Shares of NVIDIA have experienced a meteoric rise, leaving investors wondering if it’s time to take profits and how to avoid capital gains taxes. The stock is up 198% over the past year and has become a significant part of the S&P 500 index. As the biggest indicator of the artificial intelligence trend, NVIDIA’s performance may impact the market. Financial advisors suggest assessing your exposure to the stock and not letting it become an overly large part of your portfolio.
There are no set rules for how much of a stock is excessive, but most advisors recommend not having more than 10% of your holdings in a single stock. This is to prevent major losses if the stock were to decline significantly. In retirement accounts or IRAs, taxes on capital gains are deferred until withdrawals are made. However, in taxable accounts, capital gains taxes apply and can be offset by losses. An equal-weight index fund like Invesco S&P 500 Equal Weight ETF can be an alternative to exposure to NVIDIA.
Other companies benefiting from the AI theme include Micron Technology and Corning, which could be alternative investments to NVIDIA. Financial planners suggest considering how you plan to use potential profits from NVIDIA, such as funding home renovations. While NVIDIA’s stock may continue to rise, selling it could be a wise decision to prevent capital losses in the future.
Overall, balancing your portfolio and considering tax implications is crucial when dealing with high-performing stocks like NVIDIA. Planning for potential profits and losses is essential to managing risk and maintaining a diversified investment strategy.
Article Source
https://www.barrons.com/amp/articles/nvidia-capital-gains-strategy-ai-corning-micron-b1a94883
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