What do Nvidia, Tesla, AMD, Camtek, and Fair Isaac have in common? Sure, they’ve been among the best-performing stocks over the past decade, with gains ranging from 40% to 75% annually. But there’s something else they all share—something that could make or break an investor’s resolve. Let’s explore how these market darlings managed to create millionaires while testing their investors’ patience like few others.
A Rollercoaster of Returns
The numbers are dazzling. A $10,000 investment in Nvidia a decade ago? Worth nearly $2.7 million today. Even Tesla, which had the “smallest” gains among the top five, turned $10,000 into $290,000. But these figures only tell part of the story.
Here’s the kicker: Every one of these stocks dropped by at least 50% at some point in the past ten years. That’s right. Even Nvidia, the titan of AI and GPUs, saw a two-thirds drop as recently as 2022. Tesla? It’s taken three separate tumbles, each erasing more than half its value.
For context:
- Nvidia: Down 66% in 2022.
- Tesla: Three separate drops exceeding 50%.
- AMD: A similar pattern, including a current dip of 40% from earlier highs.
Why does this matter? Because these gut-wrenching declines make it almost impossible to hold on. Watching hundreds of thousands—or even millions—evaporate would test the mettle of even the most seasoned investors.
The Psychology of Selling (and Why It’s Often Wrong)
It’s easy to see why investors panic during these drops. Imagine you’re sitting on a six-figure gain, and suddenly half of it vanishes. The instinct to sell feels almost irresistible, especially when headlines amplify the doom-and-gloom narrative.
But hindsight reveals a harsh truth: Selling during those moments was a mistake. For all their volatility, these stocks came roaring back, rewarding those who stayed the course with staggering returns.
And this pattern isn’t unique to these five. Historically, many of the best-performing stocks endure periods of sharp decline before bouncing back stronger. The real challenge lies in resisting the urge to sell and trusting in your investment thesis.
Charlie Munger’s Timeless Wisdom
The late Charlie Munger, Warren Buffett’s legendary partner, had a knack for cutting through the noise. His advice? Accept that 50% declines are part of the deal if you want to reap exceptional rewards.
In Munger’s words: “If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century, you’re not fit to be a common shareholder.”
It sounds harsh, but it’s the truth. Successful investing demands patience and a willingness to ride out the storm. After all:
- A 50% drop doesn’t necessarily signal a company in trouble.
- Some of the best opportunities emerge in the depths of market despair.
- Without a clear thesis, it’s easy to let fear dictate decisions.
Why an Investment Thesis Matters
One of the most actionable takeaways from these stories is the importance of having an investment thesis. When prices plummet, it’s natural to second-guess yourself. But if your thesis remains intact, it’s often a sign to hold on.
For example:
- Nvidia: Its dominance in AI and graphics cards hasn’t waned, even during downturns.
- Tesla: Despite intense competition, its brand and innovation keep it a leader in EVs.
- AMD: The company continues to make strides in chips, challenging giants like Intel.
The lesson? Know why you’re investing. If the fundamental reasons haven’t changed, don’t let short-term price movements cloud your judgment.
How to Handle Market Volatility
It’s one thing to know the theory, but what should investors actually do when their portfolio tanks? Here are some practical steps:
- Revisit Your Thesis: Is the company still performing as expected? If so, it may be worth holding on.
- Stay Diversified: Even the best stocks can be unpredictable. A balanced portfolio helps mitigate risks.
- Avoid Timing the Market: Selling in a panic often leads to missing the recovery.
And remember, volatility isn’t a bug—it’s a feature of the market. Accepting this truth can help you navigate the ups and downs with greater confidence.
A Table of Perspective: Winners and Their Woes
| Stock | Annual Growth Rate | Largest Decline |
|---|---|---|
| Nvidia | 75% | 66% (2022) |
| Tesla | 40% | 70% (Multiple) |
| AMD | 45% | 50%+ (Multiple) |
| Camtek | 42% | 50%+ |
| Fair Isaac | 43% | 50%+ |
These numbers highlight the double-edged sword of investing in high-growth companies. The rewards are immense, but the ride is anything but smooth.
The Big Picture
The past decade’s top-performing stocks offer a masterclass in resilience. They’ve shown that extraordinary gains often come with extraordinary challenges. For investors, the key is to stay the course, guided by a well-researched thesis and a steady hand during turbulent times.
Investing isn’t for the faint of heart. But for those who can stomach the volatility, the rewards can be life-changing.
