The Price of Admission

Stock markets around the world have recently hit another all-time high. And yet there’s always a reason not to invest.

But with the benefit of hindsight, we’re usually glad we did.

I was reminded of this recently by something the American investment writer Ben Carlson pointed out: the S&P 500 has recorded almost 1,400 new all-time closing highs since 1950. That’s roughly 20 new highs every year, on average.

I think that’s an important point. We tend to associate an “all-time high” with danger. 

Surely markets are too expensive? Shouldn’t we wait for a correction? Is this a bubble? Wouldn’t it be safer to sit in cash until things settle down?

Yet all-time highs aren’t unusual at all. They are precisely what you’d expect from an asset class that rises in value over long periods of time.

What investors have actually had to live through

We all know and can remember that reaching those highs was never comfortable. Over the past decade, British investors have lived through

• Brexit and years of wrangling over our relationship with Europe; 
• A once-in-a-century pandemic and the fastest 30% stock-market fall in history; 
• UK inflation reaching 11.1%; one of the sharpest interest-rate hiking cycles in decades; 
• the Liz Truss mini-budget and the turmoil that followed; 
• the death of Queen Elizabeth II after seventy years on the throne; 
• a revolving door at Number 10 that has now delivered Andy Burnham as Britain’s seventh prime minister in a decade. 
• a cost-of-living crisis; 

Layer on the wars in Ukraine and the Middle East, tariff fears, and the steady stream of predicted recessions and crashes that mostly didn’t arrive, and it’s a remarkable list.

At various points, every one of these things felt enormously important. Some genuinely were. But here’s the thing: the successful investor didn’t need to predict any of them or even how markets would respond. 

They simply needed to stay invested through them.

Easy in hindsight, uncomfortable in real time

When we look back at a long-term investment chart, investing looks pretty simple. The line moves, broadly, from bottom left to top right, and it’s tempting to think, “Why didn’t everyone just hold a diversified portfolio and sit tight?”

Because when you were living through it, it felt completely different. 

A chart doesn’t show you the morning after the Brexit referendum, or the fear in March 2020 as economies shut down overnight, or the anxiety as UK government bonds were sold off during the mini-budget crisis. 

It certainly doesn’t capture the very human temptation, in each of those moments, to say, “Perhaps we should just step back until things become clearer.”

Things rarely do become clearer. One uncertainty is simply replaced by the next.

The price of admission

There is a price attached to the long-term returns generated by investing in the world’s great companies, and it isn’t just a management fee. It’s uncertainty. It’s watching your portfolio’s value dip from time to time. 

It’s holding investments when the outlook looks bleak and continuing to invest when others are frightened. 

It’s accepting that there will always be intelligent, persuasive people explaining why this time is different, and you should get out.

Volatility isn’t a malfunction in the system. It’s the price of admission.

What happens next?

Honestly, we don’t know. Markets could continue climbing or fall 10% from here. At some point there will be another bear market, another recession, another political upset, and almost certainly another event none of us currently has on our radar. 

Someone will, inevitably, appear afterwards claiming to have predicted it.

None of that changes the plan. A good financial plan was never built around predicting next week, next month, or even next year – it’s built around what you want your money to achieve over the next ten, twenty, thirty, or more years. 

Your portfolio is simply one of the tools we use to help get you there.

So the next time a frightening headline lands, it may help to remember everything investors have already come through –  Brexit, a pandemic, wars, double-digit inflation, interest-rate shocks, seven prime ministers, and no shortage of predictions that ‘this time really is different’. 

Markets kept going. Patient investors were rewarded.

Sometimes the smartest investment decision is also the least exciting one: stick to the plan.

If any of this has raised questions about your own portfolio or plan, it’s always worth a conversation – do get in touch.

Hazel Scarff

Chartered Financial Planner