I. Current Theme#
The market is always fluctuating; this is normal. Investors should have a long-term perspective, ignoring short-term volatility and market noise (such as international situations, economic analysis, financial reports, etc.). The core strategy is to hold high-quality index funds (such as QQQ) for the long term, and to make reasonable asset allocation (including cash reserves) based on individual risk tolerance, while overcoming the greed and fear of human nature. Learning and building a firm belief are essential.
II. Briefing Content#
Market Volatility and Long-Term Investing#
- Market volatility is normal: A 10% market drop is normal, 20% happens about every two or three years, and 50% may happen every five to ten years. This is like the tides, wind, rain, and earthquakes in nature; it’s an inevitable natural phenomenon. Don’t think “this year is different”; every year is the same.
- Importance of a long-term perspective: As long as you stay in the market long enough, you will understand that there is nothing new in the market. The core laws of the market are “always rising” and “always fluctuating.”
- Ignore the noise: Market fluctuations, international situations, market analysis, financial reports, and economic situations are all irrelevant to the decisions of long-term investors.
- Recommended strategy: Hold the Nasdaq 100 index fund (QQQ) for the long term; it can be bought worldwide. This is the simplest and most effective strategy.
- Interactive request: Hope everyone likes, leaves comments, and most importantly, subscribes on various platforms (Podcast, Bilibili, YouTube).
Learning and Mindset#
- Learning to build belief: Investing is simple (buy index funds), but there are many external distractions (monsters and ghosts). You need to build firm belief and willpower through learning, so that you will not be easily swayed by other people’s opinions.
- Overcoming human weaknesses: Greed and fear are the biggest enemies of investment.
- Manifestations of greed: Chasing high when the market rises, thinking that the opportunity to “buy the dip” has come when the market falls, and using up all cash too early (e.g., constantly adding positions when the market has just fallen 5%-13%).
- Manifestations of fear: Not daring to buy when the market rises, only FOMOing (fear of missing out) All-in when it has risen too much; panicking when the market falls and selling at a loss at the bottom.
- Importance of cash: Ample cash is a magic weapon to overcome human nature (especially fear), as important as air. It makes you feel comfortable and secure when the market falls. Don’t exhaust your cash when the market just starts to fall.
- Living in the present: Don’t dwell on past mistakes (such as losses in real estate investment), don’t worry too much about future uncertainties, focus on the present, and do your current investment and learning well.
Asset Allocation and Leverage#
- Finding the comfort zone: Everyone has a different risk tolerance. You need to find your comfortable asset allocation ratio through market fluctuations (such as 442, 433, 523, 514, 505, etc.), and the cash ratio is very important. If you feel uncomfortable when the market falls, you should adjust to a configuration that you can hold with peace of mind during rebounds.
- Leverage risk: Few people can withstand fluctuations of more than 1.2 times Beta. When the market falls, many people will not be able to stand it and reduce leverage. Don’t be overconfident in adding leverage when the market is good.
- Example: Some people went from 442 to 0.9x leverage or even lower.
- Rebalancing: It is recommended to do rebalancing once a year. Only use a small amount of cash (e.g., 2% per year) to buy if the market is down at the end of the year. Don’t operate frequently or exhaust your cash due to monthly or short-term declines.
- About full-position leverage: It is not recommended for young people to use “full-position two-times leverage,” because there will always be a big bubble in life. High leverage may lead to a significant asset drawdown (e.g., falling to 0.1), which is difficult to recover, and you may reach your goal later than with a stable investment.
- Tortoise and hare: A stable configuration (tortoise) will outperform an aggressive high-leverage strategy (hare) in the long run. Even if the Beta is lower than 1, it doesn’t matter.
- Purpose of secured borrowing: The purpose of secured borrowing is not to pursue extreme returns, but to meet living needs or make better configurations while holding high-quality assets for the long term. The risk lies in the ability to repay the principal, not the interest burden.
U.S. Treasury Bonds and the Economy#
- US Debt Clock Update: The website has been updated, adding data such as DoJ Waste Recovery of federal wasted funds and U.S. Hidden Wealth Assets (including gold, minerals, real estate, land, stocks, Recaptured Assets, etc.).
- U.S. Balance Sheet (as of March 27, 2025, approximate numbers):
- Total Assets: Approximately 168 Trillion (T)
- Federal Government Debt (in bond form): Approximately 36 T
- Total Liabilities (including credit represented by cash M1/M2, etc.): Approximately 102 T
- Annual Income (GDP): Approximately 28 T
- Interpretation: It’s like a person having 1.68 million in assets (and the assets are growing at a rate of about 10%), 1.02 million in debt (of which 360,000 is core debt), and an annual salary of 280,000 (which is also growing). The debt is controllable, and the risk of bankruptcy is very low. U.S. dollar cash itself is also a liability, but it will depreciate with inflation, reducing the actual repayment pressure.
- Interest problem: Federal debt interest expenditure is about 1T, which is controllable relative to federal tax revenue (about 4.9T + state tax) and GDP (28T). There is no need to worry too much about the so-called interest exceeding defense spending (about 0.9T), as this comparison is not meaningful.
- Clarification of Musk’s views: Musk mainly criticized the inefficiency and waste of the U.S. government’s spending, rather than the debt itself being unsustainable.
- Impact of tariffs: Raising tariffs essentially shifts costs to consumers, leading to rising prices, which is equivalent to a disguised tax. This is just a different form from directly collecting federal taxes (paying in installments in daily consumption vs. paying once a year). The impact on the overall economy is complex, but for individuals, it may just be “shifting from the left pocket to the right pocket.”
Other Sharing#
- HSBC Hong Kong Account Opening Experience (Student Sharing):
- Threshold: May require assets equivalent to HK$1 million to avoid monthly fees (approximately HK$380).
- Transaction fee: Relatively high, but has little impact on long-term holders.
- Stock pledge interest rate: HIBOR + 1.2%, currently about 4.92%, which is acceptable.
- Suggestion: It is more convenient to sell stocks in other brokerages for cash and transfer them in than to perform complex cross-system transfers. Don’t delay important matters for small fees.
- Canadian Real Estate Investment Issues (Student Sharing):
- Non-tax residents face high withholding tax on selling property (35% of the selling price, not the profit), and transaction costs are high (brokerage fees, prepayment penalties, lawyer and accounting fees).
- Conclusion: Houses are “invisible cages” and tools for governments, the financial industry, and capitalism to bind labor. Don’t hesitate to sell the house; past investments are sunk costs. James also shared his experience of losing money selling a house in Longtan, Taiwan.
- Retirement Planning Case (Student Question):
- NT$15 million in funds + NT$5 million in financial-type mortgage.
- Suggestion: For the part that needs cash flow, consider buying ETFs such as 0050/0056 that provide dividends, but be aware that their dividends may include principal (selling component stocks).
- Investment of NT$15 million: If you don’t need to withdraw money from it, you can consider leveraged allocation (such as 433); if you need to withdraw money, you cannot use leverage. Choose the allocation based on the withdrawal rate (the amount needed after deducting Social Security benefits) (e.g., 2% withdrawal with 80/20 QQQ/cash; 3% withdrawal with SPY). The withdrawal rate is key, not the traditional 4% rule.
- Core: Any configuration must consider whether you can withstand a 50% market drop.
- Tesla FSD Experience (Student and Teacher Sharing):
- FSD V12 is amazing, close to fully autonomous driving, able to handle complex road conditions (such as San Francisco), and significantly reduces driving stress and fatigue.
- FSD has a certain “perception” ability and can judge the intentions of other vehicles/pedestrians and make intelligent reactions.
- Value: The teacher believes that FSD is worth the money (willing to spend $100,000 to buy it), improves safety (saves lives), improves the driving experience (reduces family quarrels), and may even reduce insurance premiums (using Tesla Insurance). Strongly recommends buying a Tesla car with FSD (the new Model Y comes standard). Use the teacher’s referral code for discounts.
- Consumption Concepts and Family (Student Question):
- Problem: Family members (such as spouses, parents) continue to demand new car replacements and other consumption due to “laborer thinking” or material needs, which conflicts with their own goals of accumulating wealth, and they feel annoyed.
- Teacher’s suggestion:
- Understand the needs and feelings of family members (love what they love).
- Learn to “consume smartly,” using financial tools (such as secured loans, adjusting allocation ratios) to meet some reasonable needs without excessively affecting the growth of core investments. For example, sell 100,000 QQQ, exchange it for 50,000 QLD (keeping some exposure) + 50,000 cash to buy a car.
- The goal of capitalists is to make money generate money and ultimately use it to improve the quality of life, not just to save money. Find a balance between accumulation and consumption.
- Technology Product Consumption: The teacher shared that buying high-quality displays (Nano-texture display) and AirPods Pro 2 (with hearing aid function, about $249) is to protect health and improve the quality of life. These investments are worthwhile, and financial operations (such as secured loans, credit card rebates reinvestment) can be used to make them feel like “no money is spent.”
- Defining Purchasing Power: True purchasing power means that when the purchased items (such as houses and cars) are accidentally damaged, you have the ability to easily buy another one without feeling financial pressure or heartache. Otherwise, you are exceeding your consumption capacity.
III. Q&A Session#
K#
- Sharing: Often explains to friends that market fluctuations are normal and not to panic. Also dissuaded friends from borrowing too much to invest just because their income could afford the interest.
- James’s comment: Agreed. The main risk of secured borrowing is not the ability to pay interest, but the ability to repay the principal (Margin Call) when the market falls. Adjusting leverage to a comfortable level during market rebounds is important.
C#
- Sharing: Thanks for the teacher’s inspiration, sharing that he and a friend were deeply touched and started taking action, but also lamented that many people would rather eat, drink, and have fun than squeeze out a small amount of money to invest each month. Cognition determines wealth.
- James’s comment: Glad to see students agree and execute, eventually becoming wealthy. Shared the example of an early student (2006) who persisted and has achieved financial freedom. Becoming a capitalist requires cognition and persistence, and it is indeed a minority of people.
Tommy#
- Sharing: Reviewed his 16-year investment journey: early purchases of 0050/0056 -> chasing biotech stocks (heavy losses) -> starting to invest in U.S. stocks (VOO/VTI/bonds, diversified) after the pandemic -> epiphany after listening to the course, and is now concentrating assets into QQQ. Realized that dividends (0056) are not as good as total return (0050), paying off the mortgage too early was a wrong decision, and the cost of time is terrible.
- Question 1: Should asset allocation (such as 442/433) be achieved on all accounts (Taiwan, US Brokerage, IRA, Roth 401k, etc.) as a whole, or should each account follow?
- James’s reply: All accounts should be regarded as a whole for allocation. Leveraged funds (such as QLD) can only be placed in tax-free growth Roth accounts. Cash can be placed in Brokerage or Traditional IRA/401k (doing so can slow down the growth of pre-tax accounts, which is beneficial for future taxes). The final Beta value will be limited by the size of the Roth account. Even if the Beta is lower than 1, it doesn’t matter. Stability (tortoise) may outperform aggression (hare).
- Question 2: There are historical contributions in Traditional 401k (mutual funds have been converted to QQQ), and now it is a mix of Roth and Traditional. Should the Traditional portion be converted to Roth?
- James’s reply: Whether to convert depends on the amount and current tax rate. If the amount is not large, you can convert it all at once. If the amount is large (e.g., 500,000), in order to avoid high tax burdens, it should be converted over many years. You can use the Investment Calculator to calculate how much amount to convert each year to reduce the Traditional balance to zero within a set period (e.g., 10 years) while controlling the annual tax burden. Fidelity clearly distinguishes the shares of Roth and Traditional internally.
MMA#
- Sharing: Experienced Tesla FSD V12 and felt it was very good. 99% of the journey can be driven automatically, including handling cut-ins, traffic jams, and complex slopes in San Francisco, which greatly improves driving efficiency and comfort. Admired Tesla’s technology and efficiency (the AI department has few people but significant results).
- James’s comment: Very much agree. FSD is not just mechanical execution, but can also “feel” the intentions of other vehicles and pedestrians and make intelligent judgments. FSD greatly reduces driving pressure and improves safety (saves lives). Using FSD also helps reduce the insurance premium for Tesla Insurance. Strongly recommends buying a Tesla with FSD, and stocks can be held through QQQ.
Iam#
- Sharing: Encountered a brokerage that promoted an IPO and realized that it was an interference from “monsters and ghosts.”
- Question: How to deal with close people (parents, spouses, children) who continue to hold “laborer thinking” and constantly demand material consumption (such as changing to a new car), which conflicts with their own wealth accumulation philosophy and feels annoyed and pressured? Is there a good way to deal with it?
- James’s reply:
- Understanding and love: Understand the needs of family members and love them (love what they love). Meeting reasonable needs is part of maintaining family harmony.
- Smart consumption: Capitalists don’t not consume, but consume smartly. Use financial tools (secured loans, adjusting investment portfolios such as selling QQQ for QLD + cash) to meet consumption needs as much as possible without affecting the compound growth of core assets.
- Balance: Find a balance between wealth accumulation and enjoyment of life. It is not necessary to meet all requirements, but it is not possible to completely reject them. It is necessary to meet one or two needs that family members value every year or every few years.
- No need to explain too much: Actions speak louder than words. Express love through practical actions (such as buying a car), but there is no need to argue too much about concepts.
- James’s reply:
Ling#
- Sharing: Describes a complex arbitrage strategy: Using secured borrowing (leverage may exceed 1.5 times), puts some funds into a digital account in Taiwan (about 2% interest), and buys 00864B (USD money market fund) to try to cover the 2.8% borrowing cost. Also shared how to use credit card payments to get 0% interest installments and then use the money to buy 00864B for arbitrage.
- Question: Is this operation feasible? Does it conform to the 442 configuration idea?
- James’s reply:
- Not 442: What you described is an arbitrage strategy, not the 442 asset allocation based on long-term growth that we discussed.
- Arbitrage efficiency: Putting borrowed money (cost 2.8%) into a NTD account with 2% interest is losing money. All of it should be put into 00864B with higher returns (about 4.5%) and matching currencies (USD) for arbitrage. Exchange rate fluctuations are not important.
- Credit card arbitrage: It is feasible to use 0% interest installments for arbitrage, but it is a “sesame green bean” small trick and should not be distracted too much.
- Risk: As long as the target (00864B) itself does not fall, this pure arbitrage strategy has low risk and will not be margin called.
- James’s reply:
Sandy#
- Sharing: Experienced the 2008 financial crisis, assets were halved, and since then has attached importance to cash, maintaining 30-40% cash all year round. Dared to buy in when the market fell sharply in 2022 and made a profit at the end of the year.
- Question 1: Made considerable profits last year and early this year and wanted to sell some at a high level to avoid a callback, but her husband prevented it because of concerns about high taxes (believing that it would push the tax bracket to 50%). How to deal with it?
- James’s reply: Her husband’s understanding of tax law is wrong. Long-term Capital Gain Tax is calculated separately from ordinary income tax. Its tax rate is tiered (usually 0%, 15%, 20%), and the highest is 20% (plus a possible 3.8% NIIT). Selling capital gains will not push ordinary income to an extremely high tax bracket (such as 50%). The tax rate for selling a lot of LTCG is basically fixed (it is 20% after reaching a certain amount). However, it is not recommended to time the market to sell. If you really want to operate, you should prioritize doing so in retirement accounts (such as IRA/401k). Selling has no immediate tax impact, and you can even buy reverse ETFs (such as SQQQ) for hedging in retirement accounts (advanced operation, not recommended).
- Question 2: Is it better to buy dividend-paying stocks or other things with the cash (Money Market) held? Worried about the tax on dividend-paying stocks.
- James’s reply: Don’t use dividend-paying stocks to hold cash, the tax efficiency is low. You should use money market funds. If you want to avoid both federal and state taxes, you can consider municipal bond funds (Muni Bond Fund, such as Vanguard’s VOOX). If you only consider federal tax, you can use U.S. Treasury money market funds (such as SGOV, BIL). There is a capital gains tax problem only when selling.
- Question 3: I want to anonymously sponsor a talented child (a friend’s child, with decent family conditions), but I don’t want the other party to know now, how to operate? Worried about tax issues.
- James’s reply: Anonymous operation is difficult, especially involving opening an account. And the other party’s family may not need sponsorship. A safer way is to write this child (providing name, address, and other information) into your own trust file as a beneficiary of future inheritance. This operation is simple and usually tax-free.
CL#
- Question 1: In the United States, in addition to mortgage loans and stock pledges, what other similar low-cost sources of funds can be used like “Han Xin counting soldiers”?
- James’s reply: The U.S. financial market is highly efficient and has a lot of “smart money,” so the interest rate on unsecured personal loans is usually higher (such as 8% +). Unlike Taiwan, which has a large amount of low-cost funds (due to export-oriented currency abundance), there are indeed not many other low-cost, flexible sources of funds besides stock pledges (Pledge Loan). If you have channels in Taiwan to borrow low-interest NTD funds, you can consider it.
- Question 2: Regarding children’s college tuition fees, is it better for them to apply for student loans themselves (and we will use the pledged money to pay them back after graduation), or to pay directly with the pledged money? Which is better?
- James’s reply: There is no absolute right or wrong, it depends on the child’s personality and feelings. If the child feels stressed about debt, pay directly. If the child understands financial leverage and the student loan conditions are favorable (such as interest only after graduation), you can let them take out the loan and the parents will pay it back later. The key is to communicate well with the child. The teacher shared his experience of paying his daughter’s tuition fees directly.
- Sharing: Fortunate to have followed the teacher’s advice to sell the expensive house in Los Angeles and exchange it for a cheaper one and use a pledge loan. Now I feel relaxed, unlike some friends who are trapped in expensive houses and facing difficulties under the wave of layoffs.
- James’s comment: Yes, real estate has poor liquidity, especially when bought at a high price, which easily limits life choices and financial flexibility. Young people should be especially cautious.
Hao Qing (浩清)#
- Sharing: Told about his difficult experiences in the United States in the early stages of immigration: meager salary (less than 30,000 USD/year), relying on friends to introduce jobs, being questioned by the boss for his ability, saving money, working long hours and studying every day to support his family. Shared the process and feelings of raising three children: Children are motivation and will find their own way out. Responded to the teacher’s video case about hesitating whether to have a third child, encouraged having children, and believed that children have their own future.
- James’s comment: Shared his own experience of being poor when he first came to the United States (borrowing money to come to the United States, living in Motel 6, cooking by himself). Emphasized that the hardship of life is a process and also a valuable wealth and memory. Encouraged everyone to face life challenges bravely. Marriage and childbirth are not that terrible, love is the key, and money is usually not the biggest problem.
Terry#
- Question 1: Concerns about U.S. Treasury bonds (such as the debt-to-GDP ratio, interest burden), is it possible that the world will stop buying U.S. bonds?
- James’s reply: U.S. assets (168T) far exceed debt (federal debt 36T). The interest burden is controllable relative to fiscal revenue and GDP. Countries around the world hold a large amount of USD reserves and must purchase USD assets (government bonds, treasury bills, money market funds, etc.) to store them. There are no other large-scale options to replace them. Therefore, the world will not stop buying U.S. bonds. A strong U.S. dollar is in the best interest of the United States.
- Question 2: The price of SGOV (short-term treasury bond ETF) is rising slightly every day, while the price of TLT (long-term treasury bond ETF) has been falling recently, why?
- James’s reply: SGOV tracks short-term interest rates. Its mechanism is to accrue interest accumulation daily and the net value returns after dividends, showing a step-like slight oscillation. TLT represents long-term treasury bonds, and its price (yield) mainly reflects the market’s expectations for future long-term inflation. If the market expects inflation to rise in the future (for example, worrying about tariffs leading to inflation), the yield on long-term treasury bonds will rise and the price of TLT will fall. This has little to do with the Fed’s current short-term interest rate policy.
IV. Highlighted Quotes#
The market is always fluctuating… There is nothing new in the market, that is, as long as you stay in the market long enough. – James
(Emphasizes the normalcy of market volatility and the importance of a long-term perspective)
Cash is a magic weapon to overcome human nature. – James (Cookie student also mentioned “Cash is King”)
(Emphasizes the key role of cash in dealing with market fluctuations and psychological biases)
Even if you are a god, you have many magic weapons. If you run out of magic weapons, you are not a god. – James
(Uses metaphor to illustrate the importance of cash reserves, which cannot be easily exhausted)
The purpose of capitalists is to spend money. Money is a tool, so what do we earn so much money for? It’s to spend… We need to know how to spend money without reducing assets, killing other people’s chickens, and our own chickens are still full of pits. This is our capitalist’s philosophy, not saving money. – James
(Explains a capitalist mindset that uses financial tools to achieve “smart consumption” and balance wealth growth and quality of life)
Good individual stocks don’t mean you can’t get rich, they mean you can’t get rich. – James
(Explains the difficulty of holding a single stock with huge fluctuations, it’s better to invest in index funds)
When you can afford to buy two houses, you go buy one… You can buy something that, if it breaks, you’re not sad at all, and you’re even happy that you can buy a new one. That means you have the ability to consume. – James
(Defines true “purchasing power” as the ability to afford losses without affecting life, advising young people to be cautious about buying houses)
Long-term (capital gains) has nothing to do with income… Long-term capital gain is a fixed tax rate, it’s either 15% or 20% and that’s it, it won’t be higher than 20%… You sell 10 million and it’s still 20%. – James
(Clarifies the calculation of U.S. long-term capital gains tax, it is not mixed with ordinary income and progressively increases)
A strong dollar is in the best interest of the United States. – James
(Points out the core interest orientation of the United States in monetary policy)
TLT… Its interest is linked to inflation, linked to inflation expectations. So it has nothing to do with the central bank’s interest rate. – James
(Explains the core drivers of long-term treasury bond yields)
V. Summary#
In this CLEC investment and financial management sharing session, James reiterated the core philosophy of long-term investment: embrace market volatility, adhere to holding index funds represented by QQQ, and build firm belief through continuous learning. The teacher analyzed the real situation of U.S. Treasury bonds in detail, believing that there is no need to worry too much, and clarified the misunderstanding about its interest burden and Musk’s criticism. At the same time, it discussed the rational use of leverage, the importance of cash reserves (like air and magic weapons), and how to overcome psychological biases in investment. The Q&A session involved asset allocation across accounts, Roth conversion, real estate processing (including Canadian non-resident tax issues and personal experience), children’s education funding planning, the excellent value and experience of Tesla FSD, consumption concept balance (smart consumption vs. laborer thinking), the limited sources of low-cost funds in the United States, the driving factor differences between long-term and short-term treasury bond ETFs, and the correct understanding of U.S. long-term capital gains tax and other practical issues, providing specific operational suggestions and thinking frameworks. The core message is to maintain a long-term perspective, make rational decisions, use financial tools to achieve a balance between wealth growth and quality of life, while understanding and respecting the needs of the people around you.
Disclaimer: This article is for personal study notes only and does not constitute any investment advice.