I. Main Topic#
The market continues to reach new highs. Investing doesn’t require constant attention; the key is to stick to a long-term investment strategy, maintain a well-diversified asset allocation, and remain patient. The real risk isn’t short-term volatility, but the inability to accumulate sufficient wealth over the long term, and not knowing how to utilize accumulated wealth effectively. Furthermore, it’s crucial to be wary of various financial traps and maintain rational investment practices.
II. Briefing Content#
Market Trends and Investment Strategies#
- The market is at a new high. Don’t waste time over-analyzing; stick to long-term investing, buy and hold. The market generally trends upwards; instead of predicting pullbacks, enter the market early.
- Investing doesn’t require excessive time. After placing your order, step away and let time work its magic through compounding.
- Be wary of scams. Don’t trust any investment advice that guarantees stable returns or daily gains. Be extremely cautious of “guaranteed profit” schemes.
- Ignore the advice of financial advisors and insurance agents. They rarely have the investor’s best interests at heart and are often motivated by their own profits. Many financial products are designed to benefit the seller, not the investor.
- Investing isn’t simple. Even asset allocation within a Nasdaq 100 index fund requires in-depth research and adjustments based on individual circumstances.
- Investors should always remain optimistic. The market will eventually rise. Patiently await wealth accumulation. Time is an investor’s friend.
Risk Management and Wealth Goals#
- The biggest risks are not market fluctuations, but the failure to accumulate sufficient wealth over the long term and not knowing how to utilize accumulated wealth effectively. The ultimate goal of investing is to achieve financial freedom and enjoy life.
- Avoid the instinctive reaction to short-term losses. Overcome fear and don’t panic sell. Market downturns are normal and present buying opportunities.
- View bear markets as opportunities. Buying low translates to higher future returns. Learn to think contrarily and utilize market fluctuations for mindless rebalancing.
- The investment objective is to mitigate the risk of financial hardship, not to maximize returns. A sound investment strategy is more crucial than chasing high returns.
- Choose a simple, low-cost, passive index investment strategy, such as a Nasdaq 100 index fund, and hold a portion in cash to maintain psychological balance and cope with market volatility.
- Holding safe assets (like certificates of deposit and money market funds) can mitigate short-term risks, stabilize emotions during market fluctuations, and provide a sense of security.
- The proportion of safe assets held should be adjusted based on age and risk tolerance. Retirees are advised to hold cash equivalent to 5 years of living expenses, while those yet to retire can hold more.
- Young people should prioritize term life insurance to protect their families and avoid other types of insurance to prevent being misled by insurance companies.
Other Advice#
- Be skeptical of all information, especially regarding money. Learn to think independently and don’t blindly trust so-called “experts.”
- Don’t buy insurance or annuities for investment purposes. The essence of insurance is protection, not investment; annuities have high fees and low returns.
- Don’t disclose your wealth to your children. Encourage them to strive independently and create wealth through their own abilities.
- Engage in rational discussions, view investments with a mathematical mindset, and analyze investment results with data.
- Avoid over-investing in real estate. Maintain ample cash flow. Real estate has poor liquidity and is difficult to liquidate.
III. Q&A Session#
Ke An#
- Sharing: 16 years old, living in the Netherlands. Thanked James for his investment methods, which allowed her parents to take her on trips throughout Europe. She also shared that she finds her business management classes easier to understand than her classmates, thanks to James’s teachings.
- James’s comments: Praised Ke An’s travel experiences and learning attitude, encouraging her to continue learning and explore her career interests.
- Question: Concerned about starting investing late, wants to open an account and start investing soon. Has saved NT$200,000 and plans to invest in 00662.
- James’s reply: Affirmed the advantage of starting to invest at 16, emphasizing that time is the greatest asset. Advised her to balance learning, life, and investment, and to enjoy her youth.
Ji Ya#
- Question: Has savings equivalent to 8 years of living expenses. Working 40 hours a week only covers expenses. Driving for Uber could increase income but wants more free time. Unsure how to balance work and life and whether early retirement is possible. Is currently 42 years old.
- James’s reply: In 15 years, the 8x annual expenses will grow to 50x due to compounding, enabling retirement. Suggested a BETA of 1.2 to increase investment returns, or driving for Uber a few hours a week to accelerate wealth accumulation and achieve early retirement. Emphasized that pursuing early retirement shouldn’t be the sole focus and that finding a balance between work and life is important. Health is paramount.
Chun Xia#
- Question 1: Plans to invest a loan of NT$7 million and aims for a return of NT$20-30 million within 10-15 years. Should the investment be lump-sum or staggered? Has additional monthly income of NT$30,000-40,000.
- James’s reply: Based on a 14% annualized return, there will be NT$67 million after 15 years, reaching the NT$20-30 million target within 10 years. Recommended a lump-sum investment to capitalize on market growth.
- Question 2: Wants to share investment philosophy with family in China. Inquired about account opening procedures and trading software options in China.
- James’s reply: Suggested Chun Xia email him for an introduction to a leader familiar with the Chinese market who can provide specific guidance on account opening and software selection.
Peter#
- Question: How to persuade family members to invest? They’ve heard the advice but haven’t acted, finding it difficult.
- James’s reply: Acknowledged the “familiarity bias” that makes it difficult for family members to accept advice. Suggested Peter lead by example, sharing his investment philosophy and success stories. Encourage them to start with a small investment, like $100,000 in QQQ, and offer to cover any losses to build their confidence. He particularly recommended starting with retirement accounts and broad market index funds.
Ling#
- Question: Regarding children’s education fund investment plan. Initially planned to invest all children’s allowances in 00662 with monthly contributions, but has doubts after hearing James’s lessons on children’s education. Should the plan be adjusted?
- James’s reply: Advised prioritizing personal wealth accumulation and achieving financial freedom before focusing on children’s education funds. Suggested redirecting the monthly contributions to personal investments to accelerate wealth growth. Income like Lunar New Year red envelopes can continue to be invested for the children.
Dennis#
- Sharing 1: An insurance agent passed away due to financial problems, highlighting the importance of risk management, even for insurance professionals.
- Sharing 2: Family recommended a video by an MIT professor about national debt, who argued that national debt is another form of taxation.
- James’s reply: Explained Modern Monetary Theory (MMT). U.S. national debt represents savings held by the public. The U.S. government’s debt is repaid by Americans. The value of the dollar lies in its credit and the goods and services it can buy, not the level of debt. The government can stimulate the economy by issuing national debt without worrying about excessive debt. Issuing national debt and lottery tickets are essentially providing investment channels, not just taxation.
- Sharing 3: Wants to learn more about MMT.
- James’s reply: Recommended Dennis search for books and materials on “Modern Monetary Theory” for a deeper understanding of its principles and applications.
Hao Xin#
- Question: Are the P/E ratios of QQQ and SPY overvalued? How to deal with market fluctuations? Concerned that a prolonged stagnant market will cause borrowing interest to exceed cash reserves.
- James’s reply: P/E ratios are unreliable and unpredictable. Recommended passive rebalancing. Cash reserves will increase as the market rises; reinvest during downturns. Suggested simulating the 2000-2009 market scenario to test the robustness of the asset allocation strategy. If the market does stagnate for a long time, adjust lifestyle, reduce expenses, or consider other income sources. In the long run, the market will always go up; maintain confidence.
- Sharing: Received a suspected scam call where the caller claimed to be from the bank and requested personal information verification.
- James’s comments: Commended Hao Xin’s vigilance and reminded everyone to be cautious of calls requesting personal information to avoid being scammed.
IV. Key Takeaways#
“The first investment earns the most; that performance can never be replicated.” – Monica
Monica’s statement highlights the importance of early investment and the difficulty of timing the market. Early investments enjoy higher returns, and over time, even with the same investment strategy, it’s hard to replicate those early gains.
“The U.S. government’s debt is the public’s savings.” – James
This perspective challenges the traditional understanding of national debt, emphasizing the unique nature of U.S. Treasury bonds. U.S. national debt represents dollar-denominated assets held by U.S. citizens and global investors, reflecting confidence in the American economy.
“Survival is key, not maximizing returns.” – James
This statement pinpoints the core goal of investing, reminding investors not to be tempted by high returns at the expense of risk management. Preserving capital is more important than chasing high returns during market fluctuations.
“Time is an investor’s friend.” – James
Only long-term investments can fully benefit from the power of compounding. Time is an investor’s best ally.
V. Summary#
In this episode, James once again emphasized the importance of long-term investing and risk management, offering personalized advice tailored to each student’s circumstances. His clear explanations helped students better understand market trends, investment strategies, and the essence of wealth management. He also shared his understanding of Modern Monetary Theory (MMT) and awareness of various financial traps, reminding investors to remain rational and avoid blindly chasing high returns.
Disclaimer: This article is for personal learning notes only and does not constitute any investment advice.