Episode 134: What Happens to Your Single Stock Portfolio When Market Volatility Sets In – How Nividia’s (NVDA) 12% Drop Impacts Your Portfolio

Listen here on our website:

Or jump to this episode on your favourite platform:

Watch Now!

Are you taking on too much risk by investing in individual stocks, or could a broader sector-based index ETF help protect your portfolio from major swings in the market?

In today’s episode, we tackle a common dilemma for investors—should you bet on single stocks or spread your risk across a sector index ETF by digging into a case study. With the markets constantly fluctuating, it’s easy to get drawn into individual stocks that seem to have huge upside potential, but this comes with the risk of major losses when those stocks take a dive. We break down how the recent market turmoil, including a significant drop in Nvidia (NVDA), highlights the risks of going all-in on a single stock, especially when the stock is highly speculative or overvalued. Meanwhile, index ETFs like the Nasdaq 100 (QQQ) offer diversification that helps shield investors from these large, company-specific downturns.

For anyone looking to grow their wealth without risking it all on one company, this episode will help you understand the balance between higher returns and risk exposure. We dive into actual market data, using Nvidia’s recent struggles and the relative stability of the QQQs, to demonstrate how a diversified index ETF strategy can help protect your investments while still providing strong growth potential. If you’re questioning whether to double down on your single stock picks or diversify, this episode is the perfect resource to help you decide.

• Discover what happens when a high-growth tech stock like Nvidia faces major challenges and how that impacts your portfolio depending on your position sizing; 
• Learn how investing in a sector index ETF can reduce risk, even if individual stocks within the index ETF experience volatility; and,
• Understand how choosing the right mix of investments can help you manage potential losses while still positioning yourself for long-term growth.

Hit play now to find out how to protect your portfolio from the risks of single-stock investing and discover the power of diversification.

Resources:

• Ready to take a deep dive and learn how to generate personal tax free cash flow from your corporation? Enroll in our FREE masterclass here. 
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Dig into our Ultimate Investment Book List
• Interested in opening an Interactive Brokers Trading Account? Use our referral link here so you get a welcome bonus.
• Follow/Connect with us on social media for daily posts and conversations about business, finance, and investment on LinkedIn, Instagram, Facebook [Kyle’s Profile, Our Business Page], TikTok and TwitterX.
• Looking for a new mortgage, renewal, refinance, or HELOC? Reach out to Jon to share some options.

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting cordporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

Achieving financial independence retire early (FIRE) requires smart planning, especially when it comes to growing your net worth and generating passive income with a focus on the sequence of returns of your Canadian investment portfolio. In this episode, we focus on why Canadian investors are better diversified and protected using index Exchange Traded Funds (ETFs) instead of trying to pick the next best stock on the TSX, S&P500 or NASDAQ. For business owners, navigating the complexities of corporate structures, tax implications, and investment strategies can feel overwhelming. From understanding capital gains rules to leveraging life insurance for wealth optimization, the right approach can transform your financial future. By aligning your strategy with tax-efficient tools, you can unlock the full potential of your business and investments, ensuring sustainable growth and long-term independence.

Transcript:

Welcome to today’s episode of Canadian Wealth Secrets and we’re going to give you a secret sauce episode where we’re going to dive into key questions for anyone who’s trying to squeeze more returns out of their investments. The big question here is whether it’s better to put your money into single stocks or spread the risk with a broader sector based ETF.

Stick around because we’re going to be exploring three big ideas and actually digging into a case study. First, what happens when a single stock takes a major hit? How does that affect your portfolio? Secondly, we’re going to be looking at investing in an ETF to protect you from these types of risks. We’re going to talk about how it actually helps, even if that particular stock is inside of that sector ETF. And third, we’re going to look at how

Two different tech stocks have seen wild swings in different directions over the last few years and what that could mean for your portfolio if you were holding them. Stick around as we break it all down and help you think through what might be the most helpful for you to grow your investment dollars while ensuring that you protect the pile simultaneously. Here we go.

All right, my friends, it is the beginning of February 2025. Now this episode will really be able to resonate for years to come because we’re gonna look at a specific case study, but this is happening all of the time. Now what inspired me to do this episode now was because of all of the market turmoil going on right now. For those who are listening to this at a future time, right now, the new president,

has been put in place there, Mr. Donald Trump in the US. And of course, that was very helpful for markets. Now, we have a few other things going on where he’s been talking about tariffs and how that could impact or influence the markets. And the reality is we actually don’t know exactly what is going to happen next. However, there was one other news item that popped up and it actually sort of hit a very, very popular company.

very hard. It’s one of the companies that has done wonders over these last few years, and that is Nvidia. And Nvidia, it creates computer chips and graphics cards to really help along. And they were very instrumental for things like Bitcoin, for example, because it requires a lot of computing power. But now it’s big in the AI world. And we are in a place where, back in 1999 or so, we were in the tech bubble, the internet.

tech bubble. Right now we are in a bit of an AI bubble, a tech bubble. Now I’m happy to say it, like for sure we are in a AI bubble. Now that doesn’t mean to sell everything. By the way, I’m very heavily invested in two different tech stocks through different trading strategies. However, at some point,

things will shift like that. You can, you know, you can mark my words. I don’t know if it’s going to be this year. I don’t know if it’s going to be next year. I don’t know if it’s going to be next decade. But the reality is, is that right now there’s a lot of companies that are very overvalued based on what it is that they are truly worth, right? Which really means that there’s a lot of speculation going on. So what we’re going to talk about today is that specific company, NVIDIA.

And we’re actually going to compare it to the actual sector. in this case, we’re going to look at the queues, which is the top 100 NASDAQ companies, right? And we’re going to look at the queues, and we’re going to look at a comparison as to what’s happening. Because last week, what you may or may not remember is that there was this deep, deep seek company that released some information that suggests that

their AI technology blows Navidias out of the water. So, Navidia saw a major hit. And actually, I’m gonna start sharing the screen for those who are hanging out with me on YouTube. Feel free to head on over to YouTube. Just, you know, Google Canadian Wealth Secrets, YouTube, and episode 134. You’ll be able to hop over there with me or check out the link in the show notes page here. But if I actually share this screen and we actually look at what’s going on,

with Nvidia, there’s a few things here. Now, you’ll see a couple lines on the screen. I’ll talk about those in a second. But you’ll see that something happened last Monday on January 24 2025, where, you know, on the Friday, basically, Nvidia saw a big sort of spike down by the end of the day, it closed at about 142. And then Monday morning, and it was actually before the market opened, because there’s this thing called the

where you can actually buy and sell stocks outside of regular trading hours, few hours after, few hours before, the pre-market numbers showed that Nvidia was way down. And it actually opened at 9.30 on Monday morning down at 1.24. It was about a 10-ish percent or more hit when it opened in the market. Now, it was as bad as like 15 % pre-market. Like it was pretty bad. And what you’re gonna see here, and if we measure this thing out,

is that from Friday to Monday when it opened, yeah, it dipped 12 and a half percent. And the part that I think is really important here is that if that was 100 % of your portfolio, I don’t anticipate that to be the case for you, but I want to make this real that like if you have a million dollar portfolio and your entire portfolio is in Nvidia, because you trust Nvidia is amazing.

And you’ve been right, by the way, for a very long time. So that’s a that’s a good thing, like good for you for that. The reality, though, is that your entire portfolio went down by 12 and a half percent, right? So that million dollars is now going to be worth like south of $900,000. And that could be unsettling for someone right and

you know, this is scalable. So if it’s half of your portfolio, then you know, your entire portfolio went down by about 6%. And if it’s a quarter, then it’s 3%, and so on and so forth. Whereas if we look at what happened to the queues, which is the NASDAQ, the top 100 NASDAQ companies, we look at what happened to the queues from Friday to Monday morning, there was a gap down. Why? Because Nvidia is such a large component of the queues, there’s a lot of exposure for Nvidia.

But you’ll notice that on Friday, it closed at about just south of 530. And then on Monday morning, it opened up at about 510. And that means that it dropped by about 3 and 1 half percent. So the entire stock market got rattled by this news, right? It was like, my gosh, like a lot of the tech stocks went down. Everyone’s in a bit of a panic. Usually it’s irrational, right? Very irrational.

But what you’ll notice, though, is that where the Qs landed here, not only was it only 3 and 1 half percent lower, right? So your million dollar portfolio, if you were 100 % invested in the Qs, which most people would suggest, that’s probably not the most diversified strategy, right? It’s very tech heavy. Might be good to be in other sectors and maybe have a little bit of Bitcoin or right now maybe a little bit of gold. Like other sectors.

are affected differently. Like when tech goes down, oftentimes other sectors may go up. So that’s where this diversification sort of happens. But the important piece here is that Nvidia is a part of the cues and the cues went down by like a quarter of the distance that say Nvidia did, which is giving you some protection and you’re not fully protected, but you’re getting some protected. But what I want to share with those who are looking on the screen is where Nvidia sits now.

compared to where NVIDIA and the Qs are, sorry, where NVIDIA and the Qs sit now compared to where they were last week when all of this news happened. So NVIDIA started with a big sort of big dip down, like we said, 12 1 1 % so. And you’ll see on the screen, it rebounded the next day and it went up, but obviously not all the way back to where it was. It went up to about 130.

And then it went down again, it went up, it went down, and now it actually sits at 119. So that means that from where the initial dip happened to where it is now, it’s up about 1.61%, meaning it hasn’t done a whole lot to recover here. Whereas if we look at the cues, you’ll see that the cues quickly recovered. And when we measured this thing out from last Monday to where it sits now,

the queues have increased by about 1.7%. Now when you go down 3.5 % and you recover by almost 2%, you’re getting closer to where you were in the first place. You’re not quite there. You can see that on the chart here. You’re still down from where you were that Friday, but you’re definitely not down as far. The queues based on that Friday close all the way to where we are now is down about 1%. Whereas if we look at in a video where it is

today versus where it was on the Friday before the big dip, the it has lost a total of 16 % total. So it’s it’s actually like lost more than it did initially when it opened on the very same Monday. So it continues to go down. Now something else I want to highlight for you here is also, you know, if I am stock picking is looking at what the trends sort of suggest here, you’ll see that there’s a

200 day moving average on my screen and it is sloping up. That means over the last 200 days on average, this stock is moving up. That’s a good thing. That’s a good indicator. It means over the longer term, like this is a bullish stock, but you’ll notice there’s a yellow line on this screen and this is the 50 day moving average. So same idea over the last 50 days, basically.

is the stock moving up or down on average? And because of this big jump down, you’ll notice that the yellow line has actually flattened up. It was aggressively rising. It then flattened up for quite some time, really, since the middle of December to the middle of January. And then all of a sudden, this news came out and it plunged all the way down.

and now it sits below the 200 day moving average. So if it stays below the 200 day moving average for too long, then you can anticipate the 200 day moving average is also going to start flattening out and potentially sloping down. So in some regards, when we look at this, while we don’t make all of our decisions in investing based on this data, because of course the data can make you think this and you can get faked out, you can do all of those things, the reality is by mid December,

The last 50 days of trading suggested that Nvidia was sort of like flatlining for a bit, right? And some people may have taken profits and actually what’s happening there is someone’s taking profits, right? Someone’s selling Nvidia for less than what it was worth the prior day for this line to flatten out. And you can see it’s sort of like below the 50 day moving average, then it popped up above the 50 day average and it’s below the 50 day moving average and it’s up. And then all of a sudden now it’s below the 200. Like we’ve taken this big,

jump down. So why this is really important is when we compare to the queues, you’ll see that the queues still sit, although it popped down on the Monday after this deep seek or deep seek or sink. I can’t remember the name of the company. When that news came out, the queues opened up below the 50 day moving average, well above the 200 day moving average, as you’ll see on my screen, and it now sits again.

above the 50 day moving average. The 50 day moving average has not sort of flatlined and the 200 day moving average obviously also has not flatlined as well. So the cues look to be firmly in a bull market right now, which is a good thing. And that can change in the future. But Nvidia is actually not like Nvidia is actually going sort of more bearish here. Now this can change and you know,

new news comes out that that story was fake or whatever, and this might pop way back up. But this is the hard part about being a single stock picker is you’re taking on the risk of so many things based on this one company that right now is super overvalued. And I’m able to take on some of that risk through the cues, but it’s sort of separated, sort of like spread out across 100 companies. Now it’s not equal, but it is giving you at least more exposure.

so that you’re not exposing yourself too much here. Now, of course, if I go back to Nvidia, there’s gonna be people that’ll probably comment on this and they go, well, like, look at how, like what it’s done since the beginning of 2024. Like you’re still ahead. I get it. Like, don’t get me wrong. You are still ahead. Like if I go back here to the beginning of January, 2024, and we go to where we are now, you’re still up 151%. Like the cues are not doing.

that like advice if I go out but the queues are still doing quite well without having a ton of risk. So if I look at the queues all the way back to beginning of January and you know we start there and we go all the way up to where we are now it’s up 32 % 32 and a half you know almost 33 % and it was at one point up about 36 % so you can see here the returns are still good.

but they’re not gonna be as good as picking the right stock. But here’s the problem. Like here’s where things get a little bit muddy because guess what? Everyone’s hot on Nvidia right now, that’s amazing. Everyone’s hot on Tesla, that’s amazing. Everyone’s hot on Apple, like that’s amazing. Like those companies are all great, but the problem is is like how many other companies do you pick first before you find that one company?

right? And I’m going to give you an example of one that was quote unquote hot back in 2021. It is Roku. Now Roku has had a good, you know, a good little run here since the meaning, um, the, the middle of the summer, 2024, if I go all the way to August and we stretch this out to where we are today, like it’s grown 67 % just in like half a year. Like that’s awesome. That’s like over a hundred percent annualized return. If you bought

uh, Roku in this past summer. Now, the hard part though is that when we look at this and we go, okay, that’s fine. Um, when I zoom out a little bit more though, you’ll notice that if you had bought it in November, 2023, um, you’ll notice November, 2023, uh, it was up at over a hundred dollars and to net last summer where we just said we were buying this stock, it went down by over 50%.

So your hundred dollar stock turned into a $50 stock and now it is back to an $80 stock. So even if let’s say you bought it then you held it all the way through this massive dip and then now you’re here, you’re still at a 25 % loss and it’s, you know, over a year ago that this happened. Now the nuance here though is even though people say the stock market will rise over time,

That is absolutely correct, but what is not correct is that every company will come back. And that’s the hardest part, right? So when we’re picking an individual stock, you’ve gotta be really, really right. And if things are really, really wrong, this can be a massive issue for your portfolio. So even though Nvidia has had an amazing run, if let’s say you had picked five stocks and Nvidia was 20 % of your portfolio, that 20 % has done really well.

But if you picked Roku back in a year ago and it went down by 25%, that’s going to dig into your profits on other companies. And here’s the thing. We don’t know if Roku is going to continue taking off. sitting above its 50-day moving average. It’s sitting above its 200-day moving average. And they’re sloping up. So it suggests that it’s actually bullish right now. Awesome. Like, keep rocking and rolling if that’s you. But.

Here’s what I wanna zoom out to, because I wanna go all the way back to 2021 with Roku, and you’re gonna see on my screen here, ooh, this doesn’t look so fun anymore if you were holding Roku since the end of 2021. Now I’ve gotta zoom out on the scale here because I can’t see the top of this stock back in when we go all the way back to the peak in July, 2021. right, things started unraveling.

early 2022 for the entire equities market. you know, Roku and other companies, smaller companies started showing weakness much earlier here. And when I look at this, and we start from July 2021, and I look at the price, it was $489. And if I take that, and I stretch to where we are today, if you had bought it up there, you would be down by 83%.

right where you are today, right? So this is a massive, massive concern. Now, if I look at the QQQs back to 2021, and if we zoom out all the way to 2021, you’ll notice that it went down also, okay? So the Qs went down also in 2021. The peak of the Qs was November, 2021. You’ll see here, there was a big dip on the Qs by the way, if you held this all the way down,

you know that wasn’t so much fun like you lost 36 % over that you know that uh 2022 year but if we look at where we are now the queues have since recovered and grown since the 2021 peak all the way to 27 % since 2021 so it’s almost not only erased this negative but it’s actually grown

quite a bit as well. Now, if I zoom into 2021, I want to just show you something very interesting because we talked about the moving averages and remember what I said when we looked at Nvidia and how the 50 day moving average sort of flattened out the only way that happens is if the price action starts moving below the 50 day moving average, you’ll see it move below there a little bit here, it popped back up. This is what we call a double top

It didn’t quite hit all the way to the top, but you’ll notice it’s a lower high. The 50 day moving average started curling down and very quickly the cues started going down, down, down. And a lot of people are just buying dip, buying the dip, buying the dip. And then all of a sudden we’re now below the 200 day moving average and we just kept going, kept going, kept going. So the market was sort of telling us something. And if we were paying attention,

we could have potentially moved into some other sectors when that started happening. In worst case scenario, you got faked out and you had to move up, but you can see here, there’s definitely a trend on the downward action. And only at about, it looks like, where did we get? So we got back above this somewhere around January, 2023, did the queues look to start, you know, moving above the 200 day moving average and started its next journey.

So the reason I share this is that we can pick stocks all we’d like and we can win some, but we can also lose massively on them as well. And I want to be honest and tell you that I had some Roku in this time and I eventually sold it out, but it was still at a loss, right? And it was still at a loss. And honestly, my life is so busy now and actually my emotions are so important to me that I actually do very little

quote unquote stock picking. And if I do, it’s going to be a very small chunk of my portfolio while I can still achieve really good gains on ETFs if I’m paying attention to the macro economic sort of landscape. And if we also pay attention to some of the price action that’s taking place. Now, if you’re a set and forget investor,

You shouldn’t be doing stock picking anyway. What you want to be doing is you want to just be putting it into whatever ETFs make you feel comfortable. I was on with a Canadian Well Secrets listener the other day, and they said, like, Kyle, like, should I put my money into a global equity ETF? And it’s a hard question. The real question is, is like, how active are you going to be if you’re going to be very passive?

That’s probably a good move, right? Some people might want to do some, you know, sort of us equities. What I might say is like, don’t have it all in, the Canadian TSX, right? Or don’t have it all in the cues or don’t have it all in one specific sector, but rather consider diversifying and continuing to dollar cost average in the one thing we don’t want to do is to pick one stock or even five stocks or even 10 stocks because the chances are

you may get some of those wrong. And if you get too many of them wrong, right, just like in baseball, if you take swings and you miss and you know that you’re going to strike out more than you’re going to hit, or you’re going to miss the ball more than you hit, the same is happening with your stock portfolio. And you want to make sure that you’re not getting yourself involved in gambling. That’s really the key piece here. So the goal here is how do we have steady

consistent growth without these huge volatiles up volatile up and downs. The volatile up is always fun, but man on the way down, it’s never fun, right? So making sure that you protect yourself. You understand if you’re investing that you are investing in anything that’s going to be as consistent as possible for you. The more passive you are, the more ETF focused you should be. And remember high MERS, they aren’t helpful, but

I’m telling you right now, if you are not actively involved in your investments, they’re probably worth it. So make sure that when you’re analyzing your own portfolio, that you don’t get too excited about the potential upside without committing all of that time, energy and effort in order to make sure that you protect yourself. There is a cost called time and energy and emotions that you have to pay.

if you want to do this and be active in that game. Otherwise, allow yourself to pay someone else to do that type of work. It will hurt so much more if you try to take on all of that responsibility, but you’re not willing to actually do all of the work and deal with the consequences emotionally on the back end. So I hope my friends that you’ve enjoyed this episode here where we’ve done a case study.

exploring sector ETFs like the Q’s as well as individual stocks like Nvidia, a clear winner so far. But remember that 50 day moving average has flattened out and we are trading below the 200 day moving average. So if you’re all in on Nvidia, you might want to think about that for a second and say, why is everyone else selling Nvidia while I’m holding Nvidia? Now, if you’re like me and you’re in sector ETFs,

you can very easily just keep an eye on the macroeconomic landscape and know that a sector ETF will recover. So even if it does go down, the entire sector will not go down, right? It will come back. And therefore you have a massive amount of protection compared to someone who’s picking an individual stock. If you’re still holding Roku, be careful my friends and ride that bull while you can.

but make sure that you don’t get too attached where you can’t let go of it. My friends, if you are an incorporated business owner and you are looking for some support with those retained earnings that you have inside, some of you are already invested in ETFs or you’re invested in GICs and you’re losing 50 % passive income tax, or you are trying to figure out a better way to structure so that you can get free insurance while still investing in all of the assets that you had planned to invest in.

reach out to us over at CanadianWealthSecrets.com forward slash discovery. For those who are wanting to go down the rabbit hole, we’ve got an amazing structure for you business owners that you can learn more about in our masterclass completely free over at CanadianWealthSecrets.com forward slash masterclass. All right, my friends until next time, keep on seeking. And just a reminder that this is not investment advice.

accounting advice, tax advice, financial advice, or any other legal or other advice. And a reminder, Kyle is a life licensed accident and sickness insurance agent and VP of corporate wealth finance and management with the pan Corp team that includes corporate advisors and pan financial.

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

OPTIMIZE YOUR FINANCIAL FUTURE