00520 [Stop Being a Sucker! The Truth About Investment Scams and the Right Mindset for Financial Management

I. Topic of the Session

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The core theme of this session is to emphasize that long-term investors should ignore short-term market volatility and firmly believe in the market’s perpetual upward trend. Teacher James points out that having funds out of the market is the biggest risk, and investors should enter the market as soon as possible, adopting a “buy whenever you have money, and never sell” strategy. By debunking common market prediction indicators (like the Buffett Indicator) and analyzing asset allocation, he aims to help investors build a solid investment mindset to achieve long-term wealth growth.

II. Briefing Content

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Core Investment Philosophy and Market Attitude

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• Market Volatility Doesn’t Concern Me: For long-term investors, daily market fluctuations, global situations, tariff wars, etc., should not influence investment decisions. The market hitting new highs for three consecutive days proves the importance of staying in the market.
• Being Out of the Market is the Biggest Risk: Many people exit the market fearing a downturn, but waiting for a correction might mean never getting back in. Keeping funds out of the market and missing out on gains is a far greater risk than a short-term decline.
• Predictions are Useless, Making Money is What Matters: There are many who make correct market predictions, but the ones who actually make money are those who ignore the predictions and stay invested.
• The Market Always Goes Up: This is the core belief a long-term investor must have. Historical data proves that in the long run, the market only goes up and will always reach new highs. Investors should always be extremely optimistic and face the sun.
• Review the Past, Preview the Future: The teacher advises students, especially new ones, to watch videos from the market crashes at the end of 2018, March 2020, and in 2022 to learn how to react correctly during times of panic and to mentally prepare for future market volatility.

Investment Discipline and Risk Management

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• No Risk in Long-Term Investing: Looking at a century of history, buying at any point and holding for the long term has always been profitable. However, short-term volatility can be immense, with potential drops of 50% or even 80%, so one must focus on long-term returns.
• The Nature of Your Funds Dictates Your Investment: Money needed for the short term (like tuition or a down payment for a house) must absolutely not be invested in the stock market; it should be kept as cash. Only long-term funds that you won’t touch for 10-20 years are suitable for investment.
• The Importance of Asset Allocation:
  • Seek Stability Before Returns: Investment allocation should prioritize psychological stability. It is inadvisable for people to switch from an aggressive allocation (e.g., 442) to a conservative one (e.g., 433) when they can’t handle the pressure during a market drop (like in April of this year).
  • A Conservative Beta Value: It is recommended that an investor’s Beta value not exceed 1.0. If you think you can handle 1.0, it’s better to subtract 0.2 and adopt a Beta of 0.8, which might be more suitable.
  • Keep Sufficient Cash: It’s advisable to keep at least 30% in cash. For example, a portfolio of 70% QQQ + 30% Cash.
  • Gradual Increase in Leverage: Newcomers to the market can start without using leveraged funds. During a market dip, you can use a small amount of cash (e.g., 2% of assets) to buy a 2x leveraged fund, thereby gradually building a leveraged position and allowing the Beta value to increase naturally as the market rises. This is like riding a smooth, high-class train rather than a bumpy race car.

Specific Cases and Myth Debunking

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• Case: Currency Exchange Impact on 00662 vs. QLD
  • A student asked if the performance of 00662 (Fubon NASDAQ-100) lagged behind QLD due to the appreciation of the Taiwan Dollar (TWD).
  • Teacher’s Analysis: Comparisons must be made in the same currency. Assuming the exchange rate was 33 when investing in QQQ and is now 29, the exchange loss is 12%. Over the past 5 years, QLD’s performance was about 128%, and 00662’s was about 114%. However, after deducting the 12% currency exchange loss from QLD’s 128%, its performance becomes about 112%, which is actually lower than 00662’s 114%. The conclusion is that their performances are essentially the same; don’t be misled by nominal figures in different currencies.
• Debunking the “Buffett Indicator” Myth:
  • Many people use the “Total Stock Market Capitalization / GDP” ratio to judge if the market is overheated, which is wrong.
  • GDP is a flow concept: It only measures the new value added in the current year.
  • Market Cap is a stock concept: It includes the value of all of a company’s historical investments and accumulated value.
  • Comparing a changing flow metric to a cumulative stock metric is like comparing apples and oranges; it’s completely illogical.
  • Warren Buffett himself rarely mentions this indicator and emphasizes not to use a single indicator to judge the market. Many “pundits” and bloggers on the market abuse this concept just to get attention, like mindless “parrots.”

Scam Alert and Life Philosophy

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• Beware of Investment Scams:
  • Teacher James solemnly declares that he provides completely free and voluntary teaching. He will never contact students privately, let alone offer financial services for a 1% fee or any other charge.
  • Anyone who uses his name on platforms like LINE or WeChat to contact you, claiming they can manage your finances for a fee, is a scammer.
  • In the US, it is illegal for an uncertified financial advisor to charge fees. The teacher stresses that no one cares more about your assets than you do; you must manage your investments yourself.
• Awakening to Capitalism: Teacher James puts forward a sharp point: laborers who go to work in modern society are, in essence, “slaves” of capitalism. The purpose of his teaching is to awaken everyone’s “capitalist consciousness,” to learn to use capitalism to become capitalists, rather than being enslaved by it. (Refer to video 00315)
• Ultimate Goals in Life:
  1. Health and Longevity are Fundamental: Longevity is the path to wealth, and health is the mother of happiness. He reminds everyone to get health check-ups (like CT scans).
  2. Happiness is the purpose of life.
  3. Wealth is just the icing on the cake.
• The Principle of Borrowing to Invest:
  • For money borrowed according to proper principles, never think about paying it back.
  • Once you repay the loan, your risk (Beta value) will immediately increase. For example, an investor with 50% cash and 50% QQQ (Beta=0.5) who uses cash to repay a loan will see their Beta value skyrocket, greatly increasing their risk.
  • Having cash on hand gives you the confidence to face risks.

III. Q&A Session

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Zhao

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• Sharing: He is a 65-year-old veteran investor who lost tens of millions in the stock market twice. After starting to learn Teacher James’s philosophy after the Chinese New Year, although he had doubts about some points (about 10-15%), he found through deeper study that the teacher’s philosophy is continuously refined and has deep logic.
• Question 1: The market often says, “If you miss the best few days of gains, your annualized return will drop significantly.” What is the specific definition of this “best time for gains”?
• Question 2: Regarding “smart rebalancing” versus “mindless rebalancing,” if the market is still rising at the end of the year, will rebalancing then cause one to miss out on subsequent gains?
  • Teacher James’s Reply:
    1. On Missing Up Days: This is precisely why it’s important “not to leave the market.” Attempting to time the market will very likely cause you to miss the days with the biggest gains, leading to long-term returns far worse than those of an investor who “never sells.”
    2. On Rebalancing: Attempting “smart,” irregular rebalancing based on market movements is active investing, which cannot be taught because everyone’s judgment criteria are different (add at a 10% drop? or 20%?). This approach can deplete your cash in an extreme market (like a three-year decline), leading to bankruptcy. Therefore, the simplest, safest, and most replicable method is to rebalance once a year. It doesn’t matter that you didn’t add more at the low point in April this year, because by the end of the year, your entire portfolio will still have appreciated significantly.

Niu Ba

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• Sharing: Praised the NotebookLM system created by student “Chen Feng” and the teacher’s ChatGPT tool as being very useful.
• Question 1: For a portfolio of 60% QQQ, 10% QLD, and 30% cash, what is the Beta value? (Teacher’s reply: 0.6 + 0.1*2 = 0.8)
• Question 2: Can one use technical indicators (like the 200-day moving average) to assist in decision-making—becoming conservative when the price is below the average and aggressive when it’s above?
• Question 3: Are people like Apple CEO Tim Cook considered capitalists or laborers?
  • Teacher James’s Reply:
    1. On Technical Indicators: Completely unnecessary. In the recent V-shaped recovery, using a 200-day moving average strategy would have had you sell and buy back at roughly the same point. Not only would you not have made a profit, you might have lost money on transaction fees, underperforming a “do nothing” strategy.
    2. On Tim Cook: He is a laborer, a very highly paid “slave.” His wealth comes from his salary (including stock options), not from returns on his own invested capital. True capitalists do not have to go to work.

Inny

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• Sharing:
  1. Influenced by family, she previously invested in real estate. Her property in Japan yielded poor returns due to the yen’s major depreciation over the last decade.
  2. Shared a success story: she took out a home loan of 8 million TWD four or five years ago and didn’t pay it off early. Instead, she invested the funds in ETFs and made a profit of four to five million, deeply understanding the benefits of investing with borrowed money.
• Question 1: What should she do with the Japanese Yen she holds?
• Question 2: She has about $200,000 USD in cash (cost basis ~32 TWD/USD) and has already invested $100,000 in US stocks (QQQ/SPY/VT). Now she doesn’t know what to do with the remaining cash because she heard the teacher say there are tax issues for Taiwanese people buying US stocks.
  • Teacher James’s Reply:
    1. Handling the Yen: Immediately, right now, exchange it for TWD and buy 00662. Don’t worry about the exchange rate loss, because the potential return from the stock market is far greater than currency fluctuations.
    2. Handling the USD Assets: Again, ignore the exchange rate. For Taiwanese investors, the best approach is to sell the holdings in the US brokerage, transfer the funds back to Taiwan, and buy 00662 with all of it to avoid future estate tax issues. In the long run, the exchange rates for entering and exiting the market will average out, so there’s no need for excessive worry.

Grace

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• Question: She is in her 30s, and about 30-40% of her assets are in Bitcoin, with the rest in QQQ. How should she handle the Bitcoin?
  • Teacher James’s Reply: Because you are still very young, you can continue to hold the Bitcoin. But do not add any more. All new funds in the future should be invested in QQQ. In the future, Bitcoin might be used as collateral like gold, so you may not need to sell it. At your age, if you persist for the long term, it’s possible to have assets worth tens of billions or even hundreds of billions.

Ola

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• Sharing: He is 65 and retired. During the recent downturn, his allocation was too aggressive (Beta 1.1), and he had no cash to add at the bottom. He has now adjusted to a Beta of 0.9 (70% QQQ, 10% QLD, 20% Cash).
• Question: Is there a mechanical rule for deploying cash during a major market drop? For example, investing one-third of the cash when the market drops 20%?
  • Teacher James’s Reply: This falls under active management. If you must do it, you could consider this: when the market drops 10% (happens almost every year), you can add more once; when it drops 20% (happens every few years), you can add more again. If it continues to fall, you must be very cautious, as it could be a major bear market. At that point, you should switch to a defensive posture, not continue to add. The key is to never run out of cash, and the goal of adding to your position is to maintain your original Beta value (0.9), not to raise it.

Wasi

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• Question: QQQ has hit a new high, but her TQQQ position (about 10% of her portfolio) is still far from its high point. Why is that?
  • Teacher James’s Reply: This is due to the volatility decay characteristic of leveraged ETFs. In volatile and declining markets, the drop in leveraged ETFs will be more than a multiple of the index’s drop, and their recovery is also slower. This is why a full position in leveraged funds is not recommended. For those holding leveraged funds, adding to your position during a major market drop can help you break even faster. For those with a salary, you should normally buy QQQ and use your salary to buy TQQQ during major market dips.

Lu

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• Sharing:
  1. She shared her observation of the debate in Taiwan between “high-dividend ETFs” and “market-cap ETFs,” believing that both are good as long as they attract people to participate in the capital market.
  2. She shared her learning journey: after diligently listening to the teacher’s past courses (especially the videos from the 2022 bear market), her conviction was established, many questions resolved themselves, and she became confident in managing minor “variations” in her portfolio without needing to ask the teacher about everything.
  3. She shared her experience visiting relatives in Thailand and the joy of spending money on experiences. This was because after investing according to the teacher’s method, she felt like she had more than enough money, leading to a more relaxed mindset.
  • Teacher James’s Comment: I completely agree. There is no absolute right or wrong in investing and opinions; there’s no need to debate. He himself has learned that it’s better to understand the reasons behind the other person’s viewpoint than to argue. He won’t “burn himself out” trying to convince others but rather act as a light, allowing those who are destined to find it themselves.

Yao Nian

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• Question: Regarding children’s education, a friend’s Chinese-American child was beaten at school for stopping a black classmate from cutting in line. The school handled it poorly due to “political correctness.” How should we teach our children to protect themselves when facing bullying and injustice, without losing faith in justice?
  • Teacher James’s Reply: Safety is always the number one priority. He quoted a police officer’s advice: when faced with a violent attack, the first reaction is to run, not to fight back. We must teach our children that defending justice cannot come at the cost of their own physical well-being; we are not martyrs. One can verbally intervene, but if the other person ignores it or shows violent tendencies, one must leave immediately and protect oneself. Society will teach them their lesson; our children don’t need to take that risk.

IV. Insightful Quotes

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Being out of the market is actually the biggest risk. – Teacher James

This point was central to the entire session. The teacher repeatedly emphasized that compared to the risk of a short-term market decline, the risk of investors exiting out of fear and thereby missing out on huge long-term returns is far greater.

Today’s laborers who go to work are like the cotton pickers brought from Africa to America in the past. All who work in factories today are slaves to capitalism. – Teacher James

This is a very sharp and thought-provoking view from the teacher, aimed at awakening people to the nature of capitalism and encouraging them to become capitalists through investment, thereby escaping the status of a “laborer.”

Longevity is the path to wealth, happiness is the purpose of life, health is the mother of happiness, and wealth is just the icing on the cake. – Teacher James

The teacher shared his philosophy of life, emphasizing what is truly important. Wealth is meant to serve a better life, not be the ultimate goal.

If someone says, “Pay me 1% and I can be your investment advisor”… that is a scam. – Teacher James

The teacher directly used the language of scammers as an example to strongly remind all students that anyone impersonating him and offering paid financial advice is a scam, urging everyone to protect their assets.

You shouldn’t defend justice with your own body; we are not martyrs. – Teacher James

This was the core advice given in response to the question about how a child should face school bullying. He stressed that under any circumstances, personal safety is the highest priority, teaching children to uphold their sense of justice while also learning to protect themselves wisely.

V. Summary

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This session once again stressed the core discipline of long-term investing: ignore short-term market volatility and firmly believe in the market’s long-term upward trend. By analyzing asset allocation, the use of leveraged funds, and debunking common myths like the Buffett Indicator, Teacher James pointed out a simple yet effective path to wealth growth. The Q&A session was rich in content, covering profound discussions from specific investment strategies (like rebalancing timing and leveraged fund allocation) to life philosophies (such as dealing with bullying and the nature of capitalism). The central idea of the entire session is that investors should build a strong psychological foundation, focus on controllable investment principles, and simultaneously pursue a life of health, happiness, and longevity, viewing wealth as a tool for a better life, not the ultimate goal.