With stocks at record highs, you may not feel wealthy. Weird huh? It's a raging bull market with big technology companies and artificial intelligence leading the way. Surely, your stock portfolios are close to record highs. But maybe not.
In this post, I want to explore why some of you might not feel wealthy with stocks at record highs. There's a silent recession going on largely due to high inflation and underemployment. It's getting harder and harder to get ahead due to globalization, high home prices, and not enough well-paying jobs.
Things Were Tough During The Global Financial Crisis
When the stock markets were imploding, so was my 401k by a magnitude of about -30%. The average daily percent move in stocks is now greater due to increased volatility.
My net worth probably took an equal percentage hit because of my holdings in real estate. Good thing it's hard to mark to market real estate values given the lack of transactions. To make myself feel better, I often joked I was catching up to the likes of Bill Gates, Warren Buffet, and Carlos Slim given they lost billions.
Traffic in San Francisco was lighter back then. I could get a reservation on a whim at my favorite steak house. I also no longer had to hear every Dick, Nancy, Lisa, and Raj tell me how much money they were making in the markets.
The 2008 global financial crisis was a time for reflection. There was a reprieve from cacophony that felt wonderful.
Now that we're back to near all-time highs with the S&P 500, I'm afraid the noise will return again. Everybody is going to brag about the stock market gains while also thinking they're geniuses as well.
Stocks At Record Highs But You Don't Want A Bull Market
Wealth inequality is a growing issue in America and many countries around the world. Those who own equities and real assets are getting rich while those who can't get their money working for them are falling further behind.
The reason why you don't feel wealthy with stocks at record highs is because the majority of the population owns the minority of equities. In other words, you don't feel wealthy because the rich have gotten much richer than you!
Although this chart is from 2007, the present day percentages are about the same. Wealth is only going to get more concentrated within the top 10%.
The 10% own an incredible 80%+ of all the stock market wealth. As you've seen from a previous post on top income earners, the income split to decide the top 10% is around $115,000 a year. The top 20% (~$85,000 and up) own 90% of all stock market wealth.
If you're making less than $85,000 a year as a household, there's just not that much left after food, clothing, shelter, and tuition to dump into the stock markets and hope you'll make a return. Compounding things further, there are many $85K+ income earners who don't even bother to invest their money. The real level of dismay may therefore be much greater than 80%.
It helps to talk in extremes to make a point. Imagine if stock markets went to zero and the government confiscated all our property. The rich would be just like everybody else, making us all equal again. Now imagine if the Dow rocketed to 100,000. We'd all turn into slaves.
Envy Is Hard To Control When Stocks Are At Record Highs
It's one thing to lose money when everybody else is losing money. It's another thing to gain a little more financial security while others start making boatloads of money. If someone you know has a million dollar stock portfolio and returned $160,000 a year, you'll be hard pressed not to feel envy when your $100,000 portfolio only returned $16,000.
The percentages are the same, but the absolute return of $160,000 is enough to support a family for well over a year. Meanwhile, your $16,000 can't even buy you a new Honda Civic.
Money envy leads to bubbles. Nobody wants to fall behind in an upswing, which is why you are now seeing a herd of buyers come out of the woodwork in search for real estate. Why such folks didn't pick up properties for the cheap in 2009, 2010, 2011, I have no idea.
Here are the 2025 stock market forecasts by Wall Street strategies. Most call for more gains to potentially 6,500 – 7,100. Not bad, especially since the S&P 500 closed up 23% in 2024.
Comparison Is The Thief Of Joy
I've been roaming the open houses in San Francisco for the past six months and things are not looking good for prospective buyers. Bidding wars are back given the strength of the economy and record-high big tech prices.
The one great thing about a bull market is the positive effect stronger corporate earnings has on the labor market. For the large majority of people, working is the only way to make a living. It is an inevitability employment will improve as companies struggle to meet demand.
Soon we will see bidding wars for talent again. Just make sure you don't compare yourself to someone else who doesn't even have to work for a living.
To the 90% majority, start getting unhappy now! The top 10% are going to make everything from tuition, to real estate, to vacations, to getting a reservation at your favorite restaurant that much more expensive and difficult.
Related: When Do You Finally Feel Rich?
Stocks Provide Zero Utility
Finally, the reason why you don't feel wealthy when stocks are at record highs is because you can't enjoy your stocks. Unlike real estate, where you can live in it, raise a family, have friends over, and create wonderful memories, stocks are just funny money.
To feel rich with stocks, you need to sell stocks on occasion to pay for experiences and things! Otherwise, you'll never feel rich. The larger the stock portfolio you accumulate, the more empty you might feel.
If you can't stand to spend your stock market gains, try and buy a perfect house. This way, you not only get to enjoy your wealth, you still own a risk asset that could appreciate further in a bull market. To me, there's no better thing worth spending money on than a fantastic primary residence.
See:
The Bull Market Checklist To Living Your Best Life Today
How To Outperform Th Stock Market
Invest In Private Growth Companies
If you want to feel rich, then consider diversifying into private growth companies. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment.
Check out the Fundrise venture capital product, which invests in the following five sectors:
- Artificial Intelligence & Machine Learning
- Modern Data Infrastructure
- Development Operations (DevOps)
- Financial Technology (FinTech)
- Real Estate & Property Technology (PropTech)
Roughly 75% of the venture product is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!
The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. You can see what Fundrise is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.
I've personally invested $152,000+ in Fundrise's venture product and Fundrise is a long-time sponsor of Financial Samurai. Below is my Fundrise Venture investment dashboard.
Manage Your Finances Carefully
With stocks at record highs, you need to get a handle on your finances by signing up with Empower. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize.
Before Empower, I had to log into eight different systems to track 25+ difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances. Now, I can just log into Empower to see how my stock accounts are doing and how my net worth is progressing. I can also see how much I’m spending every month.
The best tool is their Portfolio Fee Analyzer which runs your investment portfolio through its software to see what you are paying. I found out I was paying $1,700 a year in portfolio fees I had no idea I was paying!
They also recently launched the best Retirement Planning Calculator around, using your real data to run thousands of algorithms to see what your probability is for retirement success. Once you register, simply click the Advisor Tolls and Investing tab on the top right and then click Retirement Planner.
There's no better free tool online to help you track your net worth, minimize investment expenses, and manage your wealth. Why gamble with your future with stocks at record highs?
About the Author:
Sam began investing his own money ever since he opened an online brokerage account online in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at Goldman Sachs and Credit Suisse Group. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate.
In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income. He is aggressively investing in real estate crowdfunding to arbitrage low valuations and take advantage of positive demographic trends away from expensive coastal cities.
[…] I didn’t buy additional property in 2008-2012 because the markets were falling apart from 2008-2010, and I was already figuring out a way to leave a job that no longer paid as well or provided as much pride. Leveraging up felt like the wrong thing to do at the time. In retrospect, leveraging up was the absolute right thing to do at the time to create more wealth. Now that I’ve regenerated enough income to purchase a place, everybody else has made more income as well. (Related: Why You Don’t Feel Wealthy With Stocks At Record Highs) […]
the only problem I have with the 1% is the political favors they gain with their money to where they can get bailed out or have privy information after the economy and other things essential to investing where the rest of us don’t.
In other words don’t believe the markets are fair, or the regulation by our politicians is fair with the end result being totally unfair for the retail investor. Throw in the Federal Reserve printing money out of thin air and these rich leaches getting first crack at this paper close to 0% interest, their you have it. Its not hard to make millions per month if you have easy access to debt base money, inside information, and a friendly government to your needs.
Hey Sam,
good article, keep up the good work.
Can you write about car leasing though?
Compared to buying, is leasing a smarter option for guys like me who are obsessed with cars?
I abide your 1/10th buying rule but i am not entirely comfortable with the idea of spending huge sum of money on the New gorgeous yet untested range rover.
but on the other hand leasing it will cost roughly 800 a month for three years, which i think it is great as i probably will not drive the same car for three years without getting bored.
granted it is just a thing getting you from A to B, but i am not trying to spend irrationally.cars are really something i love.
Hope to get an answer from you.
Regards
Can someone explain how we would be slaves if the Dow went to 100,000? I guess I’m just not getting it.
Read my post above, but basically the Dow would need to increase by 7x to reach that value which in the past it has increased by that amount, and were not clinking chains today or yelling my name is kunta kinte…
Don’t worry, Sam is just being dramatic.
I definitely feel wealthier, but also increasingly frustrated trying to get my money working for me.
As a result of a recent windfall I have about 60% of my net worth in cash. It seems like a bad idea to dump it into stocks with the DOW pushing record highs every day. So, I’m looking at buying a house, but I’m struggling bringing myself to bid at or above asking prices that are already 10%+ higher than 6 months ago in an already highly priced region (SoCal). Any advice? That vacation home in Vail sounds like a good idea actually.
Cash is not a bad thing mate. Buying your own house to live in is a much better idea.
Your anecdote about asking prices 10% higher than 6 months ago and folks piling on is exactly what I’m talking about.
You might feel wealthier, but not wealthy, not once you start looking to buy real assets! Good luck!
Building up some cash reserves to pounce in the next down market as well.
Sam,
You know this: The time you really make money in stocks or real estate is when you buy, not when you sell. The more others are getting greedy the more I’m becoming fearful.
“What are you doing with your Benamins now that the good times are back?”
Paying off some debts, looking at some home improvements, and more importantly looking to minimize taxes more than anything else.
Ahahaha. Your post is so timely.
I just sold a stock which doubled in price. I had 15,000 shares and made $6,000 in profit. Made me quite happy, until my boss told me he sold the same stocks, but he had 1 million shares. Suddenly $6,000 felt like pocket change.
It also means that even though my boss and I buy the same stocks, he makes a lot more than I do, because he can afford to buy shares in big volumes, and make money of marginal trades. I can’t do the same, because commission and fees would eat up most of profit if I do the same.
The rich gets richer indeed.
I’ve never understood the draw down to zero. Just finished a post on an ideal withdrawal rate. Stay tuned.
So wealth distribution looks like the compounding returns of the stock market… Put a little, get a little, put a lot.. get.. holy crap! Compounding has been the friend of the 1% for sure! Actually the 1%.. are most of their funds in the stock market, properties or businesses?
Their money is in real assets for sure: property, businesses, commodities, and stocks included. If you are a renter who only saves, this bull market is making you poorer by the minute sad to say.
Do you happen to know which asset the top 1% holds the most of? Or the common distribution of their assets? 10-20% in property, 30-50% in stocks, 30-40% in business? Just curious!
Yeah you can see by the numbers that its the rich who’s assets are growing at an astounding rate. It does inspire me to put more into stocks and other investments for sure! Though I suppose I still don’t compete with the top.. Oh well! Can only work on refining my own life. ;)
https://www.theatlantic.com/business/archive/2012/12/the-recessions-toll-how-middle-class-wealth-collapsed-to-a-40-year-low/265743/
I do feel wealthier in the current market. I was able to buy property in the down turn and have loyally been feeding money into the markets during the recession so its nice to finally see these investments providing some nice returns, even if they don’t stack up to what others are making.
The job stability that a good market brings helps with this feeling too. Many more options are opened up for your money when you don’t have to worry about getting axed on any given day.
Nice job getting property during the downturn. It really is about employment for most of us given that’s how most of us make a living.
But for those online, a great economy can also mean more ad spending too. Positive wealth effect.
Excellent post. I’ve given the dynamic you describe here some thought as well, and illustrating it with the ‘extreme’ examples (at dow 100K we are all slaves!) is a great way of driving the point home.
Even the disciplined 401k savers are hurt by the bull market, because our current contributions now buy so little–except for the ones near the end of their wage servitude, who have already built up such a massive nut that their new contributions aren’t significant.
It will be scary at Dow 100,000. I see Biff from Back To The Future III ruling the world.
Good post Sam! Like others have said I think wealth is to a certain extent relative. I know it’s easy to give into that temptation to compare, but it really gets you nowhere. The latest run up has been good to our portfolio and we have enjoyed some decent gains. We’ve taken some of those (as they’re in IRA’s) and basically just stayed the course while taking a few opportunities to get some value for the long run.
Good stuff. Just be prepared for the very wealthy to crowd us out!
Great post, Sam. I was wondering if you had seen that “Wealth Inequality in America” video. It’s been floating around facebook for the last week or so. Pretty eye-opening. I’m convinced that many of us in the income groups that are below where we “should be” in terms of wealth would be a lot better off if we had more spending discipline. I’ve just come into that mentality in the past few years (FYI, I’m about your same age), and reading your website has really galvanized that mindset for me. Sometimes I wonder if I would still have to work had I had your same discipline of saving right out of school. Instead, it was spend, spend, spend. Cars were my vice, too, but I also spent on all manner of other things. Were it not for a freak stroke of good fortune (my wife and I bought an antique coffee table at a shop for $150 and it ended up selling at auction for $150,000 six years later), I would probably still be struggling to get out of debt. Imagine if we hadn’t had to use most of that money to pay off credit cards!
But, I digress. I am also wary of this raging bull market. It just seems like it’s running up too quickly and we’re due for another correction. For an economy that’s still “in recovery,” it seems insane that the Dow just hit an all-time high. I’m a big fan of slow, steady, *sustainable* growth and that description isn’t characterizing the stock market right now.
Thx Winston. Is the video not the same video I have at the bottom of my post, or is it different?
That is crazy you got a 1,000 bagger on an antique coffee table! I’ve never heard of that. Where did you find it? And why did someone sell you something so valuable, so cheap?
Sorry, I wasn’t clear. Yes, it’s the same video. I was just wondering if you had seen it, so when I saw your post I knew that you had!
Re: the coffee table — the artist who designed it, Carlo Mollino, isn’t exactly a household name. Just like the antique store, we had no idea what we had. We used it as anyone would use a coffee table, and when it didn’t fit in our living room after a move, it was relegated to the garage. It wasn’t until we picked up a copy of Dwell magazine that contained an article about him did we realize the similarity between his other pieces and our table. A few mouse clicks later and we knew that we had something special. I put the link to the auction page in the “website” blank, if you care to see it. It’s a beautiful piece. The buyer actually paid $180k because of the 20% buyer’s premium. I’m glad we got to enjoy it for several years before we found out its value — I couldn’t bring myself to actually use something that valuable and fragile if I knew about it!
WOW! That is the most amazing thing I’ve heard from a reader ever! Congrats. It’s like winning a $150,000 lottery! The antique store fella must be kicking themselves!
I still can’t believe it myself sometimes.
Arrrgh! Sam! I hate what you are saying…mainly because it is so darn true. I especially love the part about money envy. That really does drive the market to places that it probably shouldn’t go in the first place. For those who really know the game, they make even more money during these times. Then they get out before the crash.
The problem is, when things are crashing, very few dare to deploy their cash as they should!
I’m fortunately making more money after getting a raise, but it hasn’t made me want to spend more money. I’m happy increasing my savings per month instead. I rebalanced a chunk of my 401k out of stocks and into stable fixed income to lock in some gains. The visuals in that video are pretty wild.
Congrats on the raise! I’m hearing more and more positive anecdotes of folks finding jobs (or at least getting interviews) and deserving folks getting raises.
You can’t lose if you lock in a gain. Hope the markets stay steady.
I’m feeling flush with money! We even went out to an expensive French restaurant last month. Actually, I’m feeling really nervous with the stock market going so high. I just sold 20% of my IRA and I’m moving to bonds. I’ll probably rebalance more if the market keeps going up.
I haven’t rebalanced due to the rally, but I’m with you. The markets shooting so high lately does make me a little nervous & a bit gunshy about buying stocks right now.
Why would you move to bonds? The Fed raising rates will kill the bonds
Agreed. I am definitely over-weight in stocks given my retirement time horizon, but I’m not touching bonds until interest rates at least account for historic levels of inflation. Right now, a Fed move to 5% interest would truly be killer to bond prices. I do own Fidelity new markets Income, with international bonds that have paid relatively well. They will still eventually take some kind of a hit, but there will not be alternatives in 4 years that are 3x to 5x of the current coupon rate.
Please save me some of your money so we can go party and eat some steak dinners on your tab next time we meet up! Maybe at WDS! Thanks Joe.
So I’ve got a somewhat strange theory. I think it’s way better to start your career in a bear market, like a 10 year long bear market. That way, you buy a ton of rather cheap index funds, then when you want to start living off of your assets, you might have a bull market which will make you rich.
So because I’m a long term investor who would like to live off my the return from my assets in about 10 years, I’m actually a little bummed that the market is roaring so soon (2 years) into my investing experience.
That is a decent theory, but unfortunately there have been plenty of studies showing that one’s lifetime earnings ends up much lower than getting a job in a bull market. Makes sense as raises and promotions are less frequent when times are tough.
Our incomes outweigh our investment returns by a great deal.
I agree with Sam. You want the bull markets so your salary will increase. It sucks to see 0% raise during the bear market, but you can’t even complain because you still have a job.
What you want is the wild swings like we’ve had over the last 15 years. Just keep buying during the dips and you’ll be fine.
well alright, that’s a great answer to my question. I guess I’ll just enjoy this bull market we seem to be having then!
Well effectively the Dow is at 100,000 comparing to past time periods. The dow between 1945-today is up 140x, where Dow today at 14,000 to 100,000 is only 7.14x. And things be much better today. Sorry you’re believing all that statist liberal crap about inequality. I am in Ecuador right now and the poor in the USA are doing 100x better than the guy who stands outside the hotel looking at my car all night for $3, or the woman who cleans the trash can that I put my soiled toilet paper in because the sewer system doesn’t allow for it.
Looking forward to that lunch Jeremy! When there is a plan, there is a way.
The only thing that upsets me about the market is that its ups and downs rarely have anything to do with actual fundamentals but instead are oriented on what the government is doing from one day to the next.
But perhaps that’s just my perception of things… I’ll continue to watch my 401(k) do its thing, but my current fascination is P2P lending.
Wealthier ? Hmm, I think I feel better than when I see the market go the other way (down)! It doesn’t change a thing for me. I felt more relief when Brown’s sales tax increase went through to save teachers. No more layoffs, budget cuts and furlough days. Accumulating more wealth does not make me spend more. Maybe, I maybe the only one though!
To feel wealthy, you should not compare to others, but to your own Expenses! i think i even read it on financial samurai. Wealth is a relative measure. wealth is, when you have enough money to not bother how you can make a living!
so dont feel bad getting only 16k instead of 160k, if you only need 12k to live its still 4k more than you need to be free!
Right you are! Here is the savings by age article which refers to one’a expense coverage ratio. Glad you remembered!
https://www.financialsamurai.com/2012/12/03/how-much-savings-should-i-have-accumulated-by-age/
Rico, you are right on. The only wealth we need to worry about is our own, and the definition of wealth is an individual as each person. I have an emergency fund right now, but one day, the tipping point will come, and the fund will turn into my “financial independence”. If we keep expenses low, that tipping point will come sooner rather than later.
As far as owning stock: that’s the majority of my investment right now, but in the next year investment property will be a huge part of it, and P2P lending a small part of the pot.