Should You Invest At All-Time Highs? (Buffett's $400 Billion Mistake)

追加: 2026-05-14

[00:00:00]If you're feeling nervous about investing at an all-time high, then you're not alone. Because despite the S&P breaking new records, Warren Buffett is reportedly holding a record amount of cash. But I think it's a mistake. And following him could cost you a lot more than you think. So in this video, I'll show you why the world's most famous investor might be wrong. And the system I've built to help you remain invested at these record highs to get much better returns without the risk of a major draw down. But let's begin with Buffett because he's the one that's been grabbing the headlines. And it might be making you think that waiting in cash to buy the dip is the smart move. Buffett's cash piles reached record levels three times in the past three decades. And each time it preceded a major market crash. In 1999 before the dotcom bubble burst and the NASDAQ fell 80% in 2007 before the GFC and the S&P losing 60%.

[00:00:52]And in 2019 where $128 billion was saved from a 34% loss and right now it's sitting at almost $400 billion representing the largest cash in American business history. So why am I not worried? Well, there's a couple of reasons. Firstly, Berkshire Hathaway has been a net seller of equities for 14 consecutive quarters. So all the way back to late 2022, which just so happened to be the low in the S&P. Now, the market has since doubled from there with Buffett's fund underperforming in two of the last three years. And as for the successful crash calls that I showed you a minute ago, it might just be a coincidence and a false signal because Buffett also was recording a record amount of cash in 2004, which at 40% of assets back then was an even higher percentage than today. And all that happened is that the bull market accelerated. And between 2012 to 2014, it was also elevated. And the S&P, you guessed it, went on to gain 70% over that period. I'm not, of course, saying that Buffett's stupid or claim to be any smarter than I. I actually don't think that he's making a macro bet here. It's more likely that he just doesn't see anything particularly compelling right now, at least in the size that he invests in. But the bigger question isn't really about Buffett or Berkshire Hathaway here. It's about whether you should be invested at all right now at the levels we're at. Selling stocks whenever the market hit a new all-time high would have destroyed 90% of your wealth over the very long run.

[00:02:24]Now, in this case, they're looking at a 100year period, which realistically I don't think any of us are really going to be around for. Certainly not in our investing lifetimes, unless, I don't know, we all become Brian Johnson and live forever. But that's the important message. you'd be 10 times better off remaining invested through all periods as opposed to selling and then the next month getting back in if the market had reset. So Schroeders actually goes on to break it down for us into shorter time frames. The wealth that you destroy by switching out at an all-time high would see you lose almost 30%, 40% or 60% over a 10, 20, or 30 year horizon, which is typical for many investors. And JP Morgan takes it a step further. They compare investing on any day whether it was an all-time high or not and then holding for one year, three years or five years and compared the performance to otherwise buying only when the market hit an all-time high and holding over the equivalent period. And what you can see is that investing on any day, this is between 1988 and the end of 2020, you would have underperformed randomly buying and holding over 1, three or 5 years, which means investing at all-time highs should see positive expected returns over a 1, three or 5year period historically. So the data is clear here.

[00:03:47]All-time highs are not a warning sign.

[00:03:50]In fact, statistically, they're one of the best times to be invested. But that's not actually what you're afraid of. You're not worried about the market going up in the long run. We all know that that's what happens. What you're worried about is if the market drops 30% in the meantime, especially if it's the week after you invest. And that's a completely different problem. And it's something known as sequencing risk. This is a chart of Japan. It was the hottest ticket in town. However, it peaked and Japan fell out of favor. Not only did it see a 90% draw down following what was a bulletproof rally, but it took over 40 years for it to recover fully. If you were approaching retirement at any point in this bull run, you were probably leaving it as late as possible to capture all of the returns. But if you left it even a couple of months too late, you were already into a major draw down, which would inevitably have delayed your retirement and maybe even worse. So the traditional move here amongst advisers is to put you into a balanced model portfolio so that you're not exposed to the volatility of stocks.

[00:04:56]The idea being that if something goes wrong, bonds should save you. However, even this saw a 30% draw down. This is the draw down chart at the top just before 2005 and it took 5 1/2 years to recover. So even the safe option is not immune to drawdowns. And because all of the industries asset allocation models that your money is certainly run on, if you have an investment advisor, you're potentially exposed to the same kind of risks that investors in Japanese stocks found in the '90s. So let me explain exactly what happened. This is a chart of 10-year government bonds. So it shows interest rates falling for over 40 years, but that changed in 2022. You can see inflation spiking to almost 10% and that saw a similarly sharp response from the Fed in hiking interest rates going from basically zero to 5 a 12% in barely 12 months. So this is what happened to the 6040 portfolio. a 22% draw down, which isn't the first time that's happened, of course, because we saw a similar thing back in 2005. So, what happened here is that stocks and bonds fell simultaneously and bonds no longer offered that kind of diversification that we were used to in decades prior. In order to mitigate drawdowns, we must now be more active in our portfolio management because we can't rely on just passively doing a 60/40 split anymore. The regime has shifted now towards one of higher inflation and also higher neutral rates.

[00:06:41]These things are not going to reverse overnight or the next time the S&P drops 30%. So to remain invested in the long run without being shaken out by this new regime, you're going to need to be agile, not stuck using a model that was designed for 40 years of falling rates based on modern portfolio theory. Let me show you the tool I built that reads the regime and then repositions accordingly to help you reduce draw downs while boosting your returns through steady compounding, which is what this is all about. So this is quite a colorful chart. It looks at the signals and works out on a monthly basis which one ETF it should be investing in for the month ahead. It dynamically splits between these risky or safe bets. But the difference this time is that it has an inflation filter and that's to help us avoid the situation that we saw for example in 2022. We've got stocks in blue, bonds in white, and you can see how they both incurred losses of 13% for bonds and about 17% for stocks over the course of the year. So, what the model is going to do is first of all ask the question, are 10-year bonds the right safety trade here? And if they're losing, then of course, it's going to move on to the next alternative. So what the model then looks to do is determine whether inflation protected equivalents are a better bet. But as you can see here, and of course it was making this decision in real time all the way, tips also lost that year. So it wasn't allocating to those. So it's almost like a waterfall as it's beginning to move through the best possible options when it comes to the safety trade. And that's where the dollar actually comes in.

[00:08:22]Because despite the talk of inflation, the US dollar ETF, UUP, was rising all year. And this is why the model was able to generate the returns that I'll show you in a second. So, just to illustrate again what we've been discussing here. Stocks declined and bonds didn't offer safety because we're in this unusual environment of inflation running up to 9% and the Fed just continuing to hike interest rates as stocks are selling off. This is a nightmare scenario. So, getting to the numbers now. The reason I've gone through all of this, the model is in yellow and then you've got 6040 in blue and then at the end you've got the S&P.

[00:09:03]What you can see is that the maximum draw down for the model in yellow never exceeded 15% over a 20-year period. So, it went through 2022, it went through the great financial crisis and everything in between. On the other hand, in blue, 6040 had that 30% draw down we mentioned in the financial crisis. It had the earlier draw down which isn't actually shown here back in 2005 of about 20% and then the further draw down of a similar magnitude just as we saw in 2022. And for stocks, not surprisingly, given the volatility, the draw down was even greater, over 50% in the financial crisis and the similar amount to 6040 during 2022, which underscores exactly what I've been describing. We're going into bonds didn't save you because they fell just about as much as stocks did anyway. So, it was a very unusual environment. But unfortunately, now given the regime shift, it's probably the new normal. So I've just taken you through how the maximum draw down for the model was around 16%. But the number that you're probably drawn to in addition to this is the compound return. So that came in at nearly 20% compared to 9% for 6040 and 11 12% for the S&P over this period resulting in a total return of 28 times your money. So if you invested 10k that would have grown into 280k 100 grand would be worth 2.8 million and that's compared to just 5x for 6040 and call it 8x for the S&P. So three times the upside with significantly lower draw downs too. And that's what results in the equity curve. Its better periods come when everybody else is caught off guard. So to bring it all in, you can see the sideby-side comparison. Again, this is not financial advice. Past performance is not a guarantee of future results, and this is hypothetical simulated performance, at least for the last few years, because I didn't have this model all coded as it is today.

[00:11:07]When I was still back in the city running money with this as a pro, it was all done in this very old spreadsheet that nowadays, as Trump would say, would make your head spin. Arguably the most important number here, just to repeat, is a significant reduction in draw down and also not giving up any upside performance. In fact, significantly improving it. I'll leave a link to the model if you want to check out when it's released in a couple of weeks. There'll also be a discount for founding members if you get on the list. And now you've seen what the model does. Then watch this video next, which busts another Buffett myth which might be holding you back from making consistent returns. I'm off to work on my tan because I'm back in Bali and you know what they say, sun's out, guns out, something like