I. Topic of the Day#
The session focuses on the impending new highs anticipated in the investment market. James encourages everyone to bolster their investment confidence and enter the market early. He elaborates on various asset allocation strategies, particularly the use of leveraged funds and the significance of cash reserves. Additionally, James dives into the nature of US dollar hegemony and its implications for the global economy. He also shares his thoughts on marriage and childbearing.
II. Briefing Content#
The Market is About to Hit New Highs:
- The market is on the verge of reaching new highs. Entering early is more advantageous than waiting for the new highs to materialize.
- Earnings reports from AI and high-tech sectors are projected to surpass expectations. Market funds and corporate profits are also expected to exceed projections.
- The market consistently trends upward. Investment requires patience; wealth is worth the wait.
Interpreting the Asset Portfolio Research Paper:
- Long-term bonds carry higher risks than stocks while yielding lower returns. Investment in them is not recommended.
- QQQ offers superior returns and risk resistance compared to SPY.
- Leveraged funds (e.g., QQQ2D) are characterized by high volatility, substantial downside risk, but also significant upside potential.
- Intelligent asset allocation can achieve returns equivalent to a 100% QQQ portfolio while providing greater cash security.
- Retirees or individuals without income are advised against using leveraged funds. An 80/20 asset allocation strategy is recommended.
- Cash is the cornerstone ensuring investors can continue investing.
Additional Investment Advice and Experience Sharing:
- Retirees should claim their social security benefits as early as possible and utilize them for investments.
- Real estate is a liability; selling property for investment purposes is recommended. Avoiding mortgage loans against real estate is advised.
- Young individuals can leverage credit loans for investments, accelerating wealth accumulation.
- Exercise prudence in investments. Avoid excessive diversification or venturing into unfamiliar domains such as real estate or REITs.
- Investing in individual stocks is not advised. Opt for market capitalization-based index funds like QQQ.
- Experiencing substantial losses is a prerequisite to appreciating the allure of high returns. The market always presents risks, and one must learn to navigate them.
- Short-term safe assets (e.g., treasury bills) are essential components of an investment portfolio, aiding investors in weathering market fluctuations.
- The higher the proportion of cash or cash-equivalent assets, the greater the risk tolerance of the investment portfolio.
- Refrain from self-managing stock portfolios. The returns from most stocks fall short of those from treasury bills.
- Stock index funds constantly face future risks. Embrace risk tolerance; only by weathering the storms can one see the sunshine.
- Don’t put faith in market predictions. During market downturns, “stock gurus” often emerge, but their predictions are frequently inaccurate.
- Adhere to long-term investment principles. Avoid being swayed by short-term market fluctuations.
Marriage and Childbearing:
- Marriage serves the purpose of creating life to carry on the universe’s legacy. Loving one’s partner as one would love their own child is paramount to a successful marriage.
- Childbearing lies at the heart of life’s meaning. Young individuals should marry and have children early, unburdened by financial pressures.
- Even without marriage, childbearing should be considered. A life spent single and childless will ultimately lead to profound loneliness.
III. Q&A Session#
Mike:
- Sharing:
- Mentions the Chinese government’s strong push for policies akin to MMT (Modern Monetary Theory).
- Question 1: Taiwan Semiconductor Manufacturing Company (TSMC) is not included in the Nasdaq 100 index, and the NYSE has extended its trading hours to 22 hours, while Nasdaq hasn’t followed suit. Why?
- James’s Response: Nasdaq’s trading hours are already standard. Extending trading hours only affects after-hours trading, holding little significance for ordinary investors. TSMC’s exclusion from the Nasdaq 100 index is linked to factors such as trading costs.
- Question 2: How can MMT be explained to someone without financial expertise?
- James’s Response: James uses simple language to elucidate the relationship between government deficits and currency issuance. He asserts that governments can cover deficits by printing money without facing national bankruptcy. Using early American history and ancient barter systems as examples, he illustrates how governments utilize currency issuance to purchase goods and services, and how taxation maintains currency value. James emphasizes the essence of US dollar hegemony, highlighting that the US leverages its control over vital resource trading, like oil, to sustain the dollar’s global dominance, citing Russia’s forced use of dollars for oil purchases as an example. He also points out that the core nature of fiat currency is a representation of national sovereignty, enabling governments to mandate its use through legal means.
IAM:
- Sharing:
- Questions whether investing in QQQ also implies supporting “rogue” entities.
- After comparing returns from QQQ and its top ten constituent stocks, IAM observed higher returns from the latter, leading to confusion about the role of the remaining 90 companies.
- Question 1: Does investing in QQQ equate to supporting “rogue” entities?
- James’s Response: We, as investors, are contributors. Through our investment in QQQ, we allocate capital to the 100 companies making the most significant contributions to humanity, propelling societal progress.
- Question 2: The top ten constituent stocks of QQQ generate higher returns; what is the purpose of the other 90 companies?
- James’s Response: The composition of QQQ’s top ten holdings changes annually. Examining solely the past decade’s data is insufficient. Companies previously ranked lower have the potential to enter the top ten, underscoring the vital role played by the remaining 90 companies.
- Question 3: Are companies ranked lower in QQQ’s constituents at risk of being removed due to a decrease in their market capitalization percentage?
- James’s Response: Typically not, but QQQ mandates that the percentage of any individual constituent stock cannot exceed a specific threshold. Adjustments are made if this limit is surpassed.
- Question 4: How can one view the complete list of QQQ’s constituent companies?
- James’s Response: This information can be accessed on websites like Yahoo Finance, which displays QQQ’s holdings, or on QQQ’s official website.
Chunxia:
- Sharing:
- Shares a friend’s investment story. This friend works at Apple and previously held steadfast belief in real estate and cash investments. However, recent issues like property taxes have awakened them to the importance of QQQ. Concerns about Apple stock’s risk have led them to hesitate about stock pledges.
- Question: This friend holds a large quantity of Apple stock. How can they convert it into QQQ, and how should they approach a stock pledge?
- James’s Response:
- The maximum long-term capital gains tax is 20%, regardless of income. James recommends that this friend sell a portion of their Apple stock sooner rather than later, converting it into QQQ to mitigate individual stock risk and reduce future tax burdens.
- A gradual sale of Apple stock is advised, such as selling 10% or 20% each year or only selling the appreciated portion to minimize tax liability.
- A stock pledge can be utilized for tax payments, for instance, borrowing 20% for tax obligations while reinvesting the remaining funds to enhance investment efficiency.
- James suggests experimenting with a stock pledge, such as borrowing 2% for personal use, to gain firsthand experience with the convenience of borrowing.
- He emphasizes the critical role of cash. A higher proportion of cash or cash-equivalent assets translates to greater risk tolerance for the investment portfolio.
- James’s Response:
Jenny:
- Sharing:
- Owns multiple properties but has refrained from selling due to tax deductions and rising rental income.
- Question 1: Should she sell her properties?
- James’s Response: Real estate investments lack the return and liquidity offered by QQQ and potentially face substantial inheritance taxes in the future. Selling the properties is advised. Property taxes, maintenance costs, insurance fees, and more erode the returns from real estate investments. Moreover, real estate is illiquid, requiring time for liquidation. Properties, as inheritance, subject heirs to hefty inheritance taxes, potentially creating an insurmountable financial burden.
- Question 2: How can she convert to a Roth IRA?
- James’s Response: A Backdoor Roth IRA conversion is an option, involving initially depositing funds into a Traditional IRA and subsequently converting them to a Roth IRA.
- Question 3: Can property tax deductions and rising rental income offset the costs associated with real estate investment?
- James’s Response: The deductible amount for property taxes is limited. Moreover, income from rent increases is subject to income tax and cannot fully offset the costs tied to real estate investment.
- Question 4: Concerns about mortgages and trusts.
- James’s Response: If a mortgage is obtained under an individual’s name, even placing the property within a trust cannot circumvent inheritance taxes. Using an LLC (Limited Liability Company) for property purchase from the outset is recommended, or transferring the property into an irrevocable trust before death to avoid inheritance tax liabilities.
Professor Zhou:
- Sharing:
- Shares personal and sibling investment experiences. His sister, after experiencing investment losses, is hesitant to redeem her insurance policy. Jenny, due to returns from real estate investment, is reluctant to sell her properties. This illustrates how investors often fall prey to sunk cost and opportunity cost fallacies.
- Question: How can we enlighten ourselves and those around us to avoid such investment pitfalls?
- James’s Response: Understanding the concepts of sunk cost and opportunity cost is essential. Losses from investments should be cut promptly, avoiding attachment to past investments. Seek superior investment opportunities. While Jenny’s real estate investment generates cash flow, its return is low, and it may face high inheritance taxes in the future. Therefore, she should consider selling the property and investing in higher-yielding assets like QQQ.
Bart:
- Question: Issues connecting to the room.
- James’s Response: Recommends force-quitting the app and re-entering the room before raising a hand.
Daisy253:
- Sharing:
- New to financial management, past investments were haphazard, primarily focused on real estate and insurance.
- 45 years old, with an 18-year-old daughter and a 14-year-old son, can invest NT$80,000 monthly. NT$10,000 is allocated to children’s savings, with the remaining NT$70,000 for personal investment, aiming for rapid asset accumulation to reach NT$10 million.
- Owns a rental property generating NT$30,000-40,000 in net monthly income, with principal invested ranging from NT$2 to 3 million, and the property valued at NT$3 to 4 million.
- Children lean towards a “non-marriage” ideology, expressing no desire for offspring.
- Question: How should assets be allocated, and how can children be guided towards sound financial management principles?
- James’s Response:
- Suggests referencing the article James provided, titled “Individuals Still Some Time Away from Retirement,” and adopting a BETA 1.2 asset allocation strategy.
- Advises against giving children excessive funds at present. Instead, encourage them to save independently once they have a stable income, guiding them to establish proper financial management habits.
- Proposes incentivizing children to marry and have children by offering NT$1 million annually in the future.
- Emphasizes that 00864B cannot be replaced by 0056. Cash is cash and should not be substituted with stocks.
- Underscores the significance of marriage and childbearing, advising early marriage and parenthood, urging them not to be bound by financial anxieties.
- James’s Response:
Xie Weiya:
- Sharing:
- Recounts the story of a friend working at Apple. This friend steadfastly believed in real estate and cash as investments but recently recognized the importance of QQQ due to concerns like property taxes. However, they remain apprehensive about the risks associated with Apple stock and hesitate to engage in stock pledges.
- This friend maintains a high spending level but undoubtedly possesses the financial capacity for retirement. They simply derive great enjoyment from work.
- The friend has already contacted Lisa and is preparing for a stock pledge.
- Question: This friend holds a substantial amount of Apple stock. How can they convert it into QQQ, and how should they approach a stock pledge?
- James’s Response:
- The maximum long-term capital gains tax is 20%, independent of income. James recommends selling a portion of their Apple stock as soon as possible, converting it to QQQ to mitigate individual stock risk and reduce future tax burdens.
- A gradual sale of Apple stock is advised, such as 10% or 20% each year, or selling only the appreciated portion to minimize tax liability.
- Utilizing a stock pledge for tax payments is suggested, such as borrowing 20% for tax obligations while reinvesting the remaining funds to enhance investment efficiency.
- James encourages them to experiment with a stock pledge, perhaps borrowing 2% for personal use, to experience the convenience of borrowing firsthand.
- He highlights the vital role of cash. A higher proportion of cash or cash-equivalent assets translates to greater risk tolerance for the investment portfolio.
- James advises this friend to learn from investment approaches employed by individuals like Warren Buffett and Wei Ying-ch’ung, leveraging credit for investment purposes.
- James’s Response:
Sunny:
- Question: How should labor pension funds be withdrawn?
- James’s Response: If proficient in investment, withdrawing the entire labor pension fund at once and investing it in high-yielding assets like QQQ is recommended.
Wu Liyun:
- Question: Is NT$5 million in stocks and cash sufficient for retirement?
- James’s Response: NT$5 million in assets is insufficient to support a comfortable retirement. Withdrawing a labor pension monthly to supplement retirement income is recommended.
Nana:
- Question: Concerns regarding genetic screening.
- James’s Response: Genetic screening is recommended to identify any potential genetic defects.
College Student:
- Question: Concerns about Backdoor Roth IRA.
- James’s Response: College students, lacking income, do not require a Backdoor Roth IRA. Directly depositing funds into a Roth IRA is suitable.
Jessie:
- Sharing: Has 1099 income.
- Question: Can 1099 income be deposited into a Traditional IRA?
- James’s Response: Yes, 1099 income is eligible for deposit into a Traditional IRA. Additionally, a Backdoor Roth IRA can be executed using a spouse’s W2 income.
IV. Key Takeaways#
Young individuals should be bold in using borrowed funds for investment to accelerate wealth accumulation. – James
Young people are in their prime earning years, with steadily increasing income. They can utilize tools like credit loans to access low-cost capital for investing in high-return assets like QQQ, thereby speeding up their wealth-building journey.
Cash is the cornerstone ensuring investors can continue investing. – James
Market volatility is a constant. Maintaining sufficient cash or cash-equivalent assets helps investors navigate market fluctuations with ease, preventing panic-driven asset sales, ultimately achieving long-term investment objectives.
Exercise prudence in investments. Avoid excessive diversification or venturing into unfamiliar domains. – James
Focus investments within familiar areas. Refrain from blindly pursuing diversification or investing in unfamiliar domains, such as real estate or REITs.
The essence of US dollar hegemony lies in the US leveraging its control over vital resource trading, like oil, to sustain the dollar’s global dominance. – James
By mandating US dollar settlements for global oil transactions, the US compels other nations to hold dollar reserves, solidifying its global currency dominance.
Marriage serves the purpose of creating life to carry on the universe’s legacy. Loving one’s partner as one would love their own child is paramount to a successful marriage. – James
The significance of marriage lies in procreation and the continuation of life. Loving one’s partner deeply, treating them as one would treat their own child, is crucial for a lasting and fulfilling marriage.
Childbearing lies at the heart of life’s meaning. Young individuals should marry and have children early, unburdened by financial pressures. – James
Childbearing is inherent to human nature and the perpetuation of life. Young people should courageously embrace the responsibility of parenthood, refusing to be deterred by financial concerns.
Investors often fall prey to sunk cost and opportunity cost fallacies. – Professor Zhou
Sunk costs refer to incurred expenses that are irretrievable, such as purchased stocks or real estate. Opportunity cost represents the potential gains foregone by choosing one investment over other available options. During decision-making, investors should not be swayed by sunk costs; instead, they should prioritize opportunity cost, selecting investments offering higher returns.
V. Conclusion#
This session revolves around the anticipated new highs in the investment market. James encourages listeners to solidify their investment confidence and enter the market promptly. He meticulously explains various asset allocation strategies, emphasizing the use of leveraged funds and the paramount importance of cash reserves. He also delves into the nature of US dollar hegemony and its global economic implications, sharing his personal views on marriage and childbearing. The Q&A segment addresses questions encompassing asset allocation, stock pledges, retirement planning, investment strategies, and more, making it a content-rich and insightful session.