What Weston Wellington Taught Me About All-Time Highs—and Investing

The stock market is once again around all-time highs, which should make investors feel pretty good.

Oddly, it often does the opposite.

Have stocks gone too far? Should we take something off the table? Should we not add money to the portfolio now? Maybe we should wait for the inevitable correction?

I understand the instinct. I also know one of the people who did more than almost anyone to teach me why a perfectly normal human instinct can make for a lousy investment strategy.

His name is Weston Wellington, and after 31 years at Dimensional Fund Advisors, Weston recently retired.

Most investors probably don’t know his name. But for many financial advisors and their clients who came to embrace evidence-driven investing, Weston belongs on a pretty rarified pillar.

He was one of the great teachers.

I was lucky enough to be one of his students.

He Influenced the Way I Thought

When I started Cogent Strategic Wealth in 2010, I wasn’t new to financial markets. I had already spent more than two decades immersed in them professionally. I also had personally owned an evidence-driven investment portfolio for nearly a decade. 

But knowing markets and knowing how to be a successful investor aren’t necessarily the same thing.

Early that year, I attended what we affectionately called “advisor boot camp” at Dimensional’s headquarters in Austin. I had the remarkable good fortune over the years to learn from Dan Wheeler, Gene Fama, Ken French, David Booth and several other evidence-driven investing sages who fundamentally influenced the way I thought about investing.

Weston occupied his own special place in that group.

He was wicked smart, but that wasn’t what made him special. Weston had a gift for taking whatever investors were worried about, stripping away the emotion and the headline, and looking at it through history, evidence and human behavior.

He would turn the problem upside down—almost in the Charlie Munger tradition of inversion.

Instead of asking, “The market is at an all-time high. Isn’t that dangerous?”

Weston might effectively ask:

“If investors are rewarded over time for owning successful businesses, why wouldn’t the market regularly reach prices it has never reached before?”

Of course.

Once you see it, you can’t quite unsee it.

Weston did that for investors and advisors over and over again.

All-Time Highs Aren’t Warning Signs

One of Weston’s great observations was that investors often apply the laws of physics to financial markets: what goes up must eventually come down.

Except stocks aren’t objects suspended in the air. They are ownership interests in businesses that employ people, innovate, compete, generate profits and hopefully become more valuable over time.

If stocks have a positive expected return, new all-time highs aren’t unusual. They’re necessary.

In his wonderful 2021 piece All-Time-High Anxiety, Weston showed that over the 94 years ending in 2020, the S&P 500 reached a new month-end high more than 30% of the time. Even more importantly, subsequent one-, three- and five-year returns after those highs were, on average, similar to returns following sharp market declines.

More recent Dimensional research tells much the same story. From 1926 through March 2024, the U.S. market finished a week at a new high 933 times out of 5,099 weeks—more than one week in six. Average weekly returns following those new highs were remarkably similar to average returns across all weeks.

That doesn’t mean markets won’t fall from an all-time high. They will.

It means “all-time high” tells us surprisingly little about what happens next.

That distinction is classic Weston.

We Are Human Before We Are Investors

Weston also understood that investing isn’t just about numbers. It’s about people.

We are wired to pay attention to danger. When markets rise dramatically, we wait for the other shoe to drop. When they fall, we fear they’ll keep falling.

And the financial media knows exactly how to push those buttons.

“Millions of Businesses Continued Operating Normally Today” doesn’t generate many clicks.

“MARKETS HIT RECORD HIGH: IS A CRASH COMING?” does.

Weston taught us to separate what is interesting from what is important.

A recent essay from fellow advisor Taylor Schulte describes this nicely through Seth Godin’s analogy of the wind and the current and their effects in a river.

The wind is loud: elections, Fed meetings, recessions, wars and whatever crisis happens to dominate today’s news cycle.

The current is quieter: millions of people going to work, entrepreneurs risking capital, engineers solving problems, scientists discovering things and businesses figuring out better ways to serve customers.

The wind gets our attention.

The current moves the canoe.

I think Weston understood that better than almost anyone I’ve known.

A Guinness at Kingston Mines

Some of my favorite Weston memories, though, have nothing to do with charts or returns.

Years ago, after a Cogent client and prospect event at our offices on the 84th floor of the Sears Tower, Weston, Erik Totten and I ended up at Kingston Mines.

We listened to some great Chicago blues, drank Guinness stout, laughed, and listened to Weston tell stories just a few stories about markets, history, and investors. Yet it was the ones around his adventures on motorcycles that were the just so interesting to me. 

That night captures Weston for me.

Yale educated. A prodigious student of markets and history. A lover of music and motorcycles. Intensely curious about human beings and why we do the things we do.

And funny.

You could spend an evening with Weston, have a hell of a good time, and realize afterward that he’d taught you three things you would remember for the rest of your career.

Then I Went Back to Austin

Not long ago, I found myself back at Dimensional’s Austin headquarters.

Only this time, two of my adult children were there with me, both now working in our industry and helping families manage their wealth.

That one hit me.

I thought about the guy who had arrived there in 2010, starting Cogent and trying to figure out what kind of advisor he wanted to become. And now I was back, years later, with two of my children.

The ideas Weston and others had taught me hadn’t stayed in Austin.

They traveled home with me.

They became part of Cogent. They shaped conversations with clients during bear markets, elections, COVID, financial crises and countless scary headlines. They influenced how we built portfolios systematically and, more importantly, how we helped people behave when markets tested them.

And now some of those lessons are traveling another generation.

That’s what a great teacher does.

Don’t Confuse Discomfort With Information

Of all the lessons I learned from Weston, this may be the one I most want our clients to remember.

When markets reach another all-time high and something inside you says, “This can’t keep going,” pay attention to the feeling.

It’s real. It’s human.

But don’t confuse discomfort with information.

Markets will fall again. There will be another recession, another war, another election, another crisis and another moment when selling feels like the obviously intelligent thing to do.

We simply don’t know when.

Evidence-driven investing doesn’t eliminate uncertainty. It gives us a framework for living successfully with it.

That’s why we diversify, plan, maintain appropriate liquidity and build portfolios around people’s lives rather than predictions about markets.

A good financial plan shouldn’t require us to know what happens next.

Thank You, Weston

Weston recently wrote about how fortunate he felt that Dan Wheeler called him in 1994 and offered him a job at Dimensional.

I wonder if Weston realizes how fortunate the rest of us were that he said yes.

Thousands of advisors learned from him, and then went home and taught their clients. Someone stayed invested during a bear market. Someone stopped chasing yesterday’s winner. Someone ignored a frightening prediction. Someone invested at an all-time high rather than waiting for the correction that never came.

Those decisions compounded.

So did Weston’s influence.

They certainly did at Cogent.

Weston, it could fairly be said that you and your wonderfully distinctive way of explaining investing permanently influenced the way I think about money and markets.

There aren’t many people you encounter during a career about whom you can genuinely say that.

You’re one of them for me.

I’m one of the advisors you influenced. My clients are among the families who benefited. My colleagues have benefited from what you taught me.

And now, remarkably, some of those lessons are being carried forward by my own children.

I don’t think even you can fathom the dent you’ve made in this profession.

Thankfully, it can never be repaired.

Enjoy retirement, my friend. Listen to some great music. Ride the motorcycle. Read some history. Find a good Guinness.

We’ll keep repeating the lessons.

And the next time the market hits another all-time high and someone asks me whether we should be worried, I’ll probably smile and think of Weston Wellington.

Because the headline isn’t the investment thesis.

Discomfort isn’t information.

And if capitalism continues doing what it has done for generations, we shouldn’t fear the next all-time high.

We should expect it.