CapitalTime

Articles on investing and capital management, with a quantitative focus.

New Highs Are a Permanent Win

2026-08-14

People enjoy seeing new all-time highs in their portfolio, but we know that markets are volatile. One month you’re up, and another month you’re down.

In this post, I’m going to argue that new highs are very good news, and worth celebrating. They give the investor a “permanent win”, despite the volatility of markets.

My argument is somewhat statistical in nature, using a quantitative view of markets. This argument only applies to non-leveraged portfolios.

When you have a portfolio (like 100% stocks, 60/40, or my own PRP), one key metric is the historical maximum drawdown. We can look at the portfolio’s history over many decades and see the worst-case percentage drop. As long as the history includes some big market crashes, the maximum drawdown gives you a good idea of the worst-case scenario.

My own maximum drawdown is -23% based on 56 years of market history.

Permanent Win (Example)

You have 500K invested in a portfolio, and the historical maximum drawdown was -30%. You can expect the worst-case to be 350K.

But notice what happens to the worst-case value as the portfolio rises by 20% increments to successive new highs.

Even though markets are volatile, and your portfolio can crash at any moment, each new high bumps the worst-case to a new high. This is what I mean by a permanent win.

There is a tangible improvement in the worst-case value. Each new high raises this (virtual) floor of the portfolio. You can’t end up worse than this floor, unless a new record-breaking crash exceeds the old % maximum drawdown.

Behaviour Matters

The situation I described above only works when an investor stays invested. Unfortunately, many investors get anxious and pull their money out during drawdowns.

To see these ideal results with repeated new highs, and a rising worst-case floor, an investor must control their own behaviour and remain invested through market volatility.

— Jem Berkes