Why I Buy Stocks at All Time Highs

Tyler Gardner (0:00)

The lesson here isn't, don't buy individual stocks. The lesson is, don't convince yourself, you know something about timing the market when you don't. Because the moment you start believing you're smarter than the collective wisdom of millions of investors around the world, all of whom have access to the same information, if not more than you do, you're setting yourself up to fail. This time is different is the most expensive lie you will ever tell yourself.

Hello friends, this is Tyler Gardner, welcoming you to another episode of Your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance, and investing. So let's get started and get you one step closer to where you need to be. Hello everyone and welcome back to Your Money Guide on the Side. I'm Tyler, and if you're new here, this is the show where we talk about money, investing, and why I'll never leave the beautiful state of Vermont for the one and only reason that they don't allow billboards on the interstate. And if you haven't driven from Massachusetts over the border of Vermont and instantly have gone, wow, something's different here, then you're missing out, and that's the best advice I've got for you this week. Today's episode has a title that's going to make some of you immediately skip to the next podcast in your queue. Why I buy stocks at all time highs. I can already hear the comments. There's a reason this guy's not a financial advisor anymore. He clearly doesn't understand markets. Someone tell him the crash is coming, and someone tell him that it's all about time in the markets, not timing the markets. Yeah, I agree with some of what I just mocked. And here's the thing. I might not know where markets are going, as none of us do, but I do appreciate looking at where they've been throughout history and sharing as many fun takeaways as I can with you so you can officially and always choose your own adventure. It is also precisely why I keep buying stocks, when everyone else is paralyzed with fear, convinced they've figured out something the rest of us missed. Quick fun fact, they haven't. This episode isn't really about all time highs. It's about the single most expensive investing mistake you will ever make, sitting on the sidelines waiting for the right time to invest, while quietly congratulating yourself for being smarter than the market. Again, you're not. And I've got the data this week to back it up. We are going to cover five reasons this week why staying in cash, waiting for a crash, or timing your entry is a profoundly bad idea. So if you're still here, as always, if you have found this show even remotely helpful over the past few months or weeks, or it's helped you feel even one ounce more confident with your own financial decision making, please consider leaving a review on Apple or Spotify or wherever you listen, as it helps others find the show, tells them what to expect, and it helps me appreciate that the endeavor is actually useful to somebody, somewhere. And as I wrote my master's thesis once upon a time on Dr. Samuel Johnson, who spent nine years of his life devoted to writing the Dictionary of the English Language, I too am mildly obsessed with waking up each day and recommitting to doing something that is of use to somebody. So thank you for taking the time to write a review, and I appreciate you all. Enough Dr. Johnson, let's get into it. Reason number one I buy when stocks are at all-time highs. All-time highs happen way more frequently than you think, and that's actually good news. Let's start with the most uncomfortable fact. Markets spend a lot of time at all-time highs. And I mean a lot. Between 1950 and 2023, the S&P 500 hit an all-time high on roughly 7% of all trading days. That's about 1,300 days. Put another way, if you had a standing appointment to check the market once a week for the last 73 years, you'd have seen an all-time high roughly 350 times. That's not rare. That's frequent. In other words, dare I be so bold, for a chart that throughout history moves up and to the right, that's normal. And here's where it gets really interesting. From 1975 to 2025, if you bought the S&P 500 only at record highs, your average one-year return was 13.6%. Buy it any other time? 12.9%. So buying at all-time highs actually performed better. Two years later, 27.6% versus 27.4%. Still better. But here's the amazing stat. The average five-year return for buying at all-time highs, 87.6%, versus buying at any other time, 81.9%. Much better. In other words, buying at all-time highs isn't this dangerous game that many of you believe it is. It's actually statistically superior, at least since 1975, than waiting for a dip. Now, I think timing the market in general is nonsense, but you get my point. And I know what some of you 2 listeners are thinking. What about current valuations? Isn't the market overvalued when it hits all-time highs? For my 1 listeners, when random ding-a-lings talk about what's called valuation, usually, not always, they're talking about what's called a P-E ratio, meaning the price of a stock or an entire index, compared to the underlying earnings per share of said stock or entire index. These are the historical averages that loosely people base their under- or over-valued commentary on. And here's some of the data. Since 1980, when the market's price-to-earnings ratio was above 20, supposedly too expensive for what you were getting with earnings per share, the average five-year return was still 75%. When valuations were below 20, 83%. So yeah, there's a difference. But my guess is that not a single person listening has ever had a genuine change in their life circumstances based on 8% over five years, let alone realized it had even happened. The it's overvalued crowd has been yelling bubble since Reagan was in office. Meanwhile, investors who stayed the course made roughly 14x their money. So this is just one reason we don't wait for perfect valuations, as bluntly they don't exist. Now, I know that some of you also do adhere to some basic mathematical principles, and one that I do appreciate is called reversion to the mean. When something is consistently higher than the mean or average for an extended period of time, won't it revert at some point? Yeah, yeah, it will. Or at least that's what the data has told us that far. But when it happens is a complete guess, and trying to time that moment is a fool's errand. So is a crash looming, and are we going to lose all current valuation in the market? Well, maybe. And also, maybe not. Markets do pull back. They always have. But the problem, once again, is the logic. Because you're assuming you know when the pullback is coming. And statistically speaking, you don't. Nobody does. Not you. Not me. Not the guy on CNBC who still believes we're living in an era where a suit and tie make you look like you should be able to tell us what to do with our money and how markets move. Markets hit all time highs constantly, because that's what markets do when economies grow and companies make money. Waiting for a crash means you're betting against the fundamental trajectory of economic progress and that historically has been a losing bet. And as I always like to remind at the very least myself, if we experience massive problems in the economy and that reflects in the markets, do you not believe that human beings wouldn't rise up to try to fix said problem and thereby create and establish new companies and new entities worth of value in this world? But don't worry. If you're still not convinced that you should just start buying today, we've got four more reasons why sitting on the sidelines is costing you a fortune. We'll get right back into it after a quick word from one of today's sponsors. Here is the truest thing I will ever tell you about money. You could have a billion dollars in the bank, but if you don't feel healthy and good about yourself, none of it matters. Which brings me to this confession that might disqualify me from polite society. I am obsessed with salt. Not in a, oh, I like chips kind of way, but in a, I will actively seek out the saltiest option on any menu kind of way. And if I can't find something to my liking, I'll just drink pickle juice when I get home. So when I tell you that LMNT is my favorite thing I put in my body every day, understand that I'm speaking as someone whose taste buds were engineered for this product. LMNT is an electrolyte drink with 1000 milligrams of sodium, 200 milligrams of potassium, 60 milligrams of magnesium, and zero sugar. I get to drink something salty, feel hydrated, and skip the crash from 30 grams of liquid candy. Here's my routine. I work out every morning for an hour or two to get into the right headspace to produce daily content. Newsletter, social, podcast. LMNT sets me up for success. I feel good all day, not just while I'm on the bike or in the pool. And my flavor of choice? Mango chili. It's weird, but if you love salt and a little spicy kick, perfect way to start the day. And now they even have sparkling LMNT in cans, which has become my go-to in the afternoons. After I get back from my walks in the woods with the hounds and need to pick me up without the caffeine crash. Also, the packaging is brilliant. LMNT comes in tiny stick packs so I can throw five or six in my carry on when I travel, because rule one, don't check bags, and they take up almost zero space. And right now, they're offering a free sample pack with any purchase. So just go to drinklmnt.com/tyler.