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This is the October 6, 2024 free Financial Samurai newsletter. To join 60,000+ others looking to achieve financial freedom sooner, subscribe here. Financial Samurai was founded in 2009 and is the leading personal finance site today. Everything is written based off firsthand experience and knowledge because money is too important to be left up to pontification.
The September jobs report showed the U.S. added a better-than-expected 254,000 jobs, while unemployment ticked down to 4.1% from 4.2%. Meanwhile, the East Coast port strike lasted a brief three days, with workers securing a $24-an-hour pay raise over six years, boosting top wages from $39 to $63 per hour.
On Friday, the S&P 500 surged into the close, hitting another all-time high of 5,751. Goldman Sachs strategist Scott Rubner remains bullish, projecting the S&P 500 could reach 6,000 by year-end.
Rubner noted that U.S. corporations are currently in a blackout period, which ends on Oct. 25. During this time, their ability to repurchase stock is limited. However, $974 billion in authorized share buybacks from September are set to be unleashed once the blackout period concludes, potentially driving U.S. stocks higher.
On the downside, valuations remain elevated, with forward earnings multiples hovering around 22X. Despite this, I plan to continue buying any pullbacks with my monthly cash flow.
OpenAI Funding Bonanza And Venture Strategy
On Wednesday, OpenAI announced it has completed its long-anticipated funding round, raising $6.6 billion in what is now the largest venture capital deal of all time, valuing the company at an impressive $157 billion. This comes after OpenAI’s February 2024 funding round, which valued the company at around $80 billion.
In a blog post, OpenAI stated, “The new funding will allow us to double down on our leadership in frontier AI research, increase compute capacity, and continue building tools that help people solve hard problems.”
This clear roadmap for growth, coupled with the potential for future funding rounds at even higher valuations, is a key reason why I’m investing in open-ended venture capital funds where I can evaluate the holdings firsthand.
I also suspect that OpenAI’s largest competitor, Anthropic, will raise another funding round within the next six months, likely at a significantly higher valuation.
Always Risks To Be Aware Of
However, this strategy is not without risk, as private companies fail all the time and there’s no guarantee the eventual exit valuation will be higher. Further, existing shareholders often get diluted—by roughly 20% on average.
Let’s say you own $1,000 worth of shares in a company valued at $1 billion, and the company raises another round at $2 billion. Your share value likely won’t double to $2,000. Instead, it might increase to around $1,800 due to dilution.
Still, I’m committed to increasing my exposure to private AI companies, primarily through Fundrise Venture. Although I’m investing with a 5-10 year horizon, it’s reassuring to know I have the option to sell and gain liquidity if needed—something I can’t do with my closed-end venture capital investments. I’ve invested $143,000 so far and Fundrise is a long-time sponsor of Financial Samurai.
AI Affecting My Dad
The OpenAI news hit close to home because their ChatGPT product essentially put my dad out of a job. Fortunately, he’s a traditional retiree with a pension after decades of service with the U.S. State Department. My concern for him is not financial.
But this is a real-world example of why everyone needs to learn how to harness AI for productivity. If you don’t, your job could be at risk, too. Given my direct experience with AI improving my productivity, as well as its effect on my dad, I remain committed to building up my AI exposure as a hedge against an uncertain future.
What’s interesting, psychologically, is that every $1,000 I invest in AI companies, I feel a little less worried about the future. Our children don’t have the ability to invest and protect themselves, so that responsibility is up to us parents.
Read: AI Put My Dad Out Of A Job And I’m Worried
Beware Of Continuing To Work From Home
In light of the risk of AI taking your job, if you are still mid-stage or early-stage in your financial independence journey, I would try to come into the office more days than not. In other words, try to come in three days a week or more so you can be seen and heard.
Although the September jobs report was strong, the gains were mostly in education & health services, leisure & hospitality, government, and construction jobs. If you work in tech, finance, consulting, and law, hiring is not nearly as robust.
When you’re out of sight, you’re out of mind. As a result, it becomes much easier for a manager to lay you off. Face time is more important than you think, especially if you’re a likable person.
The riskiest time to be an employee is during the fourth quarter, as that’s when you’ve worked the longest without receiving a year-end bonus. Management is reviewing where to cut to optimize their teams for the upcoming year. Managing is also deciding in 4Q who to promote.
I believe I’ve solved the work-from-home versus office debate in my new post: Settling the Work From Home Debate Once and For All
Retire Early or Retire Rich? Time vs. Money
Finally, a common question that comes up in financial planning is whether it’s better to retire early or to retire rich. I say, without hesitation, retire early.
Why? Because time is far more valuable than money. Once you’ve ensured that your retirement income and savings will cover your basic needs, accumulating extra wealth isn’t likely to enhance your quality of life. In fact, delaying your retirement to chase even more money could end up making you less happy. You’ll have fewer years to enjoy the freedom you’ve worked so hard to achieve.
With more time, you’ll have the freedom to pursue your passions, spend more time with loved ones, and simply enjoy life. Don’t obsess over reaching a certain “rich” threshold that might just keep moving further out of reach. If your basic financial foundation is secure, take the leap sooner rather than later.
For more on this debate, check out:Â It’s Better To Retire Early Than To Retire Rich
To Your Financial Freedom,
Sam
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