The Two Levels Of Rich: One Of Which Doesn’t Rely On Index Funds

It's safe to assume the vast majority of you reading Financial Samurai want to be rich. I trust those of you who've been reading this site between 2009 and 2012, when I was writing heavily about investment strategies, have indeed become much richer. The compounding forces since then have been enormous.

We are probably one of the richest communities on the internet today based on all the surveys I've conducted. For example, 35% of you have a net worth of between $300,000 – $1 million. While 25% of you have a net worth over $1 million. Not bad compared to the median net worth figures who have less than $100,000.

Despite our good fortune, it's worth discussing the two levels of rich. Because since I started this site, it's clear one level of rich has pulled far ahead. And that one level of rich didn't do so by investing in index funds.

Index Funds And The Rich

I know we all love index funds. They are the personal finance community's #1 recommendation for where to invest our money in stocks. However, it's hard to get really rich off index funds alone.

In addition, if you want to achieve financial independence well before the traditional retirement age of 65, investing only in index funds is probably not going to cut it.

The only way to get rich sooner off index funds is to consistently invest large sums of money. But that's kind of like saying to get richer, start with a lot of money. Index fund investing is more for capital preservation once you get rich.

The reality is, there's a whole other level of rich that has little to do with investing in index funds. As one centi-millionaire once told me, “Investing in index funds is what middle-class people do who don't know what to do.”

My View On Index Funds

I'm a fan of index funds. Over a 10-year period, the vast majority of active fund managers underperform their respective indices due to high fees and poor investing acumen. However, as I look back on what enabled me to leave my job in 2012 and stay unemployed, it wasn't index funds.

I view investing in index funds as a low-cost, lower-risk way of investing in public equities. Investing in an S&P 500 index fund or ETF is my default setting when I'm buying the dip, but don't have strong conviction.

I understand the downside of investing in an S&P 500 index fund or ETF. A typical bear market lasts about a year and has about a 35% drawdown. I'm good with that.

Investing in an S&P 500 index fund is like investing in a super-tanker. It doesn't move very fast – at historically a 10% annual return – but it also doesn't easily veer off course or sink to the bottom of the ocean either. Sooner or later, the super-tanker will get to its destination.

Index funds have acted like a pleasant tailwind pushing me more towards an ever-moving financial independence number. But they weren't the difference maker.

The Two Levels Of Rich

1) First Level Rich: The Mass Affluent

The first level of rich is what I consider the mass affluent class. The mass affluent class is highly educated, motivated, and upwardly mobile. The mass affluent class is considered rich by general standards, but often doesn't feel rich.

Today, the mass affluent class has investable assets of between $500K – $3 million. The mass affluent class also has a net worth of between $500K – $5 million. The range is largely dependent on age, location, and household (single versus couple). HENRYs are part of the mass affluent class.

The mass affluent class loves investing in stock index funds and real estate. They've got good jobs, often with six-figure household incomes. Usually less than 20% of their investable assets is invested in alternative investments, including cryptocurrencies.

For the most part, the mass affluent class is a great place to be. You're comfortable and always have hope for a wealthier future.

Level of net worth needed to join the top 0.1% in selected countries (U.S., Monaco, Switzerland, Singapore) and more

2) Second Level Rich: The Truly Rich

The second level of rich is what most people think about when they hear the word rich. We're talking vacation homes in the Hamptons, first-class flights, $100,000+ automobiles, and generous donations to charity where your name appears on a wall.

Let's call the second level of rich the Truly Rich. The truly rich have investable assets of at least $5 – $10 million and a net worth of at least $10 – $25 million, depending on location, age, and household.

In a bull market, the truly rich crush it with multi-million dollar gains a year. Conversely, in a bear market, the truly rich get beat up the most. Back in 2009, we were all relatively much wealthier not because we made more money, but because people like Warren Buffet lost tens of billions of dollars in individual wealth.

The truly rich have a minority of their investable assets and net worth in index funds. Instead, the truly rich have the majority of their net worth in their business and other business ventures.

In terms of wealth creation, the top 0.1% and 0.01% have trounced those in the top 1%, never mind the 99%. For those folks with incomes and net worths between my two definitions, you are free to call yourself whatever you want.

The top 1% by wealth in America versus Top 0.01%

Net Worth Breakdown By Levels Of Wealth

Here's a good net worth breakdown visualization by net worth levels. The data is from the Federal Reserve Board Of Consumer Finances, which comes out every three years.

Let's assume the mass affluent represented in the chart below is at the $1 million net worth level. Roughly 25% of the mass affluent's net worth is in their primary residence, 15% is in retirement accounts, 10% is in real estate investments, and 12% is in business interests.

In comparison, for the truly rich ($10M+), at least 30% of their net worth is in business interests. Intuitively, we know that entrepreneurs dominate the wealthiest people in the world. Therefore, if you want to be truly rich, take more entrepreneurial risks.

Index Funds Are Mostly For The Mass Affluent

I actually don't know a single person who is worth over $10 million who has a majority of their investment assets, let alone net worth, in index funds. Conversely, I know plenty of people with net worths below $5 million who either only invest in index funds or only have a combination of index funds and real estate.

Here is the rough net worth breakdown of three truly rich people I know. Perhaps you can share your own insights too in the comments below.

Truly Rich Net Worth Composition #1: Net worth of about $30 million. 35% is his ownership stake in his online business. 30% is in investment real estate. 20% is in public equities (60% index funds, 40% individual names). 10% is in various private funds. 5% is in municipal bonds and other low-risk investments.

Truly Rich Net Worth Composition #2: Net worth of about $100 million. 40% is his ownership stake in his private equity firm as a partner. 10% is in various private companies. 15% is in public stocks (50% index funds). 30% is in real estate. 5% is in various risk-free investments.

Truly Rich Net Worth Composition #3: Net worth of about $250 million. 30% is invested in private funds spread across venture capital, venture debt, private equity, and private real estate. 40% is his ownership stake in his private money management firm. 20% in physical real estate, including two vacation properties. 10% is in municipal bonds and other stable investments.

Then I know one fella who was roughly worth “only” $100 million 10 years ago and now he's worth over $3.5 billion through savvy investments. He's an excellent tennis player too!

None of these examples involve investing in index funds to get rich. They all got truly rich by building a business while owning lots of equity.

Getting Rich Is About Time And Risk Tradeoff

If I could rewind time, I would have taken a lot more risk. I spent a lot of time fortune hunting in my 20s, but then slowed way down by 30 to focus on my career.

Blowing yourself up in your 20s and early 30s is not that big of a deal. You can always earn back your losses. But once you're in your 40s or later, unless you've already amassed a decent fortune, it's harder to take more risks to get rich. If you have children and parents to take care of, you will be forced to be more risk-averse.

When I was 23, I had a lucky win in 2000 when I invested $3,000 in VCSY, a Chinese internet company. It grew by 50X to $150,000. Oh man how I wish I had invested more. I look back now and can't believe how little I had invested.

On the other hand, if I had invested $3,000 in an S&P 500 index fund back in early 2000, it would be worth about $9,200 today. Not bad, but not nearly the $150,000 that I would go on to reinvest in San Francisco property in 2003.

Although it felt risky buying property at age 26 with a $465,000 mortgage, I should have leveraged up even more! At the time, I was looking for a much nicer property that was 80% more expensive. But I was too scared to take on so much debt despite a growing career.

As you grow older and wealthier, you'll probably wish you had taken more risks too. To make more money, you need to be more intentional. Set aside a specific amount of money to take greater risks. Actually spend time every day or week looking for homers investments. Not doing so was one of my regrets during the pandemic.

What is the minimum net worth amount to be considered rich?

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Index Funds Are Great For Those On The Traditional Path To Retirement

If you want to retire closer to the traditional retirement age of 60-65, then index funds are great. A 10% average annual return is what it is. It takes 7.2 years to double your money at that return percentage.

Being happy, plump, and free in your 60s is not bad! Although, future returns may be much lower, thereby delaying retirement.

If you want to achieve financial freedom sooner, then you're going to have to take more risks beyond index funds. As you move out on the risk curve, you will gradually start to feel like investing in index funds is one of the lower-risk investments you can make.

In addition to investing in index funds, you may want to take more risk by:

  • Starting your own business
  • Investing in real estate beyond your primary residence
  • Concentrating your positions
  • Investing in other private businesses or angel funds
  • Investing in more speculative assets like small caps and cryptocurrencies
  • Sacrificing more family time so you can reach the top of the corporate ladder (tough one)

Satisfaction Will Prevent You From Getting Richer

In terms of trying to get rich, I have this “problem” I've faced all my life. I don't have a top gear to grind for maximum wealth potential for a very long time. Instead, I'm more easily satisfied.

When I was in high school, I didn't train harder in tennis because I was satisfied with just winning at the high school level. The thrill was good enough! Winning junior tournaments or playing college tennis didn't interest me. Therefore, I never lived up to my potential until I started playing league tennis again in my 30s.

At work, I wanted to make Managing Director. But after just one year of not getting promoted to MD at age 33, I decided to move on by doing my own thing. Normal people would keep trying for three to five years to get promoted, since 33 was on the young side. But I didn't care anymore. I just needed to try once to minimize regret.

I left banking along with millions of dollars in foregone compensation at age 34. Why? Because I was satisfied living on ~$80,000 a year in passive income in exchange for more freedom.

With Financial Samurai, I know I could grow this site larger by hiring a lot of freelance writers. I can add on lots of features, create expensive e-courses, and more to make lots more money. But what's the point? To go back to feeling like I have a job? Forget it! All income generated online already feels like a bonus.

If I want to get richer, I'm not going to allocate most of my capital to index funds. Instead, I'm buying single stocks, investing in real estate with leverage, investing in private equity, or building my own business equity.

My main investment interest now is investing in Sunbelt real estate with Fundrise. I believe in the multi-decade trend of the fanning out across America. Work from home is here to stay. And millions of Americans will rationally try to move where they can get the most bang for their buck.

I've personally invested $810,000 in private real estate investments in the heartland since 2017.

If You Want To Get Really Rich

Here's the lesson. If you want to get really rich, prevent yourself from becoming easily satisfied. Tell yourself what you have is not enough or is not good enough. Constantly compare yourself to others so you can get motivated to try harder!

By constantly seeking more, you will work harder and take more calculated risks. As a result, you should get richer in the process.

Conversely, if you want to stay mass affluent or middle-class, appreciate more of what you have. Compare down, not up. Better yet, try not to compare at all.

The Buddha taught us “desire is the cause of all suffering.” Therefore, try to minimize your desire for more. This includes homes, cars, vacations, promotions, titles, and even children. Trend towards being a nobody.

The Rich Threshold For Happiness

Just know that once you make over $200,000 – $250,000 as an individual or $300,000 – $350,000 as a couple, you won't be happier. Also know that once you get past between $3-$5 million in net worth, you likely won't be happier either.

Therefore, once you get to these financial levels, I highly recommend you pursue something you really enjoy doing regardless of the money. If you can then grow your income and wealth while doing what you love, you will have hit the richest jackpot of all!

And if you really don't care about achieving these financial thresholds, you can always feel rich without having a lot of money. Find richness in time, relationships, and health.

Related posts:

The First Million Might Be The Easiest

How To Feel Rich Even If You Can't Get Rich

Venture Capital Investing

Venture capital investing is an area predominantly dominated by the rich. Investing in private companies is where you might be able to find the next Google, Meta, Figma, Apple and more. Personally, I allocate about 10% of my capital to venture capital.

The most interesting fund I'm allocating new capital toward is the Innovation Fund. The Innovation fund invests in:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. I don't want my kids asking me in 20 years why I didn't invest in AI or work in AI today.

The fund's investment minimum is also only $10, as Fundrise has democratized access to venture capital as well. Most venture capital funds have a $200,000+ minimum. 

Financial Samurai is one of the largest independently-owned personal finance sites today. For more nuanced personal finance content, join 65,000+ others and sign up for the free Financial Samurai newsletter.

157 thoughts on “The Two Levels Of Rich: One Of Which Doesn’t Rely On Index Funds”

  1. Road To Mana

    Another amazing post Sam.

    Reaching levels that have made me feel very comfortable, but truly agree cant make yourself truly rich (>$10M, >$50M) without taking more risks… alternative paths.

    Keep posting, thank you

  2. I love this post and is a work of art. So many good points. Indeed, the more the risk, the more the return. I think for this you need three things: (1) Strong connections of similar UHNW people that invest with you (2) ambition (3) high appetite for risk. If you lack one does not work. One pointer is that i am sure all the business interest holders were intrinsically involved in their business at the forefront either as an active owner or an initial investor to someone who was very close, before it went to market. I dont think you can get the same returns from mass marketed online marketed “private funds” which to me is no different (or even worst due to lack of transparency and cards being stacked against you) than index funds returns. No mass marketed passive private fund can mimic returns similar to an owner of a company that is managing the company day in day out. This is also evidenced by the fact that mutual fund stocks underperform while their managers and CEOs make extreme wealth mainly from the commissions. Unfortunately, short of creating or owning a company created by very close associates, whom you can stack the cards with, the best remains index funds which may never bring you the 0.01% wealth. Only approach, which is highly risky, as a passive investor (only if you already have money) is by concentrating single stock exposure significantly preferably with margin similar to the Bill Hwang investment strategy and hoping you could stop when you have built wealth before you crash (not too dissimilar to your Chinese stock). In fact, this is what most investors have done doubling down on an investment with debt etc. A more diluted version would be to borrow and go all in to SP 500 or Nasdaq 100 when you see a significant drop and ride it back up perhaps doubling your money. All very risky but only alternative to get to 0.01% without creating value. Happy to hear your views.

    1. I am still thinking about this article and would like to share an observation. This observation. The chart re: wealth of 0.01% vs remaining highlights a fascinating aspect of wealth accumulation among the top echelons of society. The graph clearly shows that the richest 0.01% are experiencing wealth compounding at an impressive rate of 8-10%, starkly contrasting with the top 1%, who seem to be merely preserving their wealth rather than growing it at a similar pace not even compounding at an index fund pace. This discrepancy may be attributed to several factors:

      1. The more conservative investment strategies for this group, such as favoring bonds and cash, which are traditionally safer but offer lower returns, could be limiting the wealth compounding capabilities of the remaining top 1%.

      2. Lifestyle choices and large expenditures, such as purchasing high-value assets like forever homes, funding college education for kids and grandkids, or supporting dependents, can significantly disrupt the compounding effect due to marginal size of these vs. total wealth. These assets and expenses often do not compound wealth at the rate financial investments might, due to either slower appreciation or outright depreciation.

      3. A substantial portion of the wealth of remaining 1% could be tied up in retirement accounts like 401(k)s, which, while beneficial for long-term savings, are subject to taxation upon withdrawal, potentially affecting the net compounding effect.

      4. Easier for this group to spend their wealth if it sits in an index fund account etc. than a business which is highly illiquid making it more difficult to disrupt compounding.

      This indicates that the mechanism of wealth growth at this level may be less about aggressive investment strategies and more about navigating expenditures, tax implications, and avoiding highly conservative investment choices. I keep wondering about the concept of an “inflection point” where one’s wealth begins to compound at a significantly higher rate at ‘escape velocity’ to overcome the ‘force of gravity’ where no matter how much you spend will not make an impact to compounding. Identifying this point would require analyzing not just the rate of return on investments but also the impact of lifestyle choices, tax strategies, and the ability to reinvest wealth into higher-yielding opportunities WITHOUT disruption.

      Any thoughts what this level could be? Any thoughts why the remaining 1% can not compound even at index funds rates? What may be some other forces at play here?

  3. Hi Sam,

    Another great and insightful post. From my network, most of their wealth is also tied up in their businesses and private equity stock and not in the stock market. Their focus is now on wealth preservation rather than wealth accumulation and therefore, shifted from a high risk taking (when running their business) to now being conservative and prefer less volatility. Similar to your allocation above, they are overweight in private equity and real estate and rely on the passive income to support their living expenses.

    The other insight that I’ve learned from them is that they will be overweight investments in the areas of their expertise. For example, if they worked in tech or healthcare, they will disproportionately make either public or private investments in tech or healthcare companies for a competitive advantage because they know the space.

    While being an entrepreneur is not for everyone, I think if you live in a HCOL city, most younger people should try to supplement their income with side hustles. You have nothing to lose, but your time.



    1. “ The other insight that I’ve learned from them is that they will be overweight investments in the areas of their expertise.”

      This is true, and makes perfect sense. You press where your expertise, network, are the greatest.

  4. dunning freaking kruger

    I have read this post a few times since its original release. Fascinating! The graph illustrating investments with escalating wealth was an epiphany the first time I read it.

    Personally, our household is mass affluent. With pensions and social security we may foray into the 10 million club in roughly 10-15 years. We are retiring our primary mortgage in 30 months in our mid 50’s. Without touching our investments we will have income of roughly 400,000 yearly. We invest approximately 35% yearly. We primarily invest in index funds; large cap, mid cap, small cap and international. Vanguard and Schwab. Rinse and repeat. Live below your means.

    Some of my life long friends have an entirely different investment make up. They have started their own business. 2 will approach 100 million in the next 5 years. 1 will easily eclipse 100 million + once they sell the business they are the sole owner of. Neither of these people have the majority of their investment mix in index funds. It is primarily business and private equity opportunities people have approached them on. I didn’t realize this until the first time Sam posted this article.

    Spot on.

    Be well and keep on Financial Samurai-ing!


  5. Best quote that resonated in me and will never be forgotten “Whomever say Money isn’t everything, never had any”
    We personally have a net worth of over $3M, with $1M in our primary home and $2.5M in equities/cash. I do not feel any wealthier than we were when our net worth was at $600k or $1M, although i can tell you that we worry a lot less about $ now.

    1. Sounds good. Although, you might feel differently at $5 million or $10 million net worth. Because at that level, you can generate enough passive income not to work anymore.

  6. My son has worked for a major tech company for about 7 years. He’s received RSU’s as part of his compensation over that time. I’m sure he’s a multi-millionaire by now. At least, on paper.

  7. (Very) long time reader here and this is one of the most interesting and best posts I’ve read. Thank you, Sam.

    I’ve often shared the exact same line of thinking: to be super rich, you must never settle or become content. Why be happy with $1 million per year when you can aim for $10 million, or $100 million? Frankly, I’m glad there are folks who feel this way because they often build companies that do amazing things.

    Having said that, I’ve learned that my own contentment is intertwined with the freedom of my time. And of all of the extremely wealthy people I’ve met, I wouldn’t consider a single one of them to be free. I have one business acquaintance that will make $20 million dollars this year alone. He’s on a yacht right now and traveling the globe every week. But he told me, and I quote, “I don’t want to be going on a yacht. I don’t want to sit in another jet. I want to slow down. I want to be home. But I can’t.”

    And so I’ve learned that time is the ultimate wealth, and yet we give it all away in pursuit of money.

    1. Nice to hear from you. Yes, time is the most valuable asset. But man, making $20 million in one year sure would be nice!

      I’m not sure if I can fully trust the ultra rich to say they are not happy or would rather do something else. Bc they could if they really wanted to!

  8. Hi Sam,

    Long time follower and first time commenting. What are your thoughts on setting up a trust in South Dakota? Have you look into it from a tax savings? It is known now as the tax haven in the U.S. and billions have been poured into the state including some shady money coming from overseas. Would love to hear your thoughts and if it is something you are considering. No estate or inheritance tax.

  9. How has no one quoted Succession yet in response to the survey? I have to disagree that $3-5m is the NW needed for happiness ….
    Greg: I’m good, anyway, cuz, uh, my, so, I was just talkin’ to my mom, and she said, apparently, he’ll leave me five million anyway, so I’m golden, baby.
    Connor: You can’t do anything with five, Greg. Five’s a nightmare.
    Greg: Is it?
    Connor: Oh, yeah. Can’t retire. Not worth it to work. Oh, yes, five will drive you un poco loco, my fine feathered friend.
    Tom: The poorest rich person in America. The world’s tallest dwarf.
    Connor: The weakest strong man at the circus.

  10. In the 5-10M net worth category. About 15% of assets in MFs. 35% in business. Business ownership is what got me there.

  11. Guess I’m in the Truly Rich category. Got there by working for a company that grew tremendously over a 35 year career. Got promoted to senior management and deferred all my stock awards. Stock grew 20x and is now worth a fortune. Slowly selling off and putting into a diversified portfolio, but my single stock exposure still over 50% of nw. So you can get there by working for a company if you are fortunate to get with a great company with strong growth prospects.

    Enjoy your site and your book. Keep up the great work.

    1. Congrats! A stock going up 20X over a 35-year certainly helps! :)

      I was at a firm for 11 years where the stock price went up only for a couple of years and then went out for the remaining nine years. The writing was on the wall and ultimately, the company got taken under in 2023 by UBS, 11 years after I left. Sad!

      1. Jimmy Chueng

        This is exactly the reason I feel this is the worst article I have read on this site. Don’t get me wrong. I am a big fan but this article ignores the basics of investing- diversity. Or probability of success. Just like concentration on one company is risky, the chance of stating a successful business is low.

        1. Thank you Jimmy. The worst article you have ever read on this site is impressive!

          Diversifying is one foundation of investing. But we’re talking about the people who get truly rich. There’s less diversification involved.

          Are you able to recognize that the commenter whose stock went up 20X in his career has enormous concentration of his net worth in company stock?

          Please share with her you are in the truly rich category of $10 million and above, and how you got there.


          1. Jeffrey Clem

            LOL Sam I hope you see a comment like Jimmy C made and laugh. What an idiot . You are too polite to comment differently but I’ll call it how it is. Great article . Thanks for continuing to write!

  12. SAM

    Good Morning

    I love your site!

    You should be proud of yourself, you found an amazing niche and the name “Financial Samurai!” will never be outdone in financial literature!

    I did notice you captured and utilized “nuanced language”, which proves your skill in understanding what resonates with a mass audience.

    I am still learning how to interact appropriately with your site.

    Replying to older post leaves everyone out of current conversation, for which I believe leads to fewer people being able or willing to engage with each other.

    In April 2022 you asked for people to share experiences with becoming late financial bloomers. It is now March 2023 and I have just come across that thread for which I thought to oblige your site with my thoughts and experiences on the subject.

    Not sure how to fix this but I decided to post via the site page versus just the reply thread as I think that todays readers will be better able respond, interact and capitalize off the comments.

    So for current readers there are many great historical comments that are hard to keep conversations going because of how we physically utilize the site.

    I recommend that if you have input for the discussions that you create your own thread versus replying to an older thread but making sure to reference the older thread so current readers can get to the original threads.

    So Sam

    Having come from a poverty level household it was difficult to attain a position in life where one could achieve the opportunity and mindset to break free and focus on a future with financial security and freedom. (God Bless America and our Forefathers for their willingness to sacrifice their own wealth and Reputational Standings for all of us!)

    May a horrible death come upon anyone who schemes against our right to life, liberty and the pursuit of happiness!

    “Capitalism”, is “Gods” answer to prosperity for all; anything else is communist evil actions against the poor!”.

    Make the Pie Larger!

    I started saving late in life due to not being afforded a 401k option until I was 33 and then because of life circumstances I was only initially investing 7-10 percent and because of my own naivety.

    I eventually retired from the Marine Corps and began a career with the Federal Government (Foreign Service) “Yes Sam you and I are more connected than you might have caught onto in our previous conversations.”. So now I am fully maxed out on my TSP “indexed funds” and if my math is semi accurate I should eventually hit Approximately 1 million and my wife separately will be about the same.

    Technically “mass affluent” but mentally impoverished!

    We will have 3 pensions and 2 Social Security incomes as well. (I am already invested for 35 years so every year I continue to work I remove a lower years income for my now higher wage earnings.)

    So I believe by a conservative estimate we will have an annual retirement income of 250-300k+.

    Not counting 2 Properties that we are intentionally not drawing passive income on.


    Who knows if I will become a successful writer as yourself but I am dabbling a little bit.

    I hope you do not retire again but truthfully and full heartedly I am inspired by your achievements and hope that you are able to enjoy the fruits of your labors as you see fit!


    1. Chris!

      Very wonderful to hear from you. And thank you for your update and sharing your latest. That is amazing progress and I am very happy for you!

      Feel free to comment on any of the articles. I will see them, are used to subscribe to the comments will also see you then.

      Fight on!


  13. As a counterpoint, being in the top 1% of performers at a top tier tech company such as Google can earn you seven figures annually. And investing a good chunk of that into index funds over many years can definitely put you above $5-10M net worth.

    Of course, I agree that starting your own business is still a very worthy pursuit.

        1. But your point was a good one too. That you don’t have to be top .001 percent at something to get rich, you can do it being top 1% and take less of an outsized risk. Ride that tanker one percenter! Ride.

  14. Great post. I think an underlying theme and difference between the two classes is the amount generated from assets and how these translate to funding lifestyles.

    I.e. HENRY/Mass affluent can generally afford to go on expensive vacations but the consequence of doing so would be spending a good amount of a month’s income, versus the truly rich who basically return from their very expensive vacation richer than they set off just because their income producing assets did not stop generating income.

    That being said, and always being context specific here (I live in Southeastern Europe, not exactly first world), it always comes down to living expenses, meaning that if your expensive holiday and expensive lifestyle translates to 10,000 euro/month, having 12,000€ from income producing assets would mean you are truly rich in my view..

    As Buffet said (I believe*) the ultimate flex is earning money while sleeping.

  15. Good article! I think a key takeaway is that if you want to become truly wealthy, the stock market by itself probably is not going to do it. You can become “mass affluent” and comfortable, yes, but the wealthiest people made it with their own businesses. You don’t need to be the owner of the next hot tech startup, either. Plenty of people have done very well with “boring” businesses like plumbing, HVAC, car repair, etc.

  16. Dividend Power

    Index funds is for the mass affluent is a good line. One needs to start a business to become truly rich. Few people do it through index investing, although it can provide a good retirement.

  17. Hi Financial Samurai

    What is the easiest way to find out when the S&P 500 dips and to buy.


  18. Really great read as always. I recently referenced this post on my site because I think it is quite relevant. In my profession, we make a great income, but gone are the days where a physician can be ‘just’ a physician and ‘have it all.’ What separates mass affluent wealth from the 0.01 percent is the ability to generate multiple streams of revenue. One of those revenue streams should be business ownership. Even as busy doctors, the individuals who reach financial independence (regardless of early retirement) are generally the ones who have either built real estate side hustles, created an electronic product, built a blog, or founded a business (or all of the above). Your graphics tell a very important picture. Thanks for this post.

  19. Hi Sam,

    Great Article as always. I have decided to take my real estate investment gains over the last 4-5 years and pay the cap gain taxes. My cash flow on the rentals is negligible & I am sitting on a ton of equity. My question to yo is I want to build a $500k taxable index fund account. Who should I use as a brokerage, I would like to have an IRLOC or a form of margin in case I see an opportunity to buy more real estate. I love real estate but I think having a $500k stock account will make me sleep better at night. I’m only 28 I can rebuild the real estate portfolio in a couple years time.

    1. IBKR. They don’t rent your assets out to cover their costs, and if they do, you have to agree, and they pay you for the privelage.

      Typically lowest interest rate for margin loans.

      Pretty robust mobile interface.

      Low commissions.

  20. I’m going to provide an N=1 experience here, but my parents are well above the mass affluent level due to business ownership, and they steered us away from Entrepreneurship and towards steady professional careers. I have a pretty strong sense that money is an area for “satisficing” instead of optimizing. Though this may be the perspective of someone born between third base and home plate already. From what I can tell, my parents basically went from barely positive net worth for decades, to very comfortable over a 5ish year period, to a “what do I need all this money for?”

    FWIW- they have been generous givers all throughout the years, and they do get the opportunity to turn that up since they’ve made it clear that my siblings and I have all gotten a hand up in life, and we don’t need any more of their money.

    Personally, I feel pretty happy to not deal with the stress of running a business and having dozens or hundreds of people depending on you for their paycheck. And if you’re successful, all you have is money. Lots of it certainly, but way more than you could ever really spend.

    I suspect My siblings and I will mostly end life in the mass affluent class, except for perhaps one sister who has started her own business. Or if we are decamillionaires it will be the result of luck instead of investment savvy.

    1. Thanks for sharing your thoughts. Did you feel you could relax more and not work as hard growing up wealthy? One of the fears is wealth spoiling children and adult children.

      I have an upcoming post on this topic.

      1. Interesting question. I don’t think I am spoiled, as I work hard in my professional career and steward money well. I also understand that I have had advantages that others haven’t had. My current wealth isn’t the result of inheritance, but I can’t say it’s of my own merit either.

        I’m not trying to build an 8-9 figure business, but I am also working to contribute to society (my community, my own children, etc) in other ways and through other efforts.

        If I thought that I could realistically build a high quality business that provided excellent work for many people, I may feel some obligation to start that because of that business. However, I don’t think I have that skill set right now. Maybe in another decade or so it will be a different story.

        I look forward to reading your article on the topic!

    2. Reasonable thoughts but that mindset is also the reason for the saying a fortune doesn’t last more than 3 generations (which is probably good overall for society)

  21. Index funds are safer to bet on. So for a busy person who cannot actually afford to invest in financial planning, it makes sense. Nevertheless a very articulate post here Sam. Really loved the content.

    Keep up the good work!

  22. Thanks, Sam. Sober, thought provoking, emotional and demoralizing post. I am a HENRY and only in the last 2 years or so really got serious about money and investing. My firm offers a .50 to .75 c (depending on our year) on every dollar up to the max (20,500 this year), so I can’t not do that even though I don’t like 401(k)s. The comment about “middle class people” and “index funds” really hit home. I have a ROTH (that I backdoor), some BTC, and lots of cash in stable coins, but really just feel like I am starting to get ahead. Lots of mistakes in my 20s and 30s. Appreciate your insights and providing realistic goals to hit, like $300k in invested assets.

    1. Thanks for reading Timothy. That’s a good 401(k) match. Gotta take full advantage! Folks like me no longer have that benefit and it really adds up over time.

      Although you may have started later, the great thing is that you’re now focused. And hopefully, you enjoyed your 20s and 30s more than the average person too! I was thinking about writing a post on this topic, late starters. Maybe you can share some thoughts on what your financial mindset was in your 20s and 30s and what made you focus more on money in your 40s?

      Thanks for any color!

  23. I am definitely in the mass affluent class I am a high income professional who owns a small business and invests the vast majority of my money and income into index funds and I’m perfectly content with this and have no desire to become into the truly rich class. My splurges include fine dining, flying business class and staying at swanky resorts in the Carribean which I can do 3 times a year. Long live the mass affluent class!

  24. My 2 cents: I think most people can’t accept the idea of having less wealth that once they had. Once they stop earning as much money as they used to, the idea of spending the wealth terrorizes people. Few can handle the idea of spending 5M$ of 10M$ they have by the time they die. No amount of money can overcome that fear. The way I look at it is: I will build as much as wealth I can, I will retire by mid 50s, live within my means, be with my family, and hope for the best. Life is not risk-free.

  25. You have to figure out your goals. If you want to be “truly rich”, then you should take more chances and be more entrepreneurial.
    Me, I’m much more laid back. My goal is to be happy. That doesn’t take $10+ million. I’m already happy at the “mass affluence” level. Why struggle so much to get rich? There are a lot of risks too. What about those entrepreneurs who failed? You don’t hear much about them.

    1. True. I think for many, getting richer is almost like a game. We all have this desire to strive for more. But it’s be nice if we appreciate a certain limit and enjoy more of what we have.

      You’ve always struck me as someone with pretty good balance, which is fantastic!

  26. Sam, I’m on CrowdStreet now, with one deal done. What Investing Entities do you use? Individual (taxable), SD-IRA, LLC, etc? I think real estate is good to have in an non-taxable account, but the SD-IRA seems daunting. Not sure I should put in the energy to pursue that. I’m curious how you approach it. Thanks!

  27. Retiring with zoodles of cash is okay … but I kind of admire Elon Musk and Warren Buffet etc … who still get a thrill from doing a business that helps others … etc …. recently early retired and looking for my next thing …

  28. Another great post, Sam. Love the breadth of your readership and comments from varying wealth/perspectives. Agree no one gets rich off Index investing.

    One point –the classifications break down when you factor in HCOL vs LCOL, kids/no kids/lifestyle choices. 10M-15M NW- gets you at or just above 1% NW in US, but not in Coastal CA or NY.

    To wit: comment from Dennis in CA with a 16M NW but still has to work at 59. Leaving aside the amount of NW tied up in non-income producing residences, the property taxes and cost of living create a high burn rate. Given these are appreciation markets, it’s possible one’s NW tied up in personal residences increased at a higher rate than your earnings and equities (which you HODL and may generate little dividends) . Either way, it seems in retirement, you’re forced to sell assets at one point — high growth real estate or high growth stocks.

    We are 51, retired 20 months ago, and at +/- 10M or so NW with 24% in equity in personal residences but without 100% paid off mortgages, finding it hard to live off passive income alone. Assuming SWR of 3.2% on $7.6M, (and some has to be in cash and generating little return), that’s only $243K gross a year. That is barely enough to pay income taxes, property taxes, home maintenance, health insurance, home and car insurance, gas, etc for a couple, let alone a family. Our non-heated pool is a money pit. Shitty individual NY exchange health plan is $650 a month per person with $6K deductible and super limited in-network doctor/hospital coverage. God forbid you have a major CAPEX event, need to replace your car, or have a big medical expense. The math doesn’t work. We buy vintage/used/shop from estate sales to save money and eat mostly at home, but splurge on travel. Worried about inflation, like everyone else.

    Hence, why one feels “upper middle class” or “mass affluent” and not at all close to “rich.” We felt richer when we were working with good salaries and accumulating….we thought nothing of going to St Barts every winter (9 years straight) — a luxury pipe dream at this point. Now contemplating some consulting to supplement income so we don’t feel strapped or pressured to sell assets.

    1. Thank you for sharing.. great point!

      Housing tends to be the biggest component of costs everywhere. It’s amazing that you have paid off your mortgages (and congratulations!)

      Back-of-envelope, tour SWR of $243K gross would translate into $158K net based on a a 35% all-in tax rate in a HCOL location, or a monthly budget of $13K/mth.

      From your post, it sounds like you have no dependents, and no mortgage expenses (though there will be other housing costs).

      What monthly budget would you feel you would be more comfortable living with? Trying to calculate the implied investable assets needed for “safer” retirement.

      1. We have small-ish mortgage at 3.25% left — about $750K, which could be paid off but historically left invested. Mortgage payments still drain on our passive income. Fortunately much is from real estate and sheltered through depreciation, so we were in the 12% marginal bracket last year.

        Correct, we have no dependents. Figure comfortably to hold everything we have without worry and splurges like home upgrades and slow travel, we’d need $275K+ net. Mortgage at $55K annual, Property taxes are $25K a year, Co-op maintenance $15K a year, Housing repairs/landscaping/pool another $20K, Health Insurance $18K a year. That’s already $133K a year.

        Our “first world problems”:

        1) the composition of assets (real estate heavy in appreciation markets with lower cap rates) don’t generate total cash flow needed. Since they are all in CA and NY, the longer we hold and wait to sell, the higher the appreciation and total return. That or sell long held equities. No particular interest to 1031 and chase higher cap rates/cash flow.

        2) Either reduce mortgage expense (and therefore investible assets) or move away. Our Manhattan maintenance/property tax has gone up 60% in 10 years, which is line with the average. Our friends mostly live in HCOL/capital cities around the globe so unless go off the grid, we’re not likely to get much savings. We have UK/EU right of residency and considered divesting and moving to one of select countries that don’t tax worldwide income. We’d benefit from super cheap property taxes (in general EU govts don’t look to property taxes to raise bulk of revenue) and reasonable health care/insurance costs.

        For sure, our “wealth” is having time and flexibility…a huge luxury. We might need to side hustle and get $50K extra a year to keep status quo.

    2. Yeah, on the coasts, we’re talking more like $25 million minimum to be truly rich, hence the $10-$25 million range.

      The good thing is, coastal city residents can easily move to save money.

      I’m sure you can comfortably afford to go to St Bart’s again if you want!

      1. Strangely, we don’t miss St. Barts. Too many other places to go in the world when you’re not tied to a corporate job that looks at you askance if you take more than a week off at a time. Personally I’ve gotten to a point where if the resort town has a Louis Vuitton or Dior, then it’s a turn off.

    3. C M Cal

      Thank you for the sincerity of this post!

      I think you have just described why 10 million is honestly not all that significant when it comes down to having a truly carefree retirement lifestyle.

      Best of luck with your future retirement plans!


  29. Sam, this is a great post. I am well and truly in the Mass Affluent (and HENRY). I would love to be in the other category but am not.

    I also have limited clue in how of how the markets work and think I’m better off just sticking to index funds. I have limited time due to my job and family to deal with other things, so I’m better of the way I am just sticking index funds.

    The reality is that I’ve only known about index funds for the past few years. Before then I had no idea and the money just went into my bank account

    1. Nice to hear from you. One of the points I’m trying to make in the post is that being “truly rich” doesn’t change your happiness level at all if you are already mass affluent rich.

      Therefore, you’re not missing much!

  30. Wow seeing all the comments with net worth $5mill+ but still don’t feel rich or wealthy is amazing. as someone in the net worth range of $1 mill at 40 years old I feel I would be happy with more but I seems like Sam is right that won’t make me happier.

  31. I took early retirement at 53 from my job as a fish biologist, which I loved doing. I maxed my TSP (mostly indexed funds). I now have a NW of 2.6 million about 1.1m in 60/40 indexed funds and 1.5 in real estate. 1m of the real estate I recently inherited. I would have been fine without the inheritance. I have a small pension and health insurance. My significant other has about the same.

    Now I play guitar in a bar band, windsurf, ski, mountain bike, make wine and do carpentry part time only because I love it. My SO plays a lot of tennis (4.0) and we travel when we can. I’m happy being the mass affluent.

    I think the truly rich must have had a lot of guidance from their parents. How else would one know anything about venture capital or even have any capital to invest, or have the security in their early 20s to take risks? Good for them for not squandering their guidance.

    1. Fish biologist! So neat. That is great you got to do what you love and now found things you love in retirement.

      I like to paint, but mostly paint my walls and decks as I find it rewarding and meditative.

  32. Net worth is approx $19 mil. Approx 50% equities (stocks and index funds), 45% real estate (investment and home equity), 5% bonds, -3% cash and 3% Alts (private equity, crypto, etc). I also don’t feel that wealthy as my 50% of my equity could get wiped out in a year (massive unrealized gains). Cash flow more than covers expenses. I still work a job that I don’t love with $100k income + health insurance. A lot of flexibility with the job. I have a similar background to Sam. Worked as a trader/derivs for a major bank for 12 years and aggressively saved. Negotiated severance and moved to lower cost area (that area is now more expensive than NYC) Also have 2 kids and wife.

    Am I wasting my time working?

    1. If you don’t like your job and it only earns around 100k ish and your NW is 19 mil I don’t understand why you are working. Find some work you enjoy, whatever it pays.

    2. If you don’t enjoy your work, you are definitely wasting your time. Even a 2.7% return (3 year & 10 year treasury right now) is $513k/yr on your net worth – And I hope your RE is generating at least 5% cash on equity. Stock dividends are paying around 1.5% yield with a blended portfolio or could easily get 2.5-3%+ with a more dividend focused portfolio. Who cares about the principal that much if the underlying instruments are safely delivering the income you need and then some? Principal dropping a lot would just be a good opportunity to buy at 50-100% higher yield!

      If I had your net worth, I would put $10 million into a diversified sunbelt portfolio yielding 5-7% cash on cash and the rest into index funds and just coast as that would generate around $700k/yr in income without ever touching principal. Maybe use $1-2 million for higher risk, higher return bets if you want.

      Most of the very rich folks either started a very successful company, got really lucky (concentrated bets will on average lose to the market but there are always winners) or used significant leverage to get there or inherited a ton to start.

      1. Had a few concentrated bets work out. Financial crisis came at a time in my career where I had solid income and little expense. I heavily invested in spy, qqq, aapl and MSFT. 1000%+ returns over ~15 years on some of those positions. Life changing but pure luck. Past 6 years invested in a lot of self storage/multifamily deals across the US. Those also worked out.

    3. I just wanted to congratulate you on such a thought provoking post. I know a lot of the comments strayed from “index funds don’t equal super rich” main topic but it’s because there’s so much else interesting that you presented.

      One thing that shocked me was how low the top 1% in other countries is. Makes me think as a single man in his late 30’s in between mass affluent and truly rich, I should move to one of those countries and live like a king. Or maybe even a family of 4 that are FI/work from home as a financial blogger should consider it :)

  33. Sure, the super rich have the bulk of their NW tied up in business investments. To get there, though, you have to take risks. And risks are by defnition not going to pan out for everyone. So when you see the super rich, you see people who have taken big risks that paid off. What you don’t see or hear about so much are the ones that tried and didn’t quite make it.

    Know anyone who plays guitar in a bar band? Know anyone who plays guitar in a headline act at a stadium concert? There are thousands of the former, and only a handful of the latter. Same thing with entrepreneurs. I could wallpaper my office with the equity stakes I have in various startups I’ve advised. When it comes to getting a windfall from one of them that turns into a unicorn, I’m not holding my breath.

    Conclusion? For most people, the ETF oil tanker approach is the smart move.

    1. I totally agree. It IS good to talk about the super rich, but we also have to be realistic about the chances of becoming super rich. You know why they call them the 1%? Because only 1% of the population is going to get there.

    2. Agreed – the super rich are 2 deviation right tail winners on big, usually concentrated, bets (or inherited wealth) and actually prove the passive index approach for the overwhelming majority of folks. The investments that don’t pan out well (majority) or even lose all your money are far greater than the ones that average a 20-100% CAGR. If it was that easy, private equity would be able to vastly outperform the stock market without massive leverage – instead most barely beat the market even with massive leverage (higher risk).

  34. I see these numbers and still wonder about the definitions. I am 59 and my net worth is around $16 million and is divided as follows:

    1 – Personal residence equity: $7.5 million
    2 – Second home equity: $3.5 million
    3 – Investment in multi-unit apartment: $2 million
    4 – Investment in Private Equity: $2.8 million (non-liquid at this point)
    5 – IRA: $1 million
    6 – Cash: $2.2 million
    7 – Real Estate Loans: $ 3 million

    Living in California, I am heavily invested in real estate. I have no other debt but still struggle to see how I can retire given that real estate tax alone is more than $75k a year. Per your definition, I should feel rich but I don’t because I still need to make a living to pay my bills.

    If I want to keep all the real estate, I feel I need to pay off the real estate loans and have at least $5 million in cash/non-real estate investments to retire.

    What are your thoughts?

    1. I think there might be some other type of issue that you need to overcome if you feel that your current financial situation is not enough to retire.

      How long have you been holding $2.2 million in cash and what do you plan to do with it? Maybe you need to go to the $20 million hurdle to feel more secure. But I bet there’s something else going on.

    2. Manuel Campbell

      It’s easy to see what’s wrong. Your personal residences (primary + secondary homes) are nealy 70% of your net worth. Per Financial Samurai, you would need this ratio to be around 30% to feel confortable. That would mean that you need to scale down in homes, boost your assets by a significant amount, or do a little bit of both.

      I feel the same, although my numbers are much smaller. I am currently at 42% and I currently feel very tight. I am working to boost my investments by another 30%. My ratio would go down to around 35%, which would make life much easier.

      I think this ratio works well because, to maintain a house, we would need the equivalent of two houses rented out and generating income to pay for one house. Hence the 3 to 1 ratio, or around 30%. It’s not really important whether we invest in houses, apartments or any other investments. In the end, the return on investment is the only thing that matters.

      That would mean, to feel confortable with an $11M in personal properties, you would need around $22M in good investments, either real estate, equities, bonds and/or private companies. That is quite a large number … And probably impossible to get to even if you try very hard.

      PS. Only my personal opinion. You do what you want to do. I have a lot of respect for what you have accomplished !

    3. You’re overweight in owner-occupied property. You could sell your main residence and retire to your second home for example.

      1. Manuel Campbell

        Yeah. Selling the secondary house would solve the problem instantly ! Could be rented though, the financial impact would be the same. Personal residence ratio would fall to 21%. Well under 30% !

        $7.5M in additional investments. Put that into – let say – 2800 shares of Google or the like. Earnings on 2800 shares is around ~$300K per year ($112 per share). You either wait for them to declare a dividend or sell a hundred shares per year (~$300K). You can do that for 28 years, without taking any share price increase, which is quite unlikely for a company like Google over such a long period.

        There you go. You have a wonderful retirement ! :)

        Note : This is just an oversimplified example. Always make sure to diversify your investments. We never know what could happen to a single company.

    4. When time comes to retire, Sell your second home, pay off real estate loans,
      Other investments will still generate you income.
      Invest cash in dividend bearing, stock portfolio giving you at least 3% income or be more aggressive, if you wish. .

      Depending on your monthly expense rate, you should be able to retire and still have money coming in.

    5. You have way too much equity in non-income producing assets (primary and second home) as a % of your net worth IMO. For second home – why not invest that in various real estate and just rent when you want to travel on vrbo/airbnb/etc? Are you committed to living in California? You could move to another area (eg: Charlotte) and buy a massive home for $1MM cash with only $5-10k/yr in property taxes.

      You also have too much in cash, especially in this inflationary environment. $16 million net worth, redone a bit, could easily have a luxury paid off home in a nice top 25 city and generate $500-$750k/yr in income from real estate and stock dividends without ever touching principal.

  35. I think this post really highlights the vulnerability of sound mathematics to human lifetimes –

    The power of compounding is very much real and leads to exponential gains, but only over large periods of time. Index funds – definitionally – tend to be lower volatility and ideally suited to benefit from compounding…

    …BUT the reality of human lifetimes is that we have only ~30 years to benefit from this (assuming someone in their mid 20’s starts putting away some investment savings and are able to keep saving until their mid 50’s, at which point they start thinking towards retirement)…

    …and unfortunately, the relative ability of someone in their mid 20’s to save is low, and the power of compounding will take that much longer to overcome the low starting balance and break into the UHNW $10MM+ wealth tier, in *their* earning lifetimes.

    So the majority of the members of that $10MM+ wealth tier tend to be 1) those who have taken a higher risk strategy (e.g., operating their own businesses) *and* have had those risks pay off (so major survivorship bias here) and 2) those who have had intergenerational wealth transfer (benefiting from their parents’ or grandparents’ investment decisions), effectively creating much higher starting balances that will then stand to be compounded even further during their lifetimes

    I think there’s an alternate way to look at this. All other things being the same (among reasonably intelligent, educated, hard-working people)
    – Of the 100 people who choose to sock away small amounts in “boring” index fund strategies with “safe” jobs, the vast majority of people (>80?) will get to $5MM by age 55+ (the cutoff that was defined as wealthy by the majority of respondents to the embedded poll)
    – Of the 100 people who take risks (like starting their own businesses, or employ risky investment strategies), a minority ($10MM or >$100MM), far beyond the dreams of the first group
    – And of course, of the 100 people who benefit from intergenerational wealth transfer / inheritances, all 100 will stay rich!

    Which one would you rather be?

    1. Good thoughts. I don’t want to get rich because of inter generational wealth. It won’t feel good getting something I didn’t earn.

      I felt great with $3M in 2012 at 34. That was good enough for me so I left. If it wasn’t good enough, I would have kept grinding. How about you?

      1. What if instead of grinding it out, you took it to the next level aiming for partner? Imagine your life now if you were a Goldman Sachs partner.

        1. Not sure in what ways being partner would make me happier. I’d have to spend most of my week working, which would make me less happy.

          You need to grind it out to get to partner too. How would your life be different?

  36. I came from a working class background and have no family wealth. I worked my way up to making about $85,000 a year now, have paid off debt, and am beginning to accumulate some net worth. I’ll be 30 this year. I don’t think I’m willing to work hard enough or take enough risk to be “truly rich”, but I would like to get to where I could maintain a modest lifestyle on passive income in my 50’s if I had to and have a net worth of perhaps 5 million by the time I retire in my mid to late 60’s. I’m going to have to take some risks to have a chance at that though because I’m on pace for more like 2-3 million. The woman I will marry will always make about 70-80K (or almost nothing when we have young children, and we do want some kids). I know if I continue on path I’m on I’ll be able to retire at a modest lifestyle, and I understand index fund investing and asset allocation fairly well. But I just don’t have any strategy for stock picking or how much of my assets as a relatively risk averse person I should be allocating to that or to individual investments to give me a shot at getting up to 5 million. Any help on designing a modest percentage of portfolio into a high risk high reward opportunity (that if I lost it all I’d still be able to retire with about 2 million)? Thanks all!

  37. When I think of Rich, I think of the show Lifestyles of the Rich and Famous.
    That starts at 100 million minimum. Mansion 15 million plus, 5 million vacation homes,
    5 million yacht, 500k cars, etc.

    Growing up in a upper middle class neighborhood. Our perspective when we would say this kid
    in school is rich would be typically in today’s dollars term as rich would be 10 to 20 million in networth, His dad would be say a surgeon making 500k- 1million or a successful small business owner.
    So my two levels of rich are these.

    Most of us are in the camp of Upper middle class. Not rich buy financially secure. To me about 1 million to 10 milion.

  38. Definitely see the differences between mass affluent and Truly Rich now clearly. But what’s the point? Referring to you happiness index, what could one do with that much money? Sure you can keep buying more headache-homes in the Hamptons, but you can’t buy a $700 carton of eggs or a $50,000 pair of socks (I’m sure you could, but if you did you probably belong in an asylum).

    You did point out the truly rich donate larger sums to charity and have their names on the wall. Now that is a good use of money, not only being one of the reasons a museum was built, but gently nudging that millionaire competitiveness to make another rich person donate even more so their name is higher on the list!

  39. I have a net worth of between $10.5M and $11M with about $5.7M of that in the stock market. The vast majority of that money is in index funds and it makes up the majority of my investable assets.

      1. Thanks! I shouldn’t have used “I” in my post above since there are two of us. My wife and I are in our mid 40s and live in the SF Bay Area. We made most of our money through what I consider salary — I’m a partner in an Amlaw 50 firm and my wife is at an established tech company. Her compensation includes a lot of RSUs. So we didn’t make our money by investing in index funds but that’s where most of it is and where most of it will stay for the foreseeable future.

        1. Makes sense! You guys are a power couple. Do either of you want to take it down a notch? It’s an interesting dynamic where you guys can bank a lot together. At the same time, living off one income so the other can do something else probably works well too.

          Any kiddos to take care of?

          1. We have a four-legged furry kiddo to take care of but none of the two-legged variety. :-) I will likely be taking it down a notch in the next several years. With two high salaries and the inability to really shelter any of that income, we end up paying a ton in taxes every year. And since both of us don’t need to be doing jobs at this level of effort, that seems a bit silly at times.

  40. I wish I took more risk in my 20s and early 30s! I always invested in index funds in my 401k and 529 plans, and that has worked out fine, but it certainly would never get me out of the mass affluent category. For me, buying real estate in my twenties, self-managing, reinvesting all of the rental income, taking advantage of refinance opportunities and trading up through a couple 1031 exchanges has been the biggest driver of my wealth as an individual. I just wish I bought even more back in 2008-2012. As a family, venture capital has been the single biggest contributor to our wealth, but I can’t take any credit for that other than picking a good spouse.

  41. Sam, opinion of leveraged super tankers such as TQQQ. 10k a decade ago became a million, 100k would be 10mil. That’s real money with index funds.

    1. Definitely another avenue. Go for it if you have the conviction. We owned some leveraged QQQs from 2013-2018. Unfortunately, didn’t hold on. And just traded to normal unlevered.

      1. Sam, do you have thoughts on how much leveraged ETFs should be in one’s portfolio, if at all? And to further the question, should one take out a loan to invest in Index funds?

        I’m very curious about this. I’m 37, so I believe I’m “young” enough to take the risk. Thank you!

  42. Sam … is getting individual/personal investment advice a possibility?
    At 75 using retirement savings to cover 45% of my monthly budget; and being 80% in cash. I need to take action(s) to grow my liquid assets and/or produce additional income? Paid-for home market value approximately $850,000 and liquid assets of $190,000.

    Can you advise (for a fee) or direct me?

    Thank you,

    1. Dennis, I’m only doing a couple consulting sessions a month.

      Does Social Security not cover the rest of your living expenses?

      If you really need 1X1 advice, you can email me (Address is in homepage)

  43. Sam, can you post about your forecast for the US housing market (perhaps California specifically) now that we’re in a bumpy period for stock market, sharply rising mortgage and interest rate, and lots of uncertainty geopolitically? For California and perhaps other coastal cities, housing price is pretty crazy at the moment. Do you see the high mortgage rate dampen housing demand (I think so) and can lead to a housing correction in the next 24 months? (this is based on the assumption that we will enter recession in the next 12~24 months).

  44. My husband and I are the “mass affluent” group as we both work professional jobs that pay decent salary. Our net worth went up a lot during the pandemic due to the crazy housing price increase in San Diego. The amount of net worth increase from our primary residence and two rental properties far outweighs the increase in stock holdings. In addition, making money in individual stocks are NOT easy at all. I had huge temporary gains from 2020 to 2021, but lost all the gains in 2022 due to heavily weights in tech stocks. I would have done better if I had just bought a balanced index fund like the S&P.

    I remember Sam you wrote that for average people (even for yourself), it’s better to have at least 50% or more in index fund, and not to have too much in individual stocks. I think what I learn between 2020 and 2022, is that easy money goes away easily too.

    From 2022 onward, would you say investing incrementally by buying S&P every week/month would still be a good strategy?

    1. For sure, easy come, easy go. The best down of second tier tech stocks has been swift and brutal. Knowing when to buy AND sell is tough. Hence, investing in index funds is so much easier. Capital allocation.

      Per my newsletter, I was buying the dips all through March. I’ve taken a pause now as I want to rebuild capital. I also have capital calls for my various VC and VD commitments.

  45. EscapingTheGrid


    My business partner and I are both the unicorns you have never met. We are in our 30s and have individual net worths of ~11mil in a MCOL area. We are currently in the process of DCA’ing about 7.5mil of that into a 3 fund portfolio. That leaves us with about 1.5mil in cash and the rest in our residences.

    Our motivation is having a near guarantee (“low risk investment”) of being able to live our ~200k lifestyle with our young families even if we don’t start another business. There is no other investment that would satisfy this. As long as you accept “I believe the USA will continue being economically successful over the long term”, a 3 fund portfolio carries nearly no LONG TERM risk. So that is why we are heavy in index funds.

    As a side note….we do find it interesting that you chose 10mil as the beginning of the truly rich versus something like 25mil. We believe that to fulfil the image of what people think being rich actually looks like and to do it responsibly, you would likely need atleast 25mil+. But maybe that’s just our own bias talking!

    I started writing a big response from our perspective to many of the things you mentioned in your post but erased it as it was most definitely too long for a simply comment. So instead….AMA!

    1. Yep, this is pure hindsight bias . It’s like saying to a teenager “ since I don’t know any NBA superstar who made millions working on their calculus homework , ditch your calculus class , and invest hours on your jump shot , which is what 100% of the nba stars did to achieve their goal “

      While the above statement is true , it’s purely hindsight bias just as being truly as wealthy as Bill Gates or having a networth in the hundreds of millions . Most businesses and individuals stock picking strategy end in ruin . That’s is hardly a pathway to achieve wealth .

    2. Congrats! But you didn’t get rich off index funds right? That’s the biggest part of my post.

      It’ll be interesting to see if you reinvest and stay mostly in index funds years from now.

      1. EscapingTheGrid


        Your classifications would make complete sense if the article was about “how the different classes of rich got rich”. Maybe I’m just being a bit dense, but it seems like the article is about what the rich in a certain class are doing TODAY and not about how they got to their level of wealth in the first place. Am I just misinterpreting your article?

          1. EscapingTheGrid

            We created health & personal care items which sold very well and recently sold our company!

            Now time to find a new calling

        1. This is also how I interpreted it. Just because this is how the rich currently hold their assets does not mean this is how they got rich enough to obtain the assets in the first place. Also, while it seems clear that most “truly rich” got there through entrepreneurship, it doesn’t necessarily follow that if you undertake an entrepreneurial path, that you’ll also become rich. Most business ventures fail. I know one of the central premises of the article is that you should take more risk when young and resilient, because if you fail you can simply brush it off, but the risk does need to be taken into account. The entrepreneurial path may pay off a lot bigger when it does pay off, but it also can hurt a lot more when it doesn’t. I’ve seen may entrepreneurial types who think they’re smarter than everyone else but eat real s&*t when their ideas don’t pan out.

  46. The mass affluent have net worth’s up to $5 million and the truly rich have net worth’s over $10 million. What do you call the group in between?

    1. I’m also fascinated with asking people of different ages how much they would have to make annually to never have to worry about money, defined as nice home, nice vehicle(s), dine out whenever/wherever, vacation whenever/wherever, AC runs 24/7, purchase what you think you need whenever you want, etc., and never have to worry about balances or money going out. The answers are all over the board but tend to be higher with older people that no the cost of things. Teenager ls have funny answers like 80K.

      1. Thank you. Your post just reminded me to go check that my AC is off before it gets warm enough to kick on. Seriously.

      2. $80k a year guaranteed investment income forever would cover probably 85+% of Americans. No SS/Medicare tax, extremely limited to zero federal income tax and similar in many states, no need to save and having a paid off mortgage would make $80k a year about the same as $150k-$200k/year from w2 income with a mortgage (20-25% to taxes + $20k+/yr mortgage + saving 10-20% for retirement). My two biggest expenses by a huge amount are taxes and saving for retirement. Third biggest is mortgage. Erasing those 3 and you just cut my annual expenses to about $60k, including $15k/year for travel – the only thing close to my mortgage -.and I live really, really well, with multiple expensive hobbies (travel, fine dining and expensive whiskeys) and I do run the AC nearly all the time (even in March some!).

        Plus you cut out a ton of other expenses like work clothes, gas+wear/tear on vehicle for work, dining out with colleagues, etc and many houses could go down to one vehicle (and just Uber the rare times you need two or do a vehicle rental for a day). If you do the math, most people can live in retirement for much, much less than they think they need, especially after you have a paid off home and kids are out of the house.

  47. One of my billionaire friends matches your theory, his wealth is almost entirely comprised of ownership in companies he, his parents and his grandparents built into successful ventures.

  48. Guess I qualify as rich with NW of $40m. And a little over half of that is one very large equity position with a public company where I was a senior manager. Kept it because I believed in the company and it has done much better than the S&P. Realize I have lots of risk with such a concentrated position. But prospects are still very strong and I am willing to ride out bumps. Planning to diversify but slowly. Don’t need any home runs at this point.

  49. “Satisfaction Will Prevent You From Getting Richer”

    I have to agree. As will looking forward to an imminent and very comfortable retirement. I find myself turning down what would have been golden opportunities earlier in life, but now I don’t want to invest the time or endure the stress.

    The investment portfolio, along with some pretty good passive income, will eventually get us richer, but it wont be because I’m out working for a living, keeping a constant eye out for opportunity, and working hard to live below my means.

    I’ve also written some books in a series that people liked, and I should write another to provide some closure, and I will, just . . . not yet. Too dang comfortable doing other things in my evenings.

  50. “Instead, I’m buying single stocks, investing in real estate with leverage, investing in private equity, or building my own business equity.”

    Sam, speaking of buying single stocks, any thoughts on Tesla, Amazon and Google announcing splits at their current valuations and possibly taking advantage of run-ups?

    1. I own them all, for years. Not sure how to take advantage of their run ups as a buyer. I’ve tried to buy the dips.

      I’m just going to continue to HODL for next 5-10 years.

      1. I was just thinking potentially in the short-term to buy and sell after taking advantage of the post-split run-up when the masses that don’t realize they can purchase fractional shares tend to see it as an opportunity to get in the game.

          1. I hear you. I’m just aggressively saving for another down payment and looking for a short-term (potentially high reward) place to grow a portion of it, or at least assist with staying even with inflation. Thought there could be an opportunity there with a short timeline.

  51. “In terms of trying to get rich, I have this “problem” I’ve faced all my life. I don’t have a top gear to grind for maximum wealth potential for a very long time. Instead, I’m more easily satisfied.”

    I agree with this in my experience. I am 57 with a 5-6 mill net worth, achieved mostly as entrepreneur. I am now at a life stage where more interested in wealth preservation, then wealth building,. Therefore I just put any new investable income into index funds. I have partners in my firm at my age who are still pouring money into company restricted stock each year – taking loans to do it. I just can’t fathom that. It is much more risky. We are a 70 mill firm that is exposed to all kinds of risk. Could loose all in worst case scenario. I think for me, age 35 to 50 was where I was interested in wealth building and taking on risk. By then I was confident in my career that I could always have a job, etc.

    1. Our goals and desires for wealth do change over time don’t they?

      I’m rapidly losing steam for my desire to accumulate wealth. I plan to enter decumulation phase within the next 12 months.

  52. Sam,
    You said that you have $800k invested in private real estate in heartland of America with Fundrise,
    what advice you can give to some one who never invested in Fundrise and what kind to select to begin with for income and growth?

    1. Hi Satish – I would fill out their online questionnaire and Fundrise will tailor a suggested investment strategy for you. They’ve worked on tailoring various strategies for investors for years. That’s one of the benefits of investing in a Fundrise fund, which is also vertically integrated. They help you allocate your capital and invest for you so you don’t have to think about it.

      If you want to pick and choose your deals, I would take a look at other platforms.

  53. I think I’m apart of the in between mass affluent/rich class? I made my first high five figures starting at 15 through sales, six figures starting at 17 through my first business, and seven figures at 20 through my company I own til this day.

    In my 20s, I spent about $3M living and enjoying life (mostly travel, experiences, and giving lots of money to my parents), and I saved about $3M after taxes mostly paid. The issue was I didn’t invest a lot, and I was really scared to do so as I wanted a deep cash cushion at all times back then. So, I only had about 20% of that invested in equities/real estate (so sad, but learned from my mistakes). Getting “rich” early set me back, as I learned some things about wealth too late.

    In addition, I had a few crazy down years where I really crushed myself, burned significant amounts of capital, plowed every bit of profits into R&D, pivoted the company, and it took me years to recover my net worth. That part paid off, but it was a tough few years of working 24/7.

    I’m in my early 30s now, I think my overall net worth is something north of $10M if I very, very, very, very, very conservatively value my tech company. Given the trajectory and all I learned in my 20s, I am hopeful I’ll eventually exit for a gain of $15-40M personally from the sale along with approx. $6M-7M in cash from savings. So, hopefully, I’ll end up somewhere between $20M and $50M in the next few years.

    In terms of company income, I am taking home about 500k-1M a year again while my partner brings home nearly $400K as a doctor.

    I stepped back as CEO during the pandemic, increased my equity share of the company (will always remain > 50% owner), rebooted our strategy, fired much of the team, re-hired a new team in 60 days, and hired a CEO to replace myself. I focus on finance/economics now, as it’s my new passion (funny how that works). I am hopeful to start a fund, but I am still building a track record I can get behind with my own portfolio first. So far, so good. Also, just enjoying this time off even if it’s been 16 months.

    I’m somewhere in the in-betweens right now, but I plan to join the 1%. Let’s see how it goes.

    1. Thanks for sharing your journey! The journey of an entrepreneur can be so full of highs and lows.

      Sounds like you are already in the top 1% if you want to be less conservative. $12 million is about the threshold now.

  54. “To thine own self be true”. Which means – You have to know YOURSELF. It is sooo hard for a Risk-Adverse person to gain a net worth over 10 million at a relatively young age (I’ll put that “young” age at under 55). But high risk is what it takes to get to that level.

    To drop out of Harvard? To start a business? Now that’s a serious risk taker! I always wanted to be comfortable and free rather than being incredibly rich. Therefore, I may never hit the 100 million mark (unless one of my individual holdings blows up).
    3-5 million is enough to be happy….for those who don’t have an insatiable desire for ever the material world.
    Some of us want to be rich and famous. Some of us want to be rich and nobody. I prefer the latter.

    1. This is probably closest to where I am. I learned after finishing obtaining a terminal degree that I would rather not spend my time chasing the highest income or returns possible. After 9 years of education – although I could have been making six figures right away – I took a rather low-paying job teaching. But I have a very stress-free workplace, I get 3 months off every year to hike, camp, and explore the world around me, and I’ve never done anything but invest in index funds. Despite never making more than 50-60k in a year, I’ve saved aggressively and have over 500k net worth at the age of 38. If I hold steady another 10-12 years – I’ll have the option to continue my low-stress, high-impact career – or not. My expenditures are low enough that 1-1.5 million nest egg (in today’s dollars anyway) would be very comfortable for me. I know this makes me rather different than many readers of Financial Samurai – and yet I still find enough here that is insightful so that I am grateful for the perspective gained by following the blog.

        1. And don’t forget the value of that teacher’s pension! The ultimate in future passive income!

      1. Steve, you are greatly underestimating the pension you will receive if you remain in the teaching profession. Your pension will end up earning you anywhere between 50-100% of your highest annual salary; depending upon how long you work. That alone is worth 7 figures!

        1. I wish the pension I am earning was that generous. I mean it’s not like it’s bad – it’s 14% of salary – automatic, no matching required – placed into a fund every year, like a 401-k. Now 14% would sound awesome if it wasn’t a percentage of a pretty small salary to begin with. And that fund is part of my calculated net worth (about a quarter of it) – so I have already taken it into account. Sadly, there is no guaranteed 50-100% match of highest salary for those in public higher education in my state.

          But otherwise, yes, the teaching job is great. I’ll finish a semester here in another month, and then I’m thinking of all the projects and activities I’d like to do/accomplish this summer. I don’t have the same net worth as I could have otherwise, but I feel like I completely own my own life – which is a great feeling.

          1. Ah, the 14% is much lower than I thought. Did they change the formula or something over the years?

            I was thinking the pension would pay at minimum 30-50% of last year’s salary for life.

            Man, seems gone are the days when pensions paid 70%+ salary for life.

            1. Clearly, your mileage may vary as CalSTRS (which is allegedly one of the largest in the U.S.) does have 70%+ of your final year salary. If you work in the system for 42 years (and are at least 62) you get 100% of your salary. I’m told it can actually go over 100% and I’ve known two profs who would literally make more money if they retired but chose to keep working.

  55. Sigh, in the past 3 years, since I truly started to understand investing in alternative assets, I’ve not been able to convince even one extended family member or friend to invest in anything but the stock market. The good thing….for my immediate family, I’m doing it anyway.

  56. Manuel Campbell

    I am part of the mass affluent. I would like to be part of the truly rich, but I don’t know if I will ever get to that point one day. This seems so far and unattainable. I prefer to focus on more realistic and achievable short-term goals.

    I can understand why the “truly rich” won’t invest in index funds. At 10M$ net worth, even a 0.1% management fees represents 10K$ per year. At this level of wealth, you can easily buy the 30 stocks of the Dow Jones Industrial Average, allocate 333K$ to each one of them, and have your own “index fund” without paying any fees …

    Most likely, at this level of money per investment (~333K$), you will also prefer to choose your own investments, whether they are private or public. Not mentionning the possibility to group with a couple of friends or family members, pool your assets together, and hire your own team of professionals to manage your funds (aka family offices). So, I can see why index funds and mutual funds are good products for the mass affluent.

    Hope to meet you someday with the “truly rich”. Wish me a lot of luck !

  57. Simple Money Man

    Agreed, index funds are like slow and steady…..finishes, not wins the race.

    “Instead, I’m buying single stocks” So…….which single stocks??? :-)

  58. Cool article!

    If I were to guess, most of the people with $10+ million fit into one of the following categories:
    – Senior businessperson (not founder, but c level exec/sr leader, highly compensated salesperson, etc…$1m+ comp per year)

    – highly paid Doctor/ lawyer (not all are wealthy but some at top of earning pyramid can get to $10m+ net worth)

    – successful business owner / founder (would include real estate as a business…high income and $10m+ business valuation)

    – celebrity occupation (sports star, tv/movies, online star, etc…$1m+ income between salary and endorsements)

    – inherited wealth

    From the above I would guess for most investment appreciation is not how they derive wealth beyond the growth % you would see in an index fund, except for investments they are personally involved in (ie the business they founded / actively involved).

    For me personally I don’t think I will get into one of those categories so will have a lesser level of wealth, but enough for my families needs.

  59. Sam, I think your post misses one important point: peopke who basically invest in ETFs have compounded at aprox 10%. All of them. Peopke who got high risks in search of higher returns, how many of them were succesful and how many lost a lot? I think there is more survivor bias in truly rich than in ETF rich…

    1. I don’t think I missed that point. I literally right that point of the post.

      Let’s say you invest $100,000 in an ETF that compounds at 10% a year for 10 years. How much will you have?

      There is definitely survivorship bias for sure. But just ask your rich friends how they made their wealth and let me know what they say.

      1. Thanks for your answer. I will ask. But my observation is I know some high risk takers who lost it all. I do not know ETF investors who lost it all. The problem with higher risk- higher rewards is that a lot of people do not undersrand risk well. And risk happens. Having said that I agree with you, to be truly rich you probably need to work very hard and take some risks- and be lucky (which is your correct point in other posts). Thanks for Financial Samurai, you have helped me make some significant money over the years!

  60. Very interesting article Sam!

    One area of investing I’ve changed over the last few months, is taking advantage of what I believe was overselling in tech stocks like META and Paypal. I’ve redirected capital from Index/ETF funds into single stocks for the next 12-24 months to take advantage.

    I completely agree you can’t time the market, and I am a big believer in stable broad based low cost ETF’s / Index Funds – am I silly doing this? I’ve done the research on the fundamentals and it’s within my level of risk tolerance. Also there is far more upside potential on single stocks vesus the broader index funds.

    I have a current net worth of $350k – with a goal of $1.5M by age 35 (less than 5 years away).

    Have you looked at divesting from index funds into single stocks recently?


  61. I think you need to get out and meet more people who have money…There is an ongoing tilt toward high cost private funds/investments??? Roll the dice but from experience lot’s of wealthy people use index funds and enjoy the power of compounding.

  62. If I read this post in my 20s I wouldn’t have fully gotten it. Rich was just rich in my mind back then, one group of people I wasn’t a part of who had a lot of money. It wasn’t until I got into my 30s that I really started to see how vast the spectrum is of “rich.” I knew a couple people who were worth about $1-2 million, but then I started to meet people through work who were worth more like $100-200 million. One person I met at a friend’s party is now worth a mind boggling multi billion. It’s kinda nuts.

    And yeah you’re exactly right on the exponential growth of their wealth not coming from index funds. Anyone who wants their wealth to have the chance to skyrocket has to look far beyond index funds, but they also have to be willing to weather the —kicking that can also come with incorporating higher risk into their portfolio.

  63. Double Dragon

    Love this quote. You hit the jackpot!

    The Buddha taught us “desire is the cause of all suffering.” Therefore, try to minimize your desire for more. This includes homes, cars, vacations, promotions, titles, and even children. Trend towards being a nobody.

    When you are mid 20-40, you are chasing everything, including women. once you turn 42, then you realized how accurate this quote is.

    1. Introvert Investor MD

      Agree- love the wisdom in that quote. The concept of “enough” is crucial and that seems to be something then”truly rich” who continually seek more and more wealth cannot buy. Sure, my wife and I could maybe have made more wealth, but we are happy with where we are and with the freedoms the wealth we have provides.

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