I. Theme of the Episode#
The theme of this episode is “Investing and Financial Management, Wealth is a Gift.” The core viewpoints are: Wealth is innate, but one must be informed to realize it; investing and financial management is an important way to accumulate wealth; index investing is an effective method to achieve long-term stable growth; rational asset allocation and risk control are the keys to investment success; and overcoming psychological barriers in investment and solidifying the long-term investment philosophy are crucial to ultimately achieving financial freedom.
II. Summary of the Briefing#
- Wealth is a Gift: Wealth is innate, and being informed of this fact makes a huge difference. While successful entrepreneurs like Elon Musk are a minority, most people need to be told that “wealth is a gift,” and they need to learn how to invest and manage their finances to achieve wealth growth.
- The Power of Index Investing and Compound Interest: Index investing is an effective way to achieve long-term stable returns, and its compounding effect is astonishing. For example, investing $1,500 per month for 40 years with a 14% annualized return will yield $2.6 million. Even small amounts of money can accumulate considerable wealth through consistent long-term investment.
- High Risk, High Return?: High risk doesn’t necessarily lead to high returns. Whether you can bear the risk determines whether you can ultimately achieve high returns. Don’t overestimate your risk tolerance. Your risk appetite should be determined by an asset allocation that you can withstand even if your investment goes to zero. For example, if you cannot afford the risk of TQQQ going to zero, you should not invest in TQQQ.
- Choosing Investment Targets: It is recommended to invest in the global Nasdaq 100 index fund (QQQ). Those with insufficient funds or who are already retired can consider investing in SPY or high-dividend ETFs. Avoid investing in individual stocks because they tend to disappear over the long term, while index funds can continue to exist. The half-life of individual stocks is 10 years; out of 100 stocks, there may be less than three left after 50 years.
- Investment Mindset: The market will eventually rise, and investment requires patience. Always stay optimistic, even if the investment goes to zero. Learning about investing and financial management requires continuous thinking, like peeling an onion, layer by layer, to elevate the energy of the spiritual level. Investing is like the Yellow Mountain, eternally unchanging, yet different every day; every learning experience will bring new insights.
- Asset Allocation: Asset allocation is like building a house; it is a big project that requires comprehensive planning, not something simple. It is necessary to consider many factors, such as whether you are retired, your age, income, debt, and cash flow, to formulate a reasonable asset allocation plan. You need to carefully study the articles and videos on asset allocation provided by James to develop a plan that suits you.
- Do Not Blindly Trust External Information: Financial professionals often only consider their interests, so do not easily believe their advice. Think independently, study carefully, and do not be swayed by external information and noise. Most of the outside information is garbage; do not be affected by it, focus on learning James’ investment philosophy.
- Balancing Risk and Reward: Do not excessively pursue high returns or completely risk-free investments; balance risk and reward. Avoid changing investment strategies easily to prevent additional costs due to frequent trading. James’ investment methods can guarantee asset appreciation and relative safety, avoiding extreme situations.
III. Q&A Session#
IM:
Sharing: Learning about investment is like peeling an onion; at first, the amount of information is overwhelming, but as you learn more, you will gradually understand the core idea and ultimately reach the realm of “the great Dao is simple.”
Question 1: What do you think about the idea that “investing is simple”?
- James’ Response: Such views often mistake ignorance for inaction and do not truly understand the complexity and risks of investment.
Question 2: How should we communicate with friends who don’t understand index investing?
- James’ Response: You can start by briefly introducing the concept and advantages of index investing and suggest that they watch related videos to learn. Don’t force them to accept it, everyone has their own choices. Just like preaching, we can only try our best to spread the message; whether it’s ultimately accepted depends on the individual.
LAN:
Question 1: How to calculate Beta? What is the actual Beta value of a leveraged ETF?
- James’ Response: You can refer to the link to the article on Beta calculation on the message board. The actual Beta value of a leveraged ETF may deviate from the theoretical value due to factors such as market volatility and friction costs. When market volatility is large, the wear and tear of leveraged ETFs will be more serious, resulting in an actual Beta value lower than the theoretical value.
Question 2: Why is there a huge difference in final return between scenario 3 and scenario 4.1 in the 005 topic?
- James’ Response: Scenario 4.1 is where no money is withdrawn from the investment, so the final return will be higher.
Question 3: How to adjust Beta in a rising market?
- James’ Response: The adjustment of Beta should be determined by your own risk tolerance, not by the market trend. Do not try to predict the market, just keep a fixed Beta value.
Question 4: For investments in Taiwan, should I choose Q2D or 00670L?
- James’ Response: 00670L is recommended because it includes New Taiwan dollar hedging, which can reduce the risk caused by exchange rate fluctuations. Don’t change investment targets frequently, choose one that suits you and hold it for the long term.
Nai Xin:
- Sharing: Wealth is a gift, just as self-confidence is a gift; everyone has potential, but it needs to be stimulated. The key to investing and financial management lies in learning. Once you have mastered the correct investment method, you can focus on your own career and life and let wealth grow naturally over time. Overcome fear, build confidence, and you can realize your potential, gain wealth, and achieve success.
Jason:
- Sharing: Understanding “buy whenever you have money,” but still finding it difficult to overcome psychological fluctuations when the market rises or falls sharply.
- James’ Response: Overcoming psychological fluctuations takes time and experience. You can try to make a small number of trades, experience the impact of market fluctuations, and gradually adapt to market changes.
- IM Supplement: You can overcome psychological barriers by imagining starting to invest two years later and understanding that “money arrives at different points in time.”Don’t worry about buying at the lowest point; as long as you stick to long-term investment, you can get good returns.
Hai Rui Ji:
Sharing:
- Thank you James for selflessly sharing your investment philosophy; students learn from each other and make progress together.
- James’ investment philosophy requires continuous learning and understanding to grasp it fully. “Never sell” does not mean you cannot sell, but that you should develop a reasonable investment strategy based on your own situation. ** “Never sell” refers to mentally ignoring market fluctuations and adhering to a long-term investment philosophy.**
- Investment philosophy needs to keep pace with the times and adjust investment strategies according to changes in the environment.
Question: Already answered in the video.
Li Zi:
- Sharing: To overcome psychological barriers to investment, manage accounts separately, using one part for long-term investment and the other for tentative operations, such as selling covered calls. This satisfies the desire to trade and avoids losses due to frequent trading.
- James’ Response: You only know what is best after you have experienced it. Experience in trading can lead to a firmer commitment to a long-term investment strategy. Trying different trading strategies can help you understand the advantages of long-term investment and ultimately achieve the state of “daily reduction for the Dao.”
T:
Question 1: Why has the capital market in mainland China performed poorly for a long time?
- James’ Response: Emerging markets take time to mature. The Chinese market is like the Taiwanese market 50 years ago. It has the potential to rise in the long term, but its return may be lower than that of the US market. Investment should focus on sustainable development markets. The US market has advantages in terms of systems and industries.
Question 2: Under foreign exchange control, how do I invest in US index funds? Are there any risks?
- James’ Response: You can invest by purchasing ETFs listed in China that track US index funds, such as 513100. Foreign exchange controls mainly restrict the physical flow of funds, and buying ETFs is not restricted. The current scale of such investment is small and will not trigger a quota limit. Even with foreign exchange control, it is still possible to allocate global assets through legal channels.
IV. Key Takeaways#
Wealth is a Gift – James
Everyone has the potential for wealth, but they must be informed to realize it and learn how to invest and manage their finances to achieve wealth growth.
Learning Increases Daily, the Dao Decreases Daily – IM
Learning about investing and financial management is a process of continuous improvement. At first, you will be exposed to a large amount of information, but as your understanding deepens, you will gradually simplify your investment strategy and eventually reach the state of “the great Dao is simple.”
The Difficult to Return to After Seeing a Vast Ocean – Li Zi & James
Only after experiencing something can you know what is best. In investing, only after actually operating and experiencing market fluctuations and the impact of different investment strategies can you more firmly choose the long-term investment strategy that suits you.
The More Money You Borrow, the More Money You Have – James
Understand and control risk, not avoid it. Understanding how to use leverage can accelerate wealth growth, but only with proper risk management, such as building a solid asset allocation.
Cash is Air – James
Cash is very important and you must keep enough cash to deal with market fluctuations and emergencies.
V. Summary#
This live stream focused on the theme of “Wealth is a gift.” James explained the importance of investing and financial management, the advantages of index investing, the relationship between risk tolerance and investment returns, and how to conduct reasonable asset allocation in a simple and profound way. During the Q&A session, students actively questioned their own issues and confusions. James patiently and meticulously answered them by combining practical cases and his own experience, helping the students better understand and master the knowledge and methods of investing and financial management. He also guided the students to overcome psychological barriers in investments, establish a firm long-term investment philosophy, and ultimately achieve financial freedom.