I. Main Topic#
Trust in the power of technology and maintain a long-term investment strategy focused on Nasdaq 100 index funds, learning how to utilize stock pledging and spend wisely, especially during market fluctuations and shifts in the international situation.
II. Presentation Content#
- Market Trends and Investment Philosophy:
- AI Drives the Future: AI demand is not a bubble, but a genuine driving force behind technological advancement, promising a bull market spanning two decades. We are currently in the early stages of this growth. Morris Chang (TSMC Chairman)’s perspective and TSMC’s investments in AI corroborate this judgment. The long bull market has begun, seize the opportunity to join the wealth train.
- Market Volatility and Long-Term Investment: Market fluctuations are inherent to investing. Downswings are followed by even greater upswings. Using historical data from the Taiwan Weighted Index, Nikkei Index, and the US stock market as examples, the session illustrates the long-term market development pattern: an initial period of rapid growth followed by a period of stagnation (e.g., 32 years in Taiwan, 35 years in Japan, 24 years in the US), before entering a phase of stable growth. Therefore, overcoming panic caused by market volatility and adhering to a long-term investment strategy is crucial for ultimate success.
- Capitalism and Investment: The side effects of capitalism are wealth disparity and the exploitation of labor. Learn to operate like a capitalist and profit from investment. Hard work and saving money to buy government bonds will ultimately result in wealth erosion due to inflation.
- Benefits of Quantitative Easing: Quantitative easing is beneficial for investors, fostering a low-interest-rate environment and driving asset price appreciation. Those who fail to understand quantitative easing and complain about government money printing are often victims of capitalism, missing out on the benefits of asset appreciation.
- Characteristics of a Mature Market: Mature markets are characterized by fair, just, and transparent regulatory mechanisms, companies focused on their core businesses, and a high proportion of long-term investors and institutional holdings. The Taiwanese market is gradually maturing.
- Investment Strategies and Recommendations:
- Invest in Nasdaq 100: The session recommends investing in Nasdaq 100 index funds (QQQ), with the option to allocate to S&P 500 or high-dividend ETFs based on individual circumstances. References to Nasdaq 100 index funds globally are provided for the convenience of investors worldwide.
- Avoid Penny Stocks: Refrain from investing in penny stocks, as they generally offer low long-term returns. Real investment opportunities lie in companies that demonstrate sustained growth and lead technological advancements.
- Advantages of Stock Pledging: Stock pledging offers advantages over real estate mortgages, as stocks, unlike real estate, do not depreciate and can be held long-term, potentially allowing for “borrowing without repayment or interest” (specific instructions are available in related videos).
- Avoid Flawed Rebalancing Strategies: Avoid a 50% principal + 50% leveraged ETF rebalancing strategy, as it carries high risk and can easily deplete cash reserves during market downturns.
- Estate Planning and Stock Pledging: When engaging in stock pledging, it is advisable to diversify assets across multiple brokerage firms, pledging a portion and keeping the rest as cash to facilitate estate handling for inheritors. Cat supplemented this with a detailed explanation of the stock pledging inheritance process, emphasizing the importance of advance planning.
- Other Important Matters:
- Risk Warning and Disclaimer: The content is for informational purposes only and does not constitute investment advice. Do not remit funds to unknown accounts.
- Program Format Adjustment: The presentation content will be expanded to include material previously covered in short videos.
- QQQ Stock Selection Mechanism: Addresses audience questions regarding the QQQ stock selection mechanism, explaining the advantages of the Nasdaq exchange and why technology companies prefer listing on Nasdaq.
- Stock Pledging for Non-US Residents: Explains the regulations for non-US residents engaging in stock pledging with US brokers.
- Learning to Spend: Shares the philosophy of spending after achieving investment success, emphasizing the importance of focusing on future wealth growth and utilizing financial leverage for consumption. Don’t let wealth sit idle; learn how to use it. This point is illustrated with the example of a listener who has $4 million but doesn’t know how to spend it, calculating their potential wealth growth over 40 years and a reasonable spending level.
III. Q&A Session#
IAM:
- Shared: Expressed confusion about different types of economic crises and how the 2020-2023 pandemic period compares to previous bubbles after reading a book about economic crises.
- Question 1: Which historical economic crisis is most similar to the economic downturn during the 2020-2023 pandemic?
- Answer: The 2020-2023 pandemic was an economic shock caused by an external event, distinct from previous bubble economies. The 2000 dot-com bubble was an industry bubble with limited impact; the 2008 financial crisis resembled the 1929 Great Depression, both being asset bubble bursts, but the 2008 crisis recovered faster due to quantitative easing. The 2022 market decline was not a bubble burst, but a revaluation caused by central bank interest rate hikes.
- Question 2: What did the US do to stimulate the economy that other countries couldn’t replicate?
- Answer: The US is less constrained by fiscal discipline and is willing to borrow and issue debt, allocating funds to social welfare programs for the elderly, children, and healthcare, while guiding domestic capital towards overseas investment to mitigate inflation. Taiwan’s government was advised to learn from the US’s fiscal spending approach and guide capital towards investment, while also focusing on efficient capital utilization and building a social safety net.
- Question 3: Why are Chinese people so keen on buying houses?
- Answer: This is a vestige of the agrarian “land is wealth” mentality, which is no longer applicable today.
Eason (Doctor):
- Shared: Points to consider for Chinese investors buying Nasdaq ETFs:
- Different brokerage firms have different fee policies and financing rates; careful comparison is necessary.
- Domestic Nasdaq ETFs have premiums; buying during periods of low or negative premiums is recommended. There are no limits for buying ETFs on the exchange, but there are limits for off-exchange subscriptions.
- Recommends allocating a portion of assets to USD-denominated investments like QQQ, which can be purchased by opening brokerage accounts in Singapore or Hong Kong.
- Added: Chinese residents have a $50,000 annual foreign exchange quota for overseas investments. Hong Kong and mainland China identities have different withholding tax rates on US stock investments.
Dave:
- Question 1: Will the Nasdaq 100 index become stagnant like the Dow Jones index?
- Answer: Currently, the Nasdaq 100 is the most competitive; excessive worry about the future is unnecessary.
- Question 2: Is it feasible to only buy the top 10 companies in the Nasdaq 100 index?
- Answer: The top ten companies change frequently; individual stock selection and portfolio adjustments are too cumbersome, and returns may not be higher. Investing directly in index funds is more efficient.
- Question 3: How do VGT and XLK compare to QQQ?
- Answer: VGT and XLK track different indices than QQQ, with different constituent stocks and concentration. QQQ is more robust and has broader coverage.
Jiawen:
- Question: Can an 80% leveraged ETF + 10% cash + 10% bond portfolio be directly pledged? How is this done?
- Answer: Yes, but a small-scale trial is recommended, for instance, borrowing $200,000 against $5 million in principal, or borrowing within $1 million against $10 million. Long-term borrowing strategies should be adjusted according to circumstances. It’s possible to pledge only a portion of the stocks, leaving the remainder for additional purchases or other uses.
Peter:
- Shared: Personal investment journey, transitioning from real estate to stocks, learning about stock pledging and asset allocation.
- Question: Is there synergy between real estate and stock investment? How can real estate cash flow be used for stock investment?
- Answer: Buying a house is not recommended for young people. Real estate investment returns are lower than stocks and come with various risks (e.g., natural disasters, property taxes). Even with positive cash flow, opportunity costs should be considered; investing that capital in stocks might yield higher returns. Used Texas real estate as an example to illustrate the drawbacks of real estate investment.
Qiu Xiao:
- Question 1: What are the Canadian equivalents of US retirement accounts like IRA, Roth IRA, and 401k? Which account should cash be held in?
- Answer: Roth IRA corresponds to Canada’s TFSA, Traditional IRA to RRSP, and 401k to DCPP. The choice of retirement account for cash depends on the individual’s balance between taxable and tax-free accounts and their asset allocation strategy. One should choose to place cash in either a tax-free or taxable account based on their specific circumstances for tax optimization.
- Question 2 (Related to Eason’s question): How can one invest in Nasdaq ETFs in China, and how can quota limitations be addressed?
- Answer: Off-exchange subscriptions have quota limits, while on-exchange ETF purchases do not, but premiums should be considered. Opening multiple brokerage accounts or opening an account in Hong Kong for US stock investment can be considered.
Haoqing:
- Shared: Used the example of SpaceX launching rockets with a small team to highlight concerns about AI replacing human labor and the difficulties young people face in finding employment.
- Question: How can we address the challenge of youth unemployment in the AI era?
- Answer: Young people need to acquire AI skills to adapt to the future job market. Recommends that schools incorporate AI courses into their core curriculum, cultivating AI talent from a young age. Philosophy is an important foundational subject but should not be a primary career focus.
Jimmy:
- Shared: Discussed the changing times and the need for young people to adapt, sharing observations about the youthful demographics of Xiamen. Mentioned the importance of aligning investments with the times and shared some common misunderstandings about investing he had encountered.
- Question: What are your views on index fund investing? Is the long-term return of 0050 sufficient? What are your thoughts on individual stock investing (e.g., TSMC)?
- Answer: Index fund investing is a method accessible to the general public, but many don’t understand it and require time and experience to appreciate it. In the long run, QQQ and SPY offer higher returns and are more suitable for long-term investment. Individual stock picking demands specialized knowledge and skills and carries higher risks; it is difficult for average investors to select and hold high-quality stocks like TSMC for the long term. The key to investing is finding investment targets that can be held long-term and sticking with them.
Other Q&A:
- TQQQ Pledging: Learn about stock pledging and how to achieve interest-free borrowing through the recommended videos.
- Top 10 QQQ Holdings: Frequent trading is discouraged; holding the index fund long-term is sufficient.
- BOX vs. SWVXX: BOX is recommended for brokerage accounts to avoid dividend taxes.
- Conservative Investing: Conservative investing can involve holding cash or holding index funds long-term.
- How to Spend Money: Focus on future wealth growth and utilize financial leverage for consumption.
- Investing in US Stocks from within China: Coming to the US to invest or remitting funds to the US for investment is recommended. Consider opening an account in Hong Kong or using other compliant channels for investment.
IV. Key Takeaways#
AI demand is not a bubble; technological advancements will drive a bull market lasting 20 years. We are just at the beginning. – James
James emphasizes his belief that AI is a long-term trend and encourages investors to recognize the current market as the starting point of a significant bull run.
High returns are meaningless if the probability of success is low. – James
James reiterates that a successful investment strategy prioritizes long-term holding and consistency over chasing high returns with low success rates.
Young people need to learn AI skills to adapt to the future job market. AI courses should be core curriculum in all departments. – James
James stresses the importance of acquiring AI skills for future employment and advocates for integrating AI education into all academic disciplines.
Earning money is easy; spending it wisely is difficult. Don’t let your wealth sit idle; learn how to use it. – James
James offers a unique perspective on wealth management, urging listeners to become skilled spenders and maximize their wealth’s potential.
Governments should invest in the elderly and children, building a strong social safety net. – James
James underscores the importance of social welfare, suggesting that nations prioritize investing in the well-being of their youngest and oldest citizens.
V. Summary#
This session centers on long-term investment in the Nasdaq 100 index fund, covering market trends, investment strategies, the use of financial leverage, and personal development in the AI era. James not only shares professional investment concepts and techniques but also encourages listeners to shift their mindsets, embrace the opportunities presented by technological advancements, and learn how to better manage and utilize their wealth. He also emphasizes the government’s responsibility in social welfare development, advocating for a more robust social safety net to protect the well-being of the elderly and children. Furthermore, the session addresses the needs of Chinese investors by answering questions about accessing US markets from China and related tax implications.
Disclaimer: This article is for personal learning notes only and does not constitute any investment advice.