What to do with the sense that this can’t keep going – and why the answer is usually a calendar, not a forecast.
We’ve been hearing a version of the same sentence in a lot of conversations lately. It comes out differently depending on the person, but underneath it’s always the same thing.
This feels too high. It can’t keep going up like this.
Nobody says it as a prediction. That’s the interesting part. It arrives as a feeling – a kind of low-grade unease that sits in the background of an otherwise good year. People aren’t asking us to confirm a thesis. They’re asking whether they’re the only one who feels it.
They aren’t. And we don’t think the feeling is irrational or something to be talked out of. But we do think it’s aimed at the wrong question.
The Feeling Is Real. The Question Underneath It Is Better.
When someone says the market feels too high, the literal question is about market levels. The real question, almost always, is closer to this: if something goes wrong, does it reach me?
That’s a much better question. It’s also an answerable one, which the first question isn’t.
Nobody knows where markets go from here. We don’t, and neither does anyone who tells you otherwise with confidence. What we do know – with a fair amount of precision – is what a given family needs to spend over the next several years, and where that money is currently sitting. That second thing is entirely within our control. The first never has been.
So when the unease shows up, we tend to stop talking about markets and start talking about a calendar.
Matching Money to When You Need It
There’s a way of thinking about portfolios that institutions have used for a long time, usually under a name that does it no favors – liability-driven investing. Pension plans use it because they have to. They know roughly what they owe and roughly when they owe it, so they build the portfolio around those obligations rather than around a benchmark.
Strip the jargon away and the idea is simple enough to explain on a napkin. Money you need soon shouldn’t be exposed to things that move a lot in the short run. Money you don’t need for a long time can be.
Families have obligations too. They just don’t call them that. Tuition in three years. The roof. The gap between retiring and turning on Social Security. A parent who may need help. A business that will need working capital before it needs anything else.
Once those are on a timeline, the portfolio starts to organize itself. The near-term needs get funded with cash and shorter-term bonds, where the point isn’t return – it’s certainty about the number and the date. The long-term needs get funded with assets that can grow, because they have the one thing growth assets require: time to recover from being wrong.
Everything in the middle gets sorted accordingly.
Why This Answers the Feeling
Here’s what changes when a plan is built this way.
A decline stops being an event that threatens the whole structure and becomes an event that affects one part of it – the part you weren’t going to touch for a decade anyway. You’re not selling into it, because the money for the next several years of living was never in there to begin with.
That’s the whole mechanism. It isn’t clever. It doesn’t require predicting anything. It just means that when markets do what markets periodically do, the household’s actual spending doesn’t depend on the timing.
Experienced parties in the mountains don’t manage risk by predicting the weather. They manage it by carrying enough food, fuel, and daylight that bad weather becomes an inconvenience instead of an emergency. The forecast is interesting. The margin is what gets you home.
How much margin is right depends entirely on the family – on what’s being spent, what else is coming in, how the rest of the picture is built, and honestly on how a given person is wired. Some people sleep fine with less. Some need more, and that’s a legitimate input rather than a weakness to be corrected. This is a conversation, not a formula.
What This Doesn’t Do
Two honest caveats, because we’d rather say them out loud.
This approach doesn’t make you more money when markets rise. Holding several years of spending in cash and short-term bonds has a cost, and the cost is opportunity – in strong years, that money would have done better elsewhere. What you’re buying isn’t return. It’s the ability to not be forced into a decision at the worst possible time.
And it doesn’t eliminate the feeling. You may still look at a statement and think this can’t last. You’ll just be looking at it from a position where the thought doesn’t require you to do anything about it.
That, in our experience, is most of what people are actually after. Not certainty about markets – nobody’s selling that – but the ability to hold an uncomfortable thought without it turning into an action you regret.
The Question We’d Ask Instead
If the feeling has been visiting you lately, try trading the question in.
Instead of is the market too high, ask: how many years of my actual life are already funded, no matter what happens next?
If you know that number and it sits comfortably against your timeline, the feeling loses most of its teeth. If you don’t know the number, that’s not a market problem – and it’s a much easier one to fix.
We’re always glad to walk through it. If you’d like to see what your own version of that number looks like, we’re here and happy to help.
Ridgeline Wealth Advisors
This material is for general educational purposes and does not constitute investment, tax, or legal advice. It is not a recommendation of any particular strategy or security, and it does not account for any individual’s circumstances. Allocation approaches involve risk, including possible loss of principal, and no approach guarantees a particular outcome.
