Here’s our Club Mailbag email investingclubmailbag@cnbc.com — so you send your questions directly to Jim Cramer and his team of analysts. We can’t offer personal investing advice. We will only consider more general questions about the investment process or stocks in the portfolio or related industries. This week’s question: On Sept. 16, 2015, I bought 125 shares of Nvidia as a speculation stock. I bought it because I watched “Mad Money” that week and Jim Cramer was so convincing that NVDA could/would do amazing things in the future. Jim recommended it as a strong “spec” stock. I now own 5000 shares of NVDA (thanks to stock splits in 2021 and 2024). I truly believe Jensen Huang’s vision for Nvidia and feel strongly that the company will continue to be extremely successful for at least the next couple of years. Everyone keeps telling me to ring the register and sell some shares of Nvidia. My question to you is: Do I continue to hold, or should I sell some shares to cover the house money? My plan is to let it ride until it hits $400 and then ring the register. What are your thoughts and recommendations? Thank you!! — Lee S. from Florida. Congratulations on the monster win. This is a great example of what can happen when you focus primarily on the multiyear business fundamentals, instead of day-to-day fluctuations in the stock price. It’s no secret that artificial intelligence chip darling Nvidia has seen some pretty massive drawdowns since 2015, but those swings get easier to stomach when you stay zeroed in on the long-term outlook. Moreover, it demonstrates the importance of taking on some risk now and then. Of course, not every speculative play will do what Nvidia has, but if you decide to merely own a diversified index fund — which may be the right move for some investors – you give up all hopes of hitting a grand slam like this. Now, with that in mind, this is a clear-cut case of discipline versus conviction. As longtime followers of Jim Cramer know, our belief at the Club is that discipline trumps conviction. Not taking any profits since 2015 clearly goes against our approach of booking profits along the way. Often times in a stock that has at least doubled, we like to take off as much money as we put in and then let the rest run with “house money.” That’s our discipline, at least. It may not be yours — after all, every investor must develop their own. As Jim likes to say, bulls and bears make money, while pigs get slaughtered. Letting a successful position ride for nine years would generally qualify as piggish. But there’s no denying that in this case, you’ve managed to avoid the slaughterhouse. So, can we tell you that you were wrong for doing what you did? Not exactly. At the end of the day, you either make money or you lose it. And with this bet on Nvidia, you’ve made a boatload. It appears that your conviction has served you well. All of that said, we would argue that your case — and similar investments in Nvidia that were initiated many years before the generative AI boom — is the exception to the rule. Let’s be honest: Back in 2015, nobody could predict with 100% certainty what Nvidia would become over the next decade, perhaps except for co-founder and CEO Jensen Huang, who has always insisted the chipmaker is much, much more than a video-game company. Investors who believed in his vision of Nvidia as an accelerated computing company and stuck with the stock through thick and thin, like yourself, deserve immense credit. But for every Nvidia — and there aren’t many companies in history to realize the kind of explosive growth that Nvidia has — there are hundreds of speculative plays that do not pan out. Our rules and disciplines are designed and adhered to because our focus is on staying in the game. They are about making sure the Nvidia-wannabees don’t wipe us out before we have the opportunity to find an Nvidia. So, while your conviction has been rewarded and we still maintain our “own it, don’t trade it” view of the stock, we have to abide by our ruleset. Discipline trumps conviction, and taking profits periodically on the way up guards against the pitfalls of greed. Do we see further upside for Nvidia shares? Absolutely. After all, we just raised our price target Wednesday night following its better-than-expected earnings report. Nevertheless, long-term investing is as much about managing the downside risk as it is about searching for potential upside. For high-quality companies like Nvidia, protect against the downside, and the upside will take care of itself. And, while not our base case, we can’t completely ignore the potential headwinds for Nvidia, even if some of the big ones are outside its control. Remember, AI is now considered a national security issue, putting the semiconductors used to create AI at the center of what could be a very contentious period between the U.S. and China once President-elect Donald Trump takes office. If something were to hit Nvidia’s supply chain — most notably, additional Chinese aggression toward Taiwan — it could significantly impact the stock. To be clear, that’s not our default expectation, but we can’t pretend that it’s a zero-percent probability. Risks we don’t expect to be realized are still risks that must be considered. That’s a key reason to keep a diversified portfolio. We recognize we may be offering thoughts that go against your stated intention of holding on to the entirety of your position until Nvidia hits $400 a share. We also don’t know the rest of your financial profile, which is another important consideration in these kinds of situations. And depending on the type of investment account your shares are in, there could be tax consequences to consider — in general, we don’t think capital gains taxes are a reason not to book profits, but it’s a conversation worth having with a tax advisor. Our bottom line is that in scenarios like this, we’re going to lean on our own rules. They’ve allowed us to stay in the game and helped us donate a whole lot of money to charity along the way. Nvidia is a stock we want everyone to own for the long haul, but discipline trumps conviction. And when confronting monstrous moves to the upside, that discipline is to lock in some profits. (Jim Cramer’s Charitable Trust is long NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
