Part One
Part Two
I. Main Topic of the Session#
Investment mindset and strategy adjustments amidst year-end market volatility, along with comprehensive reflections on personal life and financial health.
II. Presentation Content#
Market Volatility and Investment Mindset#
- The only constant in the market is volatility. Investors should ignore market fluctuations, international situations, market analysis, financial reports, and economic situations, and focus on long-term investment.
- Disclaimer: The content of the COC investment and financial management channel is for educational purposes only and does not constitute investment advice. Investment involves high risks, and proper asset allocation is necessary.
- Newcomers should watch the YouTube episode 00451 “Investment Lecture Worth 100 Million” and also find related content on Bilibili and podcasts.
- Investing requires independent thinking. Do not blindly follow advice or join any groups to avoid being deceived.
- The Nasdaq 100 index fund is recommended as the only focused fund, with others being supplementary.
- The handout includes information on Nasdaq 100 index funds worldwide, including leveraged funds, and information on retirement accounts in various regions, with content continuously updated.
- The “Investment Lecture Worth 100 Million” video is the most important. Investors should always be extremely optimistic; the market will eventually rise and reach new highs.
UK and European Financial Information#
- Showcasing information provided by a UK friend regarding UK investments, loans, retirement accounts, ETFs, and insurance companies, particularly information on 2x leveraged funds on the PEA website.
US-China Trade War and Globalization#
- Issues like the US-China trade war and tariffs do not affect technological advancements and the innovation of American companies, thus having little impact on index investing.
Risks and Returns of Leveraged Funds#
- The risk of a 2x leveraged fund is not simply double, and the return is not twice the annualized rate of return, but approximately 1.4 times.
- The annualized return of QQQ over 20 years is 14%, while QLD’s is 19.6%. QLD’s total return over 20 years is 2.6 times that of QQQ, far exceeding double.
- Combining leveraged funds with cash can reduce risk and increase returns.
Investment Wisdom and Market Essence#
- The market is always smarter than individual investors. Stock picking and timing the market are futile.
- In a bull market, many “gurus” emerge, but they disappear when the market falls; this is a market norm.
- Controlling the major stocks on Wall Street means controlling the world.
Investment Sharing and Personal Insights#
- Investment sharers need to provide clear, diverse, and universally applicable investment methods and benefit from them.
- Buffett’s investment philosophy emphasizes long-term investment, perfecting the investment system.
- Understanding the essence of finance, economics, accounting, and logic helps resist external interference and adhere to index investing.
- Asset allocation is simplified into two types: 433 (conservative) and 442 (aggressive), pursuing safety rather than high returns, with cash being a safe asset.
Finance and Monetary Theory#
- The foundation of capitalism is currency. Understanding monetary theory is crucial to understanding finance, investment, and the economy.
- The status of the US dollar as the world’s reserve currency determines the subordinate status of other countries, especially those holding large amounts of US dollar foreign exchange reserves.
- China and other emerging countries are trying to break away from their dependence on the US dollar to escape US control.
Life’s Meaning and Happiness#
- The happiest thing in life is giving. Happiness is a human right. Sharing and giving energy on a spiritual level can bring more happiness than material things.
Extremes of Capitalism and Social Issues#
- Capitalism will lead to an expansion of the wealth gap. The development of robots will make spiritual education even more important.
- Systemic discrimination exists in society, leading to a vicious cycle of poverty. Our goal is to help eliminate poverty as much as possible.
US Accounting System and Social Phenomena#
- The US accounting system is very complete. Phenomena like “zero-dollar shopping” are the result of accounting costs and leftist thinking, and there is no need to over-interpret them.
Wealth and Government Relations#
- Wealthy individuals escape government control by paying taxes, while the poor are trapped.
- Legitimate tax avoidance is an important topic.
Personalization of Diet and Asset Allocation#
- Both diet and asset allocation should be customized according to individual circumstances and cannot be generalized.
III. Q&A Session#
Zhang Yong#
- Sharing: The chaos in the domestic insurance industry, where banks lure customers into buying insurance with high commissions, is even linked to the performance evaluations of customer managers. Many customers do not understand investments and choose low-yield or even risky insurance products to preserve their capital. He also shared a case of a friend who was defrauded of over 1.7 million in a romance scam, illustrating the complexity of the domestic financial environment.
- Teacher James’s comment: The US financial system strictly separates life insurance from other financial businesses, and there is no such thing as banks selling insurance. The financial supervision in China and Taiwan is problematic. Banks should focus on deposit and loan business and should not be involved in insurance and investment. This chaos will ultimately harm the interests of emerging countries.
- Question: Does Teacher James share content each week based on reflections on the same theme, or does he summarize viewpoints from reading many books?
- Teacher James’s reply: In addition to reading a lot of books, more importantly, independent thinking and critical thinking are involved. The formation of monetary theory stems from thinking about the nature of capitalism, and the content of the handouts mostly comes from students’ questions and his own reflections. This information is endless. To be an excellent sharer, one needs to have basic knowledge, thinking ability, and originality.
Xiao Cai#
- Sharing 1: Took over the family food business ten years ago when the company’s assets and liabilities were zero. After ten years of operation, the company turned a profit, and its current value (including real estate) is about 300 million NTD. Over the past decade, he distributed about 200 million NTD of revenue to his family, retaining 100 million NTD for loan purposes. Currently, he has invested 80 million in 00662 (a 2x leveraged Nasdaq 100 index ETF) and 20 million in 00631L (Taiwan’s 50 Positive 2 ETF).
- Teacher James’s comment: None
- Question 1: The bank will allocate a loan of 60 million NTD on January 1st. Should this fund be used to buy 00662 all at once, or should he wait for a 20% market drop before buying? Also, if the market crashes and 00662 and 00631L go to zero, how will he deal with it?
- Teacher James’s reply: If the market goes to zero, the company can still make loan payments. The worst-case scenario is that the land is auctioned off, and he can still get tens of millions. Since the worst has been considered, how to buy the 60 million is not important. If it were me, I would buy it all on Monday. If you choose to wait for a 20% drop before buying, you can follow your plan and inform everyone when you buy.
- Question 2: How to maintain good health?
- Teacher James’s reply: Regular comprehensive physical examinations are necessary. I have been doing annual check-ups since my thirties. Wellness, like asset allocation, needs to be personalized. The advice I can give everyone now is to eat well, sleep well, and don’t worry. What to eat specifically, what exercises to do, etc., need to be decided according to personal circumstances and cannot be given a unified recommendation.
- Question 3: What are your views on Taiwan’s politics and how to support political parties?
- Teacher James’s reply: Regarding politics and religious beliefs, everyone has different positions and viewpoints. Discussing these issues in the classroom is meaningless and fruitless. It is recommended that students do not discuss these topics in the classroom and keep their opinions to themselves.
- Question 4: How to preserve assets in response to potential cross-strait issues? He currently has about 200 million NTD in assets in Taiwan and a house worth 8 million in Vietnam. How should he allocate his assets?
- Teacher James’s reply: If you can’t sleep due to worries about cross-strait issues, it’s recommended to immigrate as soon as possible. If you choose to stay in Taiwan, you need to make some decisions, such as whether to close the company. If the 40 employees are causing you distress, consider closing the company and compensating them. Life decisions should be decisive, not prolonged. Be responsible for your own happiness.
- Additional question: How to get rid of the shackles of the family business?
- Teacher James’s reply: You have managed the company very well. The choice is your life. Do whatever makes you happy. If the family business makes you unhappy, shut it down and give the employees a good severance package. Consider your own life, not your father’s. If your father’s business is no longer your concern, and it’s not bringing you happiness, then let it go.
- Repeated emphasis: Believes that apart from investment and financial management, health is the most important asset in life, and cited the example of “Yu (Yuan) Lingqi” to emphasize the importance of regular health check-ups, hoping the channel will pay more attention to health issues.
- Teacher James’s reply: Health is very important. Everyone’s health condition is different, and it is impossible to provide a unified recommendation. Everyone needs to pay attention to and manage their health according to their own situation.
Lare#
- Question: Based in Canada, unable to leverage stocks. If income decreases in a certain year, and the tax rate drops from 32% to 24%, is it worth selling some stocks to increase income to the 32% tax bracket to improve the future cost basis?
- Teacher James’s reply: It is not recommended to sell stocks because selling incurs taxes. Canada’s tax system is very unfavorable for stock investments. When immigrating, consider future generations and choose countries with development prospects. In Canada, you can consider using an IB account for loans, but this will face inheritance tax issues, possibly up to 40%. Therefore, when planning estates, minimize assets in IB accounts. In the long run, trusts can be used to avoid taxes. It is currently not recommended to sell stocks for short-term tax benefits. Consider selling after retirement when income is lower.
- Additional explanation: IB accounts have a low financing ratio for Canadian stocks, only up to 50%.
- Teacher James’s addition: You can borrow 40% first, and add more if needed. But ultimately, there will still be inheritance tax issues.
Terry#
- Question 1: How to transfer taxable accounts or retirement accounts to tax-free accounts, such as Roth IRA? What are the specific steps?
- Teacher James’s reply: If it’s within the same brokerage, such as Charles Schwab, you can fill out a form online directly. If it’s at different brokerages, you need to contact the brokerage to obtain and fill out a form. For specific steps, you can refer to the previously released video “Investment and Financial Management Tips 26: How to Transfer from a Traditional Taxable Account to a Roth IRA Online at 722.”
- Question 2: What is your view on Crypto, and will QQQ include Crypto companies in the future?
- Teacher James’s reply: I don’t know much about Crypto and am not sure if it will exist forever, so I won’t answer.
IM#
- Sharing: Through learning, I realized that my investment was too risky, and emergency funds should not all be invested in QQQ. Now I have withdrawn 36 months of emergency funds back to the Money Market Fund. When starting with small funds, one should focus on their main job and increase income sources. After investing in index funds, my mindset changed, and I began to focus on the importance of timing. Therefore, I started to focus on diet, fitness, and learning from the experiences of long-lived people around me. In addition, I learned from investing to avoid risks, such as giving up dangerous activities like diving.
- Teacher James’s comment: It is wise to learn from the experiences of others. Being overly aggressive is human nature, but it is important to realize and correct it in time. It is wrong to increase positions when the market is rising and to be fearful when it is falling. It should be the other way around. Emergency funds should not be added to.
- Question: How to judge whether you are being too adventurous? For example, increasing the leverage ratio of asset allocation from 1.0 to 1.8 when stocks are rising.
- Teacher James’s reply: This is also a necessary evil. Now that you realize it’s not right, you can start to retreat, or when it rises, you buy in, and when it falls, you get scared. Oh, what to do? Then start to retreat. Once you have learned, don’t do it again. So, as Buffett said, when others are greedy, you should be fearful, and when others are fearful, you should be greedy. That’s the right pace. So, when you want to increase your position in the future, it should be when others are fearful. That’s how I do it. This emergency fund should not be increased. Regardless of whether the market is rising or falling, you should not add to this cervical spine disease. How could you add to it? This is not allowed. Then, if you use our asset allocation, when the market falls, you automatically buy in for one year, and when the market rises, you automatically withdraw from the leveraged fund. This is passive, and this has already achieved the practice of being greedy when others are fearful and being fearful when others are greedy.
Patty#
- Question: The relationship between the asset-backed ratio and cash reserves. If asset-backed financing is carried out, how to ensure that the cash on hand is greater than the pledged amount? For example, with assets of 1 million, allocated according to the 721 ratio, 200,000 is pledged, but 100,000 in cash cannot be moved. Is it necessary to balance for one or two years to accumulate 200,000 in cash before making a pledge?
- Teacher James’s reply: You cannot borrow 200,000 all at once; you can only borrow 2% per year. When conducting asset-backed financing, the asset allocation should be 433, not 721. Borrow 2% each year and conduct “smart rebalancing.” Even if the market falls, you will not be forced to liquidate. The cash ratio may be lower than the loan ratio in extreme cases (such as a continuous 10-year decline), but since the total asset value is still greater than the debt, there will be no problem.
Mike#
- Sharing: A friend’s experience. The friend took over his father’s family business and eventually had health problems due to overwork. He later sold the company for over 600 million and invested the funds in QQQ. He is now very happy.
- Teacher James’s comment: None
- Question 1: Regarding 401k and RMD. Previously, company stock was placed in a 401k, and now it has a high value, facing the RMD issue. After Trump takes office, is it possible to abolish RMD and change it to a 15% capital gains tax?
- Teacher James’s reply: This possibility is extremely slim. The government is unlikely to give up the tax revenue brought by RMD.
- Question 2: Regarding the Debt to Equity Ratio of companies. It is found that there are large differences in the debt-to-equity ratios of Buffett and many technology companies. Is this related to the nature of the industry? For example, the debt-to-equity ratio of software companies is usually low, while that of hardware companies like Apple is high. So, for individuals, is it a healthy level to control the debt-to-equity ratio at 0.2?
- Teacher James’s reply: The higher the debt-to-equity ratio, the higher the ROE usually is, but this needs to be based on healthy debt. Healthy debt refers to debt that can be repaid through its own operating activities, such as credit, stock-backed loans (under safe circumstances), and mortgages (that can be repaid). Apple’s debt-to-equity ratio is high because it borrows a lot of money to pay dividends and places assets overseas. In addition, it has a large amount of accounts payable. Therefore, it cannot be simply considered that a high debt-to-equity ratio is bad. It is necessary to analyze the nature and safety of the debt specifically.
- Question 3: What are your thoughts on the Jetson Orin product launched by Nvidia? This product is mainly for the personal AI market, is cheap, can use ChatGPT to generate code, and runs locally, thereby creating your own AI database.
- Teacher James’s reply: I don’t know much about this product. Our AI is mainly trained using ChatGPT as a personal assistant. Currently, I don’t use other devices for personal AI.
IV. Highlighted Quotes#
The only constant in the market is volatility. – Teacher James
This viewpoint emphasizes the normality of market fluctuations. Investors should be mentally prepared and not be affected by short-term market fluctuations.
Investing requires independent thinking. Do not blindly follow advice or join any groups to avoid being deceived. – Teacher James
This viewpoint emphasizes the importance of independent thinking in investing. Investors should make investment decisions based on their own judgment rather than blindly following others’ opinions or joining unreliable investment groups.
The happiest thing in life is giving. Happiness is a human right. Sharing and giving energy on a spiritual level can bring more happiness than material things. – Teacher James
This viewpoint emphasizes that spiritual pursuits are more important than material ones. Giving and sharing can bring greater happiness.
If you, as a commercial bank, do lending well, then focus on lending. Deposits are 2%. Then your lending is 3.5%, 4%. You just make that 2% difference. This is what a commercial bank should do. Commerce should not touch insurance. – Teacher James
This viewpoint points out that commercial banks should focus on deposit and loan business instead of being involved in areas like insurance, which not only violates financial regulations but also harms the interests of customers.
Happiness is a human right. If you are alive, you should be happy. If you live so miserably, why bother? – Teacher James
This viewpoint reminds everyone to pursue happiness and not sacrifice their happiness for money or other goals.
Impotence is also a kind of strength because accepting one’s own impotence and acknowledging one’s own impotence is also a kind of strength. – Teacher James
This viewpoint expresses a broad-minded attitude towards life. Acknowledging one’s limitations is not a bad thing; instead, it can make one more relaxed.
The truly wealthy are those who foresee a future eternally disconnected from government oversight, swiftly settling their dues to escape the clutches of authority. – Teacher James
This perspective highlights how affluent individuals utilize legitimate tax avoidance strategies to minimize governmental control over their wealth.
Learning from the experiences of others is a wise approach. – IM
This viewpoint emphasizes the importance of learning and drawing lessons from others’ experiences, which can help us avoid making the same mistakes.
When others are greedy, you should be fearful; when others are fearful, you should be greedy. – Teacher James, quoting Buffett
This is a very important principle in investing, namely, contrarian thinking, staying calm when the market is frenzied and looking for opportunities when the market is panicking.
Just be happy. There’s nothing to it, nothing to fight for, no particular meaning, nothing that grand or great. – Teacher James
This viewpoint expresses a detached attitude towards life. Don’t put too much pressure on yourself; learn to enjoy life.
Don’t wait until it’s too late, leaving no time for regrets. – Teacher James
Drawing on investment principles, this perspective underscores the importance of early health screenings, urging not to wait until problems arise before regretting, echoing Xiao Cai’s shared viewpoint.
We investors are always extremely optimistic. Market fluctuations should be ignored. The market will eventually rise and always reach new highs. – Teacher James
This viewpoint emphasizes the optimistic attitude towards the long-term trend of the market and the neglect of short-term fluctuations, demonstrating the proper mindset for long-term investors.
V. Summary#
The content of this episode of the investment and financial management channel is rich. Teacher James not only shared his views on the current market and investment strategies but also answered the practical questions of many students, involving asset allocation, business operations, health and wellness, tax planning, and other aspects. In addition, he also emphasized the importance of happiness and health, as well as investment concepts such as independent thinking, long-term investment, and reasonable tax avoidance. In summary, the content of this episode provides valuable guidance and inspiration for investors, helping everyone make wise decisions in a complex market environment and have a healthier and happier life.