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How To Easily Determine The Right Amount Of Stock Exposure

Only when the stock market goes down do people start to wonder whether they have too much exposure to stocks (equities). Questions arise: Should I cut back? Should I buy the dip? What’s the appropriate allocation to stocks right now?

While the answer depends on many variables—your risk tolerance, age, net worth, current asset allocation, and financial goals—figuring out the right amount of stock exposure doesn’t have to be complicated.

Table of Contents

A Simple Stock Exposure Litmus Test

If you’re a working adult, here’s an easy way to determine whether your stock exposure is appropriate:

Calculate your paper losses during the latest market correction and divide that number by your current monthly income.

This gives you a rough estimate of how many months you’d have to work to make up for your stock market losses, assuming no rebound. It is part of my SEER formula that helps determine your true risk tolerance.

Stock Market Exposure Example:

Let’s say you have a $1 million portfolio, fully invested in the S&P 500. If the market corrects by 20%, you’ve lost $200,000. If you make $15,000 a month, you’d need to work 13.4 months to make up for the loss.

If the idea of working 13.4 extra months doesn’t faze you—maybe because you’re under 45, enjoy your job, or have plenty of other assets—then your stock exposure might be just right. You might even want to invest more.

But if the thought of working over a year just to recover your losses is depressing, your exposure to equities might be too high. Consider reducing it and reallocating to more stable investments like Treasury bonds or real estate.

A Real Case Study: Way Overexposed To Stocks

Here’s a real example I came across: A couple in their mid-50s with a $6.5 million net worth at the beginning of the year, consisting of $6 million in stocks and $500,000 in real estate. They spend no more than $100,000 a year.

In the first four months of 2025, they lost $1 million from their stock portfolio, which dropped to $5 million. With a maximum monthly spend of $8,333 (or ~$11,000 gross), they effectively lost 90 months of gross work income—that’s 7.5 years of working just to recover their losses.

For a couple in their mid-50s, losing that much time and money is unacceptable. They already have enough to live on comfortably. A 4% return on $6 million in Treasury bonds yields $240,000 a year risk-free. That’s twice their spending needs with virtually no risk.

This couple is either chasing returns out of habit, unaware of their true risk tolerance, or simply never received thoughtful financial guidance.

As I consult with more readers as part of my Millionaire Milestones book promotion, I realize everybody has a financial blindspot that needs optimizing.

Time Is the Best Measure of Stock Exposure

Why do we invest? Two main reasons:

To make money to buy things and experiences.
To buy time—so we don’t have to work forever at a job we dislike.

Between the two, time is far more valuable. Your goal shouldn’t be to die with the most money, but to maximize your freedom and time while you’re still healthy enough to enjoy it.

Sure, you could compare your losses to material things. For example, if you’re a car enthusiast and your $2 million portfolio drops by $400,000, that’s four $100,000 dream cars gone. But measuring losses in terms of time is a far more rational and powerful approach.

As you get older, this becomes even more true—because you simply have less time left.

Here’s a table that highlights a Risk Tolerance Multiple as measured in terms of working months. Your risk tolerance will vary. You can construct the rest of the portfolio with bonds, real estate, or other less volatile assets.

How to determine how much stock exposure to have based on your risk tolerance

My Personal Perspective on Time and Stock Exposure

Since I was 13, I’ve valued time more than most. A friend of mine tragically passed away at 15 in a car accident. That event deeply shaped how I approach life and finances.

I studied hard, landed a high-paying job in finance, and saved aggressively to reach financial independence at age 34. My goal was to retire by 40, but I left at 34 after negotiating a severance that covered five to six years of living expenses. I’ve acted congruently with how I value time – it is way more important than money.

Since retiring in 2012, I’ve kept my stock exposure to 25%–35% of my net worth. Why? Because I’m not willing to lose more than 18 months of income during the average market downturn, which tends to happen every three to five years. That’s my threshold. I never want to go back to full-time work for somebody else, especially now that I have young children.

They say once you’ve won the game, stop playing. Yet here I am still investing in risk assets, driven by inflation, some greed, and the desire to take care of my family.

Adjusting Stock Exposure by Time Willing to Work

In the earlier example, I advised the couple with $6 million in stocks to either reduce their exposure or increase their spending. Losing $1 million in a downturn equates to about 90 months of work income, based on their $11,000/month gross income.

If they’d be more comfortable losing the equivalent of just 30 months of income, they should limit their stock exposure to roughly $2 million. That way, in a 16.7% correction, they’d lose no more than $330,000.

Alternatively, they could justify their $6 million stock exposure by increasing their monthly income to $33,333, or about $400,000 a year. But more easily, boost their after-tax spending from $8,333 ($11,000 gross), to about $25,000 ($33,000 gross). That way, a $1 million loss represents just 30 months of work or spending.

Of course, it’s financially safer to boost income than to boost spending. But these are the levers you can pull—income, spending, and asset allocation—to align your portfolio with your willingness to lose time.

If you have a $6.5 million net worth and only spend $100,000 a year, you’re extremely conservative. The 4% rule suggests you could safely spend up to $260,000 a year, which still gives you plenty of buffer. Hence, this couple should live it up more or give more money away.

Time Is the Greatest Opportunity Cost

I hope this framework helps you rethink your stock exposure. It’s not about finding a perfect allocation. It’s about understanding your opportunity cost of time and aligning your investments with your goals.

Stocks will always feel like funny money to me until they’re sold and used for something meaningful. That’s when their value is finally realized.

If this recent downturn has you depressed because of the time you’ve lost, your exposure is likely too high. But if you’re unfazed and even excited to buy more, then your allocation might be just right—or even too low.

Readers, how do you determine your appropriate amount of stock exposure? How many months of work income are you willing to lose to make up for your potential losses?

Order My New Book: Millionaire Milestones

If you want to build more wealth than 93% of the population and break free sooner, grab a copy of my new book: Millionaire Milestones: Simple Steps to Seven Figures. I’ve distilled over 30 years of experience into a practical guide to help you become a millionaire—or even a multi-millionaire. With enough wealth, you can buy back your time, the most valuable asset of all.

Millionaire Milestone - Bestseller On Amazon

Pick up a copy on sale at Amazon or wherever you enjoy buying books. Most people don’t take the time to read personal finance articles—let alone books about building financial freedom. By simply reading, you’re already gaining a major advantage.

Financial Samurai began in 2009 and is one of the leading independently-owned personal finance sites today. Since its inception, over 100 million people have visited Financial Samurai to gain financial freedom sooner. Sign up for my free weekly newsletter here.

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Behind The Scenes Of The Millionaire Milestones Book

After three years of writing, rewriting, and refining, I’m thrilled to officially celebrate the launch of Millionaire Milestones: Simple Steps To Seven Figures!

This book has been a true labor of love, not just for me, but for my family as well. It’s the product of countless early mornings, late nights, and weekends hunched over the keyboard, while also navigating the beautiful chaos of parenthood and everyday life.

Each chapter represents years of financial experience, both wins and mistakes, distilled into clear, actionable steps that anyone can take to build wealth over time. I wrote this book to help people from all walks of life hit their first $1 million in net worth, without needing a lucky break or a six-figure salary.

Whether you’re just starting out in your career, navigating a midlife financial reset, or thinking about how to best guide your children toward financial independence, this book will serve as your practical, no-nonsense companion.

The Making Of Millionaire Milestones: A Conversation With My Wife

To mark the occasion, my wife and I recorded a special 30-minute podcast episode discussing the behind-the-scenes of creating Millionaire Milestones, what readers can expect, and some of the emotional ups and downs that came with the process.

We talk candidly about what it took to stay committed, how we managed the juggling act as parents and partners, and why we believe this book can make a meaningful difference in people’s lives. You can listen to it below:

If you’re curious about the deeper motivations behind writing the book, check out my earlier post here: Why I Wrote Millionaire Milestones: Easy Steps To Seven Figures

A Heartfelt Thank You For Supporting Millionaire Milestones

Since July 2009, I’ve published three free personal finance articles a week on Financial Samurai—over 2,500 posts and counting. Instead of putting up a paywall or subscription service, I’ve also sent out a free weekly newsletter for over 10 years, filled with insights, strategies, and stories designed to help you build wealth and live more freely.

So if you’ve ever found comfort, courage, laughter, or joy in my writing, I hope you’ll consider picking up a hard copy of Millionaire Milestones. At under $28, it’s a small gesture that helps support this site and everything I’ve built since 2009.

And if you’ve been able to build significant wealth from reading my work over the years, there’s no better way to pay it forward than by giving the gift of financial freedom through this book.

If you enjoy Millionaire Milestones, I’d be incredibly grateful if you could leave a review on Amazon or share it with someone who might benefit. Word of mouth is still the most powerful way to spread practical financial knowledge that can truly change lives.

Here’s to hitting your next financial milestone—whatever it may be!

Millionaire Milestones book by Sam Dogen, a national bestseller

If you order a hard copy or more of Millionaire Milestones before May 10, 2025, you’ll receive an exclusive invite to my private video fireside chat on May 25 at 5:30 PM PST. I’ll be sharing deeper insights into the wealth-building strategies featured in the book and how I’m thinking about investing in today’s uncertain landscape. Simply sign up here after your purchase.

For those interested in a more personalized experience: If you order 55 hard copies (available at a bulk discount), you’ll receive a 1-on-1 video consultation with me, plus a full box of books to gift to friends, family, or colleagues. This package includes a 41% discount off my normal consulting rate. If you’re interested, please fill out the form at the bottom of my consulting page here and I’ll get back to you within 24 hours.

To Your Financial Freedom,

Sam

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Business

Skechers Is Going Private in a $9.42 Billion Footwear Deal

1746469046 Skechers GettyImages 563600481

Shoemaker Skechers announced on Monday that it had agreed to be acquired by investment firm 3G Capital in a $9.4 billion deal that would take the company private after nearly three decades as a public entity. It’s the biggest-ever deal in the footwear industry and was unanimously approved by the Skechers board of directors.

The transaction will close in the third quarter of this year and be funded by a combination of cash from 3G Capital as well as debt financing from JPMorgan Chase Bank, per Bloomberg. 3G Capital has agreed to pay $63 per share, a 30% premium to Skechers’ average stock price.

After the deal closes, Skechers will no longer be listed on the New York Stock Exchange. The company will still be led by Founder, Chairman, and CEO Robert Greenberg and its current leadership team, including COO David Weinberg.

“With a proven track record, Skechers is entering its next chapter in partnership with the global investment firm 3G Capital,” Greenberg stated in a press release. “Given their remarkable history of facilitating the success of some of the most iconic global consumer businesses, we believe this partnership will support our talented team as they execute their expertise to meet the needs of our consumers and customers while enabling the Company’s long-term growth.”

^{Skechers founders Robert Greenberg (left) and son Michael Greenberg (right) in a Skechers display room. Photo by Carlos Chavez/Los Angeles Times via Getty Images}

Skechers is one of many footwear companies that signed a letter to President Donald Trump last week asking for a reprieve from reciprocal tariffs, which are as high as 145% for imports from China and at a baseline of 10% for all countries.

“As leading U.S. footwear businesses, manufacturers, and retailers, we urge you to exempt footwear from the reciprocal tariffs,” the letter, which was signed by Nike, Adidas, Under Armour, and Puma, reads. It goes on to state that the tariffs could cause “substantial cost increases” and make footwear inventory run low in the U.S.

Skechers is the third-largest footwear company in the U.S. after Nike and Deckers, with a market capitalization of $9.25 billion at the time of writing. The shoemaker was founded in 1992 and went public in 1999 at an initial public offering price of $11 per share.

Skechers’ most recent earnings report, released last month, shows that sales reached a record-high $2.41 billion during the first quarter of the year ending March 31, up 7.1% year-over-year. Wholesale sales increased by 7.8% during the quarter.

The company stated in the report that the strong quarterly sales reflected “strong global demand.” International sales outside the U.S. contributed to 65% of Skechers’ business.

Meanwhile, 3G Capital has made a name for itself with its emphasis on cost-cutting and restructuring since it was founded in 2004. The firm focuses on zero-based budgeting, or on having executives begin at zero for their budget for every new quarter instead of starting with the expenses of the previous quarter.

3G Capital previously agreed to buy a majority stake in blinds and shutters maker Hunter Douglas NV for $7.1 billion in 2021. The firm also orchestrated the 2015 merger between Kraft Foods Group and The H.J. Heinz Company with the help of Warren Buffett’s Berkshire Hathaway.

Shares of Skechers were up over 24% at the time of writing.

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Business

OpenAI Says It Will Stay Under Nonprofit Control

1746477826 Sam Altman GettyImages 2198353376

Months after publicly stating its intention to shake up its corporate structure, OpenAI has reversed course and decided that its nonprofit arm will keep controlling its for-profit business.

According to an OpenAI blog post published Monday, the company’s board of directors decided that OpenAI will continue to rely on the oversight and control of its nonprofit division moving forward.

“OpenAI was founded as a nonprofit, and is today overseen and controlled by that nonprofit,” OpenAI board chairman Bret Taylor wrote in the blog post. “Going forward, it will continue to be overseen and controlled by that nonprofit.”

The company’s for-profit LLC, which has lived under the nonprofit since 2019 and will continue doing so, will become a public benefit corporation (PBC). A PBC is a for-profit business that must consider the public good in addition to profit in its decisions. The nonprofit division of OpenAI will control and be the biggest shareholder in the PBC.

“Our mission remains the same,” Taylor noted. OpenAI’s mission is “to ensure that artificial general intelligence benefits all of humanity.”

In December, OpenAI publicly indicated in a blog post that it was thinking about making its for-profit section a PBC, but one that had complete control over OpenAI’s operations and business. The non-profit side would not oversee the for-profit, but would instead be in charge of charitable initiatives.

Taylor wrote on Monday that OpenAI chose to reverse course and have the nonprofit retain control over the for-profit business after talking to civic leaders and with the offices of the Attorney General of Delaware and the Attorney General of California.

More than 30 civic leaders, former OpenAI staffers, and Nobel laureates delivered letters to the offices of the attorneys general last month to ask that they stop OpenAI’s effort to break from its non-profit governance.

^{OpenAI CEO Sam Altman. Photographer: Nathan Laine/Bloomberg via Getty Images}

OpenAI has recently been embroiled in a legal battle with Elon Musk, who helped co-found the company and left in early 2018 following a failed bid to take it over. Musk has since filed lawsuits against OpenAI and its CEO, Sam Altman, accusing them of breaking OpenAI’s founding agreement and working to maximize profits for Microsoft instead of humanity as a whole. Microsoft has invested close to $14 billion in OpenAI.

Musk even led an unsolicited offer to buy OpenAI for $97.4 billion in February, which Altman quickly shot down on X. As of press time, Musk had yet to comment.

OpenAI started as a nonprofit in 2015 and transitioned to a “capped profit” company in 2019, meaning that the company’s profits were limited to a certain amount, with excess profits given to the nonprofit parent organization. The for-profit arm raised $1 billion from Microsoft in 2019, alongside a $100 million initial fundraising round.

In November 2022, OpenAI launched its AI chatbot ChatGPT, which was used by 500 million global weekly users as of March, up from 400 million in February.

OpenAI closed a $40 billion funding round in March, the biggest private tech deal ever, which valued the company at $300 billion.