I. Main Topic#
This session focuses on year-end investment strategies. James emphasizes the importance of rebalancing and delves into investment philosophy, asset allocation, handling market fluctuations, and other practical investment tips. The core message is: adopt a long-term investment approach, adhere to the “buy whenever you have money, never sell” strategy, and implement a suitable asset allocation and rebalancing plan based on individual circumstances.
II. Briefing Content#
Year-End Rebalancing and Asset Allocation#
- Importance of Rebalancing: James stresses the importance of rebalancing at the end or beginning of the year. He recommends passive rebalancing, which means rebalancing when the market is performing well, to avoid panic selling during market downturns. He points out that many investors are reluctant to rebalance during market rallies, hoping to earn more, but end up succumbing to losses during declines and selling at the bottom, resulting in greater losses.
- Pledging Stocks for Tax Payment: He advises individuals with pledged stocks to borrow money for tax payments instead of selling the stocks to avoid increasing capital gains tax and to better utilize their funds. He emphasizes that under the premise of sound asset allocation and risk management, the borrowed money can be used flexibly.
- Real Estate Investment: James advises against buying real estate, believing it restricts personal freedom. He uses the example of a friend in the Bay Area selling their property to support this viewpoint, pointing out the high holding costs of real estate, including property taxes, maintenance fees, and insurance, which can put significant financial pressure on individuals.
- Children’s Education and Wealth Perspective: He suggests parents support their children’s choices, believing that happiness is more important than wealth. Children shouldn’t live for the sake of glorifying their family but should pursue happiness, serve others, and do what they love.
- 433 Asset Allocation Plan: James recommends the 433 asset allocation plan (40% QQQ, 30% TQQQ, 30% Cash) for the general public, adjustable based on individual circumstances. For retirees who are not pledging stocks, he suggests an 80/20 allocation (80% index funds, 20% cash). For investors unfamiliar with or averse to leveraged ETFs, he recommends 100% investment in QQQ or 00662.
- Taiwan’s Investment Environment Advantage: James highly praises Taiwan’s investment environment, believing it possesses cutting-edge financial tools, tax-free policies, and low interest rates, making it an ideal place for investment. He encourages Taiwanese investors to leverage this advantage.
- Mid-Life Investment Strategy: He advises middle-aged individuals, even with modest incomes, to persist in monthly investments, accumulating wealth gradually for retirement. He illustrates the returns of monthly investments of 5,000 and 10,000 at retirement with specific examples.
- Advantages of Nasdaq 100 Index Funds: James explains the rationale for investing in QQQ, stating that its constituent companies have strong profitability, focus on technology and innovation, and align with long-term human development trends. He also points out that the constituent companies of the Nasdaq 100 index have stronger profitability compared to the S&P 500.
- Investment Philosophy: He advocates for the “buy whenever you have money, never sell” strategy, ignoring short-term fluctuations and believing in the long-term upward trajectory of the market. He emphasizes that the purpose of investment is wealth appreciation, not short-term gains, and criticizes the drawbacks of short-term trading.
- The Difference Between the Rich and the Poor: James points out that the rich possess assets and credit, which they can use to “print money” through leverage for rapid wealth growth. The poor, lacking investment knowledge, keep their money in banks, missing out on wealth growth opportunities. He uses the example of Warren Buffett issuing bonds to illustrate how the rich utilize credit for investment.
- Three Contributions of Investors: First, allocating capital to the most efficient companies, promoting technological advancement; second, helping the government invest idle foreign exchange reserves; third, helping the poor activate their funds, maximizing their social value.
Other Investment Advice and Opinions#
- Don’t blindly trust the investment advice of financial advisors and banks, as they have profit motives and may recommend products beneficial to themselves, not necessarily to investors.
- Don’t believe in investment recommendations from so-called “group leaders” or random individuals. Think independently, make your own decisions, and be responsible for your investments.
- Focus on investing in broad-market passive funds in the US, such as the Nasdaq 100 Index Fund (QQQ) and the S&P 500 Index Fund (SPY). He provides codes for investing in Nasdaq 100 index funds globally.
- Avoid investing in unfamiliar assets like Bitcoin. Focus on core investment strategies to avoid distractions.
- Don’t overemphasize short-term market fluctuations and various news. Maintain an optimistic mindset and firmly believe in the long-term upward trend of the market.
III. Q&A Session#
Zhang Yong#
- Sharing: Expresses gratitude to James, shares his 15-year experience in the insurance industry, reflects on some existing problems within the industry, such as promoting low-yield financial insurance, and expresses admiration for the simplicity and effectiveness of the CLEC investment philosophy and how it can change his and his family’s financial future. He also shares his desire to help friends and family learn the CLEC investment philosophy but acknowledges the challenges in promotion.
- James’s comments: Affirms Zhang Yong’s sharing and thanks Dr. Lao Chai for the recommendation. Emphasizes the power of word-of-mouth marketing and encourages Zhang Yong to continue promoting the CLEC investment philosophy.
Mike#
- Sharing: Shares a discussion with friends in Taiwan about QQQ’s component stock adjustments and rebalancing mechanism, mentioning the Matthew effect and the idea that the strong get stronger. He also expresses surprise at the relatively small total market capitalization of QQQ.
- James’s comments: Suggests focusing on long-term performance rather than short-term fluctuations and explains that QQQ’s smaller market cap is due to the relatively low number of people who understand and invest in it.
- Question 1: The impact of QQQ component adjustments and rebalancing mechanisms on investments, and whether one should invest in the smaller 90 companies.
- James’s reply: Advises focusing on long-term performance and volatility, not short-term component adjustments. QQQ’s adjustment mechanism ensures the inclusion of the best companies, illustrated by the performance of Mega 7 and MAGS. Points out the “stronger get stronger” phenomenon among large companies and explains QQQ’s rebalancing mechanism.
- Question 2: James’s methods, tools, and experience in creating short videos, and the application of AI technology.
- James’s reply: Details the short video production process, including writing scripts, using speech recognition software, text-to-video conversion, and subtitle generation. He shares his experience with AI tools, emphasizing the importance of personal creation and the limitations of AI in emotional expression. Mentions using tools like speech recognition software, PowerDirector, and some Chinese and Taiwanese video production software.
Hui#
- Question 1: FNGS has performed better than QQQ. Can FNGS replace QQQ?
- James’s reply: No, because FNGS has excessive volatility and higher risk, illustrated by the 2000 tech bubble. Emphasizes that asset allocation should consider volatility and maximum drawdown, not just performance. In the long run, QQQ offers better stability.
- Question 2: XLG has lower volatility than QQQ and decent returns. Is it suitable for allocation?
- James’s reply: No, because XLG’s long-term performance is inferior to QQQ. He provides a performance comparison of QQQ and XLG from 2006 to the present, showing QQQ’s significantly higher returns. Emphasizes focusing on long-term performance and avoiding investments with poor long-term track records despite low short-term volatility. Investments with less than 30 years of market history are not worth discussing.
Ethan#
- Sharing: Shares his two-year experience learning and promoting the CLEC investment philosophy in China, highlighting the positive impact and challenges. He suggests domestic investors consider opening accounts in Hong Kong to invest in QQQ and shares the advantages of investing in Hong Kong.
- James’s comments: Affirms Ethan’s sharing and promotional efforts, agrees with his suggestion of opening accounts in Hong Kong, and adds to the advantages, such as access to leveraged ETFs and money market funds, making the 433 asset allocation plan more comprehensive.
Ling#
- Sharing: Shares her experience and understanding of the CLEC investment philosophy and how she applies it to life, such as educating her children. She shares a childhood story of collecting shells for money and her desire for investment.
- James’s comments: Acknowledges Ling’s sharing and praises her proactive approach.
- Question: How to pledge stocks after retirement?
- James’s reply: Explains the process of pledging stocks after retirement and emphasizes the importance of asset allocation. Suggests the 433 asset allocation plan, adjusted according to the value of the pledged stocks. Explains how to calculate borrowing limits based on the value of pledged stocks and how to add collateral.
Martin#
- Sharing: Shares his investment experience and observations in Europe and expresses envy for the US investment environment. Mentions issues such as strict regulations and heavy tax burdens in Europe.
- James’s comments: Agrees with Martin’s viewpoint, analyzes the disadvantages of the European investment environment, such as high taxes and restrictions on the tech industry, and explains his focus on the US market. Points out that European socialist ideology and wealth expropriation are detrimental to capital accumulation and economic development.
Ying#
- Sharing: Reflects on some mistakes in his investment journey, such as missing a year of market gains for a 5% fixed deposit interest rate, and shares his experience and insights on all-in investing in QQQ and TQQQ, and how he persuaded his wife to start investing.
- James’s comments: Affirms Ying’s sharing and reiterates the “buy whenever you have money, never sell” strategy and the all-in investment philosophy. Points out the importance of overcoming human weaknesses for investment success.
Pamela#
- Sharing: Shares the story of her neighbor being scammed by an accountant, reminding everyone to be cautious of investment risks and not to trust others blindly, even friends or professionals.
- James’s comments: Agrees with Pamela’s point, emphasizes the importance of improving one’s financial literacy, and advises against over-reliance on financial advisors and accountants. Points out that an accountant’s responsibility is tax filing, not financial planning, so investors should not solely rely on their investment advice.
Nick#
- Sharing: Shares his investment experience in Canada, recommends HQU, the Canadian equivalent of QQQ, and discusses using IBKR’s margin account. Highlights the challenges of investing in Canada and how to utilize IBKR for leverage.
- James’s comments: Thanks Macro for sharing and suggests that IBKR’s margin account might be an option for investors in countries without stock pledging. Recommends that investors from other countries try and provide feedback on their experience with IBKR’s margin account.
Julie#
- Question 1: Will pledging stocks affect mortgage refinancing?
- James’s reply: No, stock pledging does not appear on credit reports and will not affect mortgage refinancing rates. He advises Julie to pledge her stocks as soon as possible and not wait for interest rates to decline, as future interest rate movements are unpredictable.
- Question 2: How to use TQQQ for investment and how to balance returns and risks? How to invest the money set aside for property taxes?
- James’s reply: Suggests the 433 asset allocation plan, adjustable based on individual circumstances. Emphasizes the importance of Beta management and recommends holding leveraged ETFs in retirement accounts. He advises against investing property tax money in TQQQ, recommending instead to keep it in cash or money market funds for unexpected needs.
Other Q&A#
- James answers audience questions on topics such as 20-year investment returns, Warren Buffett’s cash holdings, account selection for funds, short video production, the impact of FNG’s bankruptcy on QQQ, simulating investments in the top ten stocks, stock pledging in Taiwan, 50/25/25 asset allocation, money market fund selection, leveraged ETF investment ratios, investment time horizons, and investment options in Canada.
IV. Key Takeaways#
Buy whenever you have money, never sell. – James
This is James’s consistent investment philosophy and the core strategy of CLEC.
Taiwan is a country with well-equipped weapons and cheap bullets. – James
James praises Taiwan’s investment environment, believing its financial tools, tax benefits, and low interest rates are highly advantageous for investors.
The most important thing in life is happiness. – James
James emphasizes that the meaning of life lies in happiness, not in working and making money for its own sake.
AI creations lack warmth. – James
James shares his experience using AI tools for short video production, highlighting the limitations of AI in conveying emotions.
You can be a benefactor to others, but whether they benefit depends on their destiny and fate. – James
James shares his understanding of wealth and life, believing that an individual’s wealth accumulation is influenced by destiny, fate, and luck, in addition to hard work.
The market has no peak, only higher highs; the market has no bottom, only a perpetual absence of a top or bottom. – James
James emphasizes the long-term upward trend of the market and advises against trying to predict market tops and bottoms.
V. Summary#
This session covered year-end rebalancing strategies, investment philosophy, the 433 asset allocation plan, CLEC short video production methods, and addressed various questions from students. James emphasized the importance of long-term investing and encouraged participants to create a reasonable asset allocation and rebalancing plan based on their individual circumstances, ignore short-term market fluctuations, and adhere to the “buy whenever you have money, never sell” principle. During the Q&A, students shared their investment experiences and concerns, raising questions about investment environments in different countries and specific investment products. James provided professional guidance and advice, helping students better understand and apply the CLEC investment philosophy.
Disclaimer: This article is for personal learning notes only and does not constitute any investment advice.