“To buy when others are despondently selling and sell when others are greedily buying requires the greatest fortitude and pays the greatest reward.” That timeless wisdom from one legendary investor, Sir John Templeton, matters more than ever as markets hover near record highs.
Nobody can consistently call market tops or bottoms. What you can do is recognise where you are in the cycle and adjust your portfolio accordingly.
The stock markets move in waves of optimism and pessimism. If you can’t see the tide, you’re likely to get caught when it turns.
Early on, I thought success was about foresight, spotting the next big win or the next looming disaster. Over time, I realised nobody consistently calls turning points. What we can recognise is the present environment.
Are people euphoric and reckless? Or fearful and paralysed? That context tells me something about probabilities.
The optimal time to invest is when widespread pessimism and hopelessness about the future prevail.
I remember buying in October 2022; it felt reckless at the time, but that very discomfort was a signal the odds were in my favour.
The S&P 500 peaked at 4,796 in early January, only to tumble 27.5% by October. The Dow dropped nearly 19%, and the Nasdaq was crushed down more than 36% from its November high.
I didn’t need to understand every nuance of inflation data, Fed policy, or balance-sheet mechanics to notice the climate had shifted.
The excitement of the 2021 tech boom was gone, replaced by a lot of fear as sentiment swung hard the other way.
The key is not prediction but awareness. Success comes less from fortune-telling and more from asking, “What’s going on right now, and how are people behaving?
I always think that risk is highest when you’re least worried about it.
When headlines are glowing and everyone’s bullish, that’s when danger quietly builds. Optimism pushes prices or decisions in life beyond reason. The dot-com boom was exactly this: brilliant ideas piled so high with hype that they collapsed under their own weight.
Conversely, the safest time is often when everyone else is scared after prices have collapsed, after layoffs hit and after confidence is crushed. Buying stocks in October 2022 felt insane, but the odds were actually excellent in your favour.
Life and investing are like poker, not chess. The cards are hidden, the odds uncertain and sometimes the best move still loses.
As legendary investor Howard Marks says, “The key isn’t prediction but positioning.”
Chess has perfect information; every move is visible. In poker, you make decisions with hidden cards and incomplete knowledge. You can do everything right and still lose a hand.
Investing is the same. The goal isn’t prediction; it’s playing so that over many hands, the odds favour you. That means leaning in when assets are cheap and fear dominates and pulling back when optimism runs wild.
Probabilistic thinking is important. Seeing life as a series of bets, some of which pay off, some of which don’t and refusing to get lost in either extreme.
Long-Term Capital Management, a hedge fund managed by Nobel laureates and Wall Street executives, is a prime example. While their models were exceptional, their downfall was due to making overly large, highly leveraged bets.
Charlie Munger famously stated that consistent avoidance of foolish or idiotic actions is more practical and offers a greater long-term advantage than attempting to be exceptionally brilliant, which is key to long-term success.
History shows us the pattern: excess leads to collapse and collapse creates opportunity. Psychology explains why: humans overreact. We chase what’s been working (recency bias), we follow crowds (herd behaviour), and we convince ourselves “this time is different.”
Crypto showed how narrative alone can inflate prices—until the story changes.
That’s why humility is so valuable. I don’t say “get out now” or “this is the bottom.” I’m never that sure. Instead, I try to adjust gradually, being more aggressive when the odds improve and more defensive when risks pile up.
Conclusion
We can’t control when the tide turns. But by recognising where we stand, we can paddle with purpose—and improve our odds of catching the right wave.”
The market is currently at a historic high. While factors such as AI and the exceptionally profitable business models of some tech companies offer justification, it remains uncertain where the market will go from here.
However, at such highs, the odds of generating significant returns are lower, and the upside is limited. As Warren Buffett said, “What the wise man does in the beginning, the fool does in the end.”
At today’s highs, being cautious doesn’t mean doing nothing—it means calibrating so you can participate in gains while being ready for corrections.
Awet Ghirmay, Head of Investment Research
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Risk warnings
The value of investments and the income derived from them may fall as well as rise. You may not get back what you invest. This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action. All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs practice. Levels and bases of tax relief are subject to change. This blog is based on my own observations and opinions.
