It's on Investopedia. It's it's just most people don't know to ask for these kinds of models. Most people don't know to even look for them.
Mike:Most people are almost conditioned to just believe that you buy ETFs and hold them, and that's the only thing that's available out there. That's not true. That's just one way. It's just some of the largest voices happen to sell those funds, those passive funds, and so they want you to believe that that's what you should do. More than one way to invest.
Mike:There's more one way to grow your money. There's more than one way to approach your retirement. There's no such thing as a perfect investment product or strategy. I believe that we should not get emotionally attached to an investment, that we should treat it more objectively as opposed to subjectively. That's all the time we've got for the show today.
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Mike:Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date. Go to www.yourwealthanalysis.com today to learn more and get started.