I just saw the clip that is making its way around the internet of the paraglider in Austria being struck by a plane. Thankfully, she was able to deploy an emergency parachute and survive. It brought flashbacks to a paragliding accident that took the life of someone I went to school with. He left behind a beautiful family with young kids. While the risk of being struck by a plane is low, paragliding is a dangerous sport. Deadly, in fact. The Austrian woman is lucky, and I presume she will return to her beloved sport. But she does so, understanding the risk she takes. That is the trick to investing. We must understand the risk we take.

I don’t take unnecessary risks with my life, no matter how much fun I think paragliding might be. I really want to live. You know who else really wants me to live? My child. I preserve my safety for his well-being even more so than for my own. He’s thriving in the world as a student and a talented athlete, and he has a great ambition to seek his full potential in life. I’m the one who quietly carries him emotionally, spiritually, financially, and sometimes physically when he’s been injured in a soccer game. He’s a strong defender, and when his opponents can’t get past him, sometimes they get frustrated and resort to attempts at injuring him to take him out of the game. He doesn’t want anyone to know he’s hurt until he’s out of sight, and it’s just me, and his giant body is leaning on me to get up the stairs to the comfort of his bed.

There’s a look he’ll give me from the field to tell me he’s hurt, but he’s not leaving the game. He’s not giving up. It breaks my heart every time, but I understand him in a way that maybe no one else does, so I support him in a way that maybe no one else can. I want to be there on the sidelines of all of his games, so he has someone who understands and someone who will quietly help him to the car without letting the opponent know they hurt him. Then get him home and nursed back to health.

Not every game is like this; many are pure fun, and he’s jumping into the air, celebrating with his team in victory, with barely a scratch on him. In those games, too, he’s finding me in the crowd for reassurance that I’m watching, and when he puts on a solid defensive performance, he’ll glance over to me to make sure I saw it. I always want him to know I’m there and I’m seeing it. I’m seeing him realize his dreams that he’s worked so hard for. The dreams I’ve worked so hard to pay for. Travel soccer is expensive, and if he makes it to college soccer, that will be expensive too. So I don’t just avoid unnecessary risks to my life and safety; I also avoid unnecessary risks to my finances.

My kid is not just dependent on me cheering on his ambitions; he’s depending on me paying for them. There really isn’t anything I’d rather spend my money on, but I need to make sure I’ll remain in a financial position to carry him forward until he can do this on his own. So I’m balancing risk and reward in my investment portfolio, which is the same portfolio some of my investment clients mirror. What was once my own personal portfolio became the flagship portfolio model of my independent wealth management firm. Now my clients and I own the exact same portfolio allocation model, and any updates that are made to the model become effective in each of our accounts at the exact same time. Some of my clients invest purely in the Mainsail Equity Model, and some want only partial exposure to the stocks I’ve identified as worth owning, through my disciplined research, so they also allocate a portion of their portfolios to short-term bonds.

I know I’m not a unique investor. I’m trying to build wealth while managing risk because I have loved ones depending on my assets to thrive in this world, and their well-being means everything to me. This is in no way a call to get out of the market or even a particular sector of the market. I’m remaining fully invested, but with an appropriate amount of caution and a solid plan to manage risk, which I’m happy to explain.

Michael Burry has been shorting Nvidia stock, and he has recently explained his rationale. He sees Nvidia following in the path Cisco followed in the dot-com crash of 2000. Most of his critics are screaming that he’s wrong because Cisco was tremendously overvalued back then, and today, Nvidia is not, so the same risk does not apply. It is true that Nvidia’s current valuation is within a healthy range and not cause for concern of a steep price correction. However, I don’t believe valuations are where Burry is drawing his comparison. He’s smarter than that, and he’s smarter than most of his critics. The primary reason Cisco’s stock price fell sharply 26 years ago was that duplicate ordering and demand shock during their heyday triggered a bullwhip effect.

The Bullwhip Effect Explained

• What it is: When hardware is scarce, desperate customers often place inflated or duplicate orders across multiple suppliers to secure the parts they need.
• The danger: Once supply chains ease, buyers suddenly cancel these duplicate orders. This leaves suppliers with bloated channel inventory and results in a sharp, sudden drop in demand.

During the internet boom, demand outstripped supply. To ensure delivery, customers placed multiple orders with Cisco and its competitors. When the tech spending boom slowed, these orders were canceled. What appeared to be infinite demand suddenly evaporated, halving growth rates. Though I see this as less of an immediate concern for Nvidia today, Michael Burry believes otherwise, I presume. I haven’t spoken to him. I just try to understand him because his insight is valuable to me.

Where Nvidia Could Be at Risk

• Hyperscaler Dependency: A significant portion of Nvidia’s revenue comes from top tech companies (like Microsoft, Amazon, Meta, and Alphabet). If these companies over-order AI chips and later scale back, Nvidia’s sales could experience a sudden deceleration.
• The “Air Pocket”: If customers experience “digestion periods” during which they pause new orders to use their existing hardware, Nvidia’s stock could face severe volatility.

How Nvidia Tries to Mitigate This Risk

• Advanced Architecture Transitions: Nvidia continually shifts customers to newer, highly sought-after products (like Blackwell and Rubin), making older chips less appealing to stockpile.
• Sticky Software Ecosystem: Nvidia’s CUDA software platform locks developers and enterprises into their hardware. This makes Nvidia chips less replaceable compared to standard commodity chips.
• Diversified Demand: While tech giants are developing custom chips, the rise of sovereign AI, enterprise computing, and smaller cloud providers helps protect Nvidia from relying exclusively on a handful of buyers.

The Mainsail Equity Portfolio Model remains invested in Nvidia, but because a bullwhip effect poses any risk at all, I adhere to the strict rules I’ve put in place to protect my clients’ assets, just as I protect my own. Because their assets are as important as my own, and I can’t see any other way to carry this out with the same level of care as simply investing my clients’ money in the exact same portfolio model as my own. When clients want to know, and they often do want to know: “What are you doing with your money?” I can tell them they can use the exact strategy and allocation I use. I can’t think of a better way to prove that I care about their asset as much as I care about my own.

No position will exceed 10% of the portfolio model, in any circumstances, no matter how good the opportunity might be, because we believe in balancing the reward/risk ratio. If a bullwhip effect materializes for Nvidia and the stock price falls by half, 90% of our portfolio will be unaffected. If Nvidia’s growth remains strong and the stock price continues to press higher, as most analysts forecast, between 8-10% of our portfolio will benefit from that growth.

The rest of the portfolio model remains diversified across multiple sectors. Warren Buffett taught us to fish where the fish are, and we’ll always be capitalizing on the current trend, wherever that may be, but never all in. I concentrate assets into just 15 of the strongest opportunities my research has identified, spread across multiple market sectors. Not all sectors are seeing the same explosive growth as the tech sector, but not all sectors are at risk of a bullwhip effect in product demand.

In a soccer game, you need talented strikers like Nvidia to score the exciting goals that win the games, but you need the rest of the team, too. Especially the defenders holding off the opponents with everything they’ve got. The defenders don’t take the glory; sometimes, they quietly limp off the field, out of sight, and you don’t notice, but they really saved the game.

You don’t have to be in or out with Nvidia; you can walk the slackline with a safety harness on, and that is what I do, and that is why my investors in the Mainsail Equity Model choose to stay. We’re not paragliding, flying high in the sky at risk of crashing to the ground. While that sounds like a thrill, it’s not a risk I’ll take. I’ll keep my feet on the ground and enjoy the views from the safety of a hiking trail to the top of a mountain. Still going places, but with a much higher chance that I’ll make it home safely to the people who need me.

This can not be interpreted as investment advice. My investment clients are allocated to portfolios that I have recommended to them based on suitability to their needs, time horizon, and investment experience. If I don’t know you, there’s no way for me to know what financial advice would be suitable for you. I’m happy to get to know you if you’re seeking portfolio management. You’re welcome to reach out to gauge whether I’d be a good fit.

A concentrated growth strategy is not recommended without professional guidance.