Investors should take note of the law of stock market gravity: what goes up, must come down.
The golden rule of building a profitable portfolio is diversification - both between asset classes and global exposure. In these times of record low interest rates most portfolio managers are shunning cash, preferring to opt for higher yielding assets such as equities or high yield bonds.
But one multi-asset manager is taking a contrarian view. Cazenove fund manager Marcus Brookes, has a sizable allocation to cash as he says in the current investment environment it is the only true diversifier.
"It is possible for all asset classes to let you down if they all start expensive," he said. "And in my opinion after a significant equities rally this year, and bond rally last year, both bonds and equities look expensive. Once an opportunity is created in the bond market I will reduce my cash weighting."
Not all funds can consistently perform well and deliver returns to investors. Fund managers by nature have a certain style bias that performs under particular market conditions. It is the job of the multi-manager to find funds with opposing styles and blend them to create a balanced portfolio.
But Brookes cannot find a manager in whom he has conviction who will take a bearish view on equities - and that worries him.
"I am having trouble finding a manager who is bearish on equities. Even Hugh Hendry of Eclectica Asset Management, who usually takes a bearish view is saying that because of speculative behaviour stocks have further to climb. This makes me nervous."
This sentiment echoes that of the sage of Omaha himself, Warren Buffett.
His famous adage 'Be fearful when others are greedy, and be greedy when others are fearful', reminds investors that contrarian views are important.
Brookes is holding cash as an alternative to bonds - a way to preserve capital.
He is not the only manager who thinks the equity market is due a correction.
John Lineham, Head of US Equities for T. Rowe Price said that he was no longer confident in his own asset class.
“We still think the fundamentals are strong but there are signs of caution,” he said at a conference in New York on Tuesday. “This is the first year since World War 2 that the US stock market has not had a correction of more than 5%. Valuations are no longer attractive – they are not unattractive either, but neutral.”
Lineham said he expected the stock market to correct in 2014, perhaps as a result of economic measures, and that it would present a buying opportunity for investors.