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Dear Financial Samurai,
Since Liberation Day, we’ve had a phenomenal run in the stock market. But I’m starting to worry complacency is setting in. Just take a look at the charts on price-to-book, price-to-sales, and price-to-earnings valuations.
If I were a money manager, I’d be dialing back equity exposure for clients. Partly to protect them from an inevitable correction, and partly to avoid getting yelled at for ignoring stretched valuations.
Interestingly, with my rollover IRA, SEP IRA, and Solo 401(k), I take the opposite approach. They’re 100% in equities, and roughly half in individual tech stocks. I care about valuations, but not enough to hedge these portfolios since I won’t be touching them until at least age 59.5.
In contrast, my taxable brokerage account is more conservative at a 65/35 equities-to-Treasuries split. That portfolio serves a different purpose: funding near-term expenses and potential big-ticket purchases like a car or another rental property.
In other words, construct your portfolios according for their intended purposes.
In Search for Value in All the Wrong Places
Even though I’ve been a growth investor since launching Financial Samurai in 2009, I’ve occasionally detoured into value stocks. After 16 years of temptation, I’ve come to a clear conclusion: value stocks just aren’t worth it.
When so many companies are innovating and growing by leaps and bounds, why waste time on bombed-out names? More often than not, they’re value traps that take forever to turn around—if they ever do.
The temptation, of course, comes when the overall market feels expensive, like it does now. You’re afraid of chasing growth right before it takes the elevator down. That’s always my fear when putting new money to work during a bull run.
But the odds of buying a value stock and watching it quickly rebound are actually lower than the odds of buying a growth stock and enduring a near-term correction.
For more, see: If You Want to FIRE, Don’t Buy Value Stocks
A Desire for More, More, And Even More
Beyond expensive valuations, greed is the other problem that creeps in. Just five months ago, we were in the hurt locker with the S&P 500 below 5,000. Fast forward to today, we’re ~30% off the bottom—and I can’t help but wonder why I didn’t buy even more during the dip and hold on longer.
If you’re feeling that same bubble of greed, take a moment to revisit your portfolio and your emotions back in March and April, when everything was unraveling. Run the numbers on your portfolio or net worth then versus now. The difference is spectacular.
We’ve got to appreciate how far we’ve come in such a short period of time. In an upcoming post, I’ll be tackling how to conquer greed and FOMO. In the meantime, you may enjoy: The Sad Reality of Needing Big Money to Make Life-Changing Money.
The Sacrifices We Must Make to Generate Passive Income
The other day, I was in the hot tub after a two-hour pickleball marathon, chatting with a MarketWatch reporter. The topic: whether $2.3 million is enough to feel wealthy today. The figure comes from the 2025 Charles Schwab wealth survey, which I wrote about in the post, You Need Less To Feel Wealthy Today Than Before.
The answer, of course, depends on age, location, household size, and lifestyle. But I prefer to frame the number in terms of passive income.
At a 4% withdrawal rate, $2.3 million generates $92,000 in gross income. Does that sound wealthy? If you have no debt, no kids, and live in the Midwest, I’d say yes.
But here in San Francisco, a family of four earning less than $115,000 qualifies for subsidized housing. In that context, $92,000 a year doesn’t feel wealthy at all. Which means $2.3 million in net worth also doesn’t cross the threshold.
To me, financial independence means your investment income can cover your desired living expenses. Once you start viewing wealth through the lens of income generation, you naturally ramp up your focus on saving and investing more.
Publishing this post makes me a little sad because I’ve had to give up something dear to both me and my children in the pursuit of passive income. But as a father, when valuations are stretched and AI disruption looms, you do what you must to provide.
Check out: Earning Passive Income Requires Optimization and Sacrifice
To Your Financial Freedom,
Sam
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