Ben Carlson: Investing at All-Time Highs | Rational Reminder 412

Why It Matters

Understanding that market peaks rarely erode long‑term wealth helps investors stay disciplined, avoid panic selling, and align portfolios with personal goals amid volatility and inflation.

Key Takeaways

• All‑time market highs rarely diminish long‑term returns for investors.
• Japan’s 1980s bubble shows outliers don’t invalidate diversification.
• Post‑crash periods historically deliver the strongest 30‑year equity returns.
• Diversification and self‑knowledge are essential tools for risk‑management.
• Inflation hedges include wages growth, assets, and disciplined saving.

Summary

The Rational Reminder podcast hosts Benjamin Felix and Dan Bordotti sit down with Ben Carlson, director of institutional asset management at Rohl​t Wealth Management, to discuss his new book “Risk and Reward” and the broader question of investing when markets sit at all‑time highs.

Carlson argues that peaks are rare—only about 7 % of trading days—and that long‑term returns are actually higher when measured one, three or five years after a high, because bull markets tend to last longer than investors expect. He uses Japan’s 1980s asset‑price bubble as a cautionary outlier, noting that despite a 30‑year slump, the country’s overall 1970‑2000 return averaged roughly 9 % annually, and that diversified global portfolios fared well after Japan’s collapse.

He cites historical crashes, highlighting the 1929 Great Depression where the S&P 500’s worst 30‑year rolling return still delivered about 8 % annualized, followed by the best 30‑year stretch at 15‑16 % after the trough. Memorable remarks include, “They should be freaking out right now. No,” and a retiree’s blunt response, “I don’t care. What does it matter? I ended up in Boca Raton,” underscoring that beating the market is less important than meeting personal goals.

The conversation reinforces that investors should prioritize diversification, understand their own behavioral biases, and focus on goal‑based planning rather than market timing. In an inflationary environment, Carlson recommends a mix of wage growth, selective asset hedges and disciplined saving as the most reliable protection.

Original Description

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In this episode, we are joined by Ben Carlson, Director of Institutional Asset Management at Ritholtz Wealth Management and author of Risk & Reward, for a wide-ranging conversation about market history, investor psychology, and the realities of long-term investing. Ben brings his trademark blend of data-driven thinking and plainspoken storytelling to topics like market crashes, inflation, diversification, and why investors are so tempted to time the market.

We explore the lessons from Japan’s historic asset bubble, the lingering impact of the Great Depression, and why diversification remains one of the few true free lunches in investing. Ben also explains the difference between volatility and risk, why the stock market is not the economy, and how investor behavior—not market performance—is often the biggest determinant of success. Along the way, we discuss inflation hedges, lost decades, speculative behavior, and the psychological challenge of staying invested through inevitable downturns.

Timestamps:

0:00:00 Intro

0:03:49 How worried people should be about investing at all time highs

0:04:50 Describing the Japanese counterexample

0:07:33 The worst market crashes in history

0:09:05 What tends to happen after a crash

0:10:32 The best ways to manage the risk of a stock portfolio

0:11:37 How Ben thinks people can "win" at investing

0:12:23 How problematic inflation is for long-term investors

0:13:48 The best inflation hedges for most households

0:16:11 Why market timing is so tempting for people

0:17:36 The most important concept in investing

0:19:02 How bad the 1929 market crash and accompanying economic depression was

0:22:08 The main lessons for investors from that crash

0:24:15 How recessionary and non-recessionary bear markets tend to differ

0:25:37 How volatility changes during bear markets

0:27:15 How people should prepare for bear markets

0:29:20 What investors need to understand about the relationship between the stock market and the economy

0:33:02 The difference between volatility and risk

0:34:47 Why a casino is a bad analogy for the stock market

0:39:10 How severe Japan's everything bubble was leading up to 1990

0:40:55 How bad Japan's long-term returns are

0:41:59 The investing lessons from Japan's bubble

0:44:22 How common lost decades in the U.S. stock market are

0:48:09 The best way to avoid getting clobbered by a lost decade in a stock market

0:49:19 What the "perfect portfolio" looks like

0:50:29 The top ten ways to lose money in the stock market

0:52:02 Ben C's top 20 beliefs about investing (The highlights)

0:54:29 Ben C defines success in his life

0:55:43 Disclaimer

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on YouTube — https://www.youtube.com/channel/

Benjamin Felix — https://pwlcapital.com/our-team/

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/