Are we in a bubble? A professor's surprising take on all-time highs

It's the headline that makes every investor's stomach churn: 'Markets Hit Another All-Time High'. The immediate thought is, 'I've missed it. It's too expensive now. A crash must be coming.' This fear can paralyse even the most well-intentioned investor, keeping their family's money on the sidelines while inflation eats away at its value. But is that the right way to think about it? Not according to renowned business professor Aswath Damodaran. In a recent interview, he tackled this exact fear head-on. He agrees that stock prices are high. 'They're richly priced. That's the only way to describe it,' he stated (CNBC Your Money Minute, https://www.cnbc.com/your-money-minute/). But he deliberately avoids the dreaded 'B-word'. 'I'm not going to use the word, the bubble word, because that suggests that somehow the prices have nothing to do with earnings. Clearly earnings have held up,' Damodaran explained (CNBC Your Money Minute, https://www.cnbc.com/your-money-minute/). This is the absolute core of the lesson for White and Yellow Belts. Price on its own is just a number. Price in the context of what a business is earning is information. Damodaran's point is that as long as the underlying companies are generating strong profits, the high prices can be justified. It's not a fantasy. 'I think the market is being held afloat by the earnings numbers, and as long as the earnings numbers keep coming in, there is no catalyst for an adjustment,' he said (CNBC Your Money Minute, https://www.cnbc.com/your-money-minute/). This doesn't mean stocks can't go down. He clarifies that small pullbacks are normal and expected. The key is to shift your family's mindset from fearing the price to focusing on the fundamentals. Are the companies you own (or the companies in the index funds you own) still making money? Are they growing? If the answer is yes, then investing at an all-time high isn't a moment of maximum risk, it's a moment of continued success. In fact, history shows that all-time highs are often followed by... more all-time highs. That's how markets work over the long term. By focusing on earnings, not headlines, you can build a resilient, long-term investing psychology that is essential for generating generational wealth.