00529 Raising Children is Better Than Maintaining a House: The Truth About Reverse Mortgages and Retirement Cash Flow

I. Main Theme

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This session’s theme revolves around “The market always goes up, live for yourself.” The core idea is that the essence of investing is very simple: believe in the market’s long-term upward trend and hold on. The real challenge is psychological. Therefore, we should not be disturbed by short-term market fluctuations, financial news, world events, or other external information. Instead, we should shift our focus back to life itself—concentrating on health, happiness, family, and personal values, viewing money as a tool to achieve freedom and abundance in life, not as the ultimate goal.

II. Briefing Content

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Life is More Important Than Investing

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• Wealth and Happiness: Wealth is a gift, happiness is a human right, and health is the foundation. Money is just a tool to achieve a free, abundant, and happy life; investing itself is not the purpose of life.
• Children’s Education:
  • Focus on cultivating the right values in children (not stealing, robbing, breaking the law, or taking drugs) and appreciating their talents, rather than just focusing on academic performance.
  • Parents should not impose their own expectations or unfulfilled dreams on their children, such as forcing them to study abroad. This puts immense pressure on the children.
  • A true home is where the parents are. Children should be encouraged to pursue their own ideals, not to satisfy their parents’ expectations.
  • Compared to buying a house for a child, it’s better to have and raise the child first, because wealth can be created, but childbirth has a time window.
• Live in the Present, Focus on Yourself:
  • In life, focus on your own goals. Don’t get sidetracked by trivial matters (like fussing over exchange rates or searching for better investments), as this will only delay the process of achieving financial freedom.
  • Teacher James uses his own management experience as an example: At the company, he focused on only the three most important tasks each day. Once completed, he could go home. This approach is efficient and goal-oriented. Conversely, trying to do everything results in being busy all day with nothing accomplished.
  • Live your own life, not one led by the media and online information. Cutting off useless external information will not result in any loss.
  • True living is about “presence”—living in the moment. Whether eating, gardening, or traveling, you should be fully engaged and feel the beauty of life itself. External distractions, like what Trump said, have no bearing on our lives or investments.

Investment Strategies and Financial Tools

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• Do the Right Thing and Persist: The secret to successful investing is to “do the right thing and stick with it for the long term.” For example, invest whenever you have money, regardless of the exchange rate, without timing the market. Once you have identified the right path (like investing in QQQ), you should forge ahead without looking back.
• Reverse Mortgage:
  • This is an excellent tool for “activating assets” and is not just for people short on cash.
  • It provides a steady cash flow, as if the house is working for you. This money can be used for investment, thus increasing your assets while retaining the property.
  • It’s a great option for parents with insufficient retirement funds, allowing them to live better lives without their children needing to provide financial support.
  • For elderly individuals with weak financial management skills and only one house left, a reverse mortgage is more stable than selling the house to invest, avoiding the risk of losing their last home.
• The Power of Borrowing to Invest:
  • An example: If you use your own $30,000 to buy a car, the potential value of that money in 50 years (about $32 million) is lost. But if you take a pledged loan of $30,000 to buy the car and invest your own $30,000, in 50 years you will have $32 million in assets, while the debt is only $340,000.
  • Conclusion: Make good use of financial leverage. Borrow for consumption or investment, and let your own money continue to grow.
• Example of Leveraged Asset Allocation:
  • Teacher James shares his asset allocation model: 40% QQQ (1x), 15% QLD (2x), 10% TQQQ (3x), and 35% cash.
  • The Beta value of this portfolio is calculated as: (40% * 1) + (15% * 2) + (10% * 3) = 0.4 + 0.3 + 0.3 = 1.0.
  • This allocation, while having an overall risk comparable to holding 100% QQQ (Beta=1.0), retains a large amount of cash (35%) for risk control and rebalancing during market downturns.
  • Key Point: Any asset allocation that includes leveraged funds must implement a smart rebalancing strategy.

III. Q&A Session

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Cady

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• Sharing: She once went against everyone’s advice to support her sister’s dream of a working holiday in Australia. Now, her sister is living very happily in Germany. She has come to realize that since her child doesn’t want to study abroad, she’ll save the money for her own study tours in retirement. She is practicing not imposing her expectations on her child.
  • Teacher James’s Comment: That’s excellent. One must live for oneself, not for others. Don’t impose your expectations on people. For children, parents only have the duty to agree, not the right to disagree. Your child’s life is not under your jurisdiction.

Chen Feng

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• Sharing:
  1. He has compiled his years of learning from the teacher into the “Great Way is Simple Investment Method” and created the “Chen Feng Leads the Way” website to share it.
  2. He summarizes the CLEC investment method into three simple but not easy things: Asset Allocation (70/30 for beginners, eventually 433), Rebalancing (once a year), and Living off Pledged Loans.
  3. He believes the hardest part of investing is psychology, which is why the teacher insists on holding weekly classes to help everyone adjust their mindset.
  4. He announced his official retirement in August 2025 and will have more time in the future to share his experiences and help more people achieve the ideal that “wealth is a gift, happiness is a human right.”
  • Teacher James’s Comment: Thank you to Chen Feng (a senior executive at a high-tech company in Taiwan) for his sharing and contributions. He has done a lot for the community (website, AI training) and actively helps everyone in the LINE group. Teacher James announced that he is making him a community Moderator.

Hai Wai Gu Zhong

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• Sharing: After renting out a house he owns, he recently took it back for his own use and found being a landlord very troublesome. He had to deal with various damages and cleaning for walls, doors, and windows, and deeply realized that the actual return on real estate investment is not as high as it seems.
• Question 1: Since the house was bought by his family, he can’t sell it freely. He’s thinking of taking out a mortgage-like loan on the house (interest-only payments) and investing the cash into 00662. Is this idea feasible?
  • Teacher James’s Reply: Absolutely correct, you should do it immediately. Borrow any money you can as soon as possible. The power of borrowing to invest is immense. He demonstrated the huge opportunity cost difference by calculating the 50-year outcomes of buying a car with $30,000 versus borrowing $1 million.
• Question 2: The teacher advises young people to invest first and buy a house later when they are “old.” What age does “old” approximately refer to?
  • Teacher James’s Reply: You will know when the time comes; you don’t need someone else to tell you. When you are wealthy enough, buying a house will be as easy as buying slippers, and you can even use borrowed money to buy one casually. At that point, you could also choose to live in a luxurious retirement community—the choice is yours.

May

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• Question: She is in her fifties/sixties and wants to take out a pledged loan in China on her fully paid-off house, but banks only offer a maximum term of 3-5 years, which is too risky. How does the teacher obtain long-term loans?
  • Teacher James’s Reply: The best long-term loan is a “stock-pledged loan,” which can be structured to never pay back the principal, and even the interest can be rolled into the principal. Mortgages and personal loans have fixed terms and are not suitable. For short-term loans (like 3-5 years), don’t borrow unless you are confident you can repay even if the market crashes. He suggests she sell her house in China, even at a lower price, as long as she can liquidate it. Abroad, she can try using Interactive Brokers (IB) for stock-pledged loans.

Rui

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• Sharing: Inspired by the teacher, he successfully borrowed a large sum of money from the bank against his assets and discovered that car loans don’t count towards his debt ratio. He plans to use a 2% pledged loan to pay off the car loan, thereby investing more funds into the 433 allocation. He now feels that the speed of his asset growth has surpassed his annual salary.
• Question: He saw a YouTuber say that Chinese engineers in Silicon Valley are unhappy due to endless “comparisons” (of degrees, companies, salaries, houses, wives, children). As someone with a master’s degree, he also felt insecure in an environment full of PhDs. How does the teacher view “comparison”? And how can the teacher confidently pay his subordinates a higher salary than his own?
  • Teacher James’s Reply: Quoting Munger, “Envy is a really stupid sin.” Don’t compare; the key is a strong inner self. You must affirm from within that you are the best. The way you see yourself is more important than how others see you. He uses his own experience of leading a team of PhDs without a PhD himself, and designing Microsoft’s Media architecture and the computer Hibernate patent, to illustrate that success is unrelated to academic degrees but is related to confidence and intellect.

Mindy

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• Question 1: She is 60 and retired. As recommended, she has allocated TQQQ in her smaller Roth IRA account. However, the AI on Chen Feng’s website advises her not to use leverage at her age and to keep many years of cash. How much cash should a retiree actually keep? Is it 30% or 15 years’ worth of living expenses?
  • Teacher James’s Reply: Don’t fully trust the AI; follow the teacher’s instruction. Her allocation (TQQQ in Roth, cash in Traditional IRA) is correct. Retirees should keep 30% cash, which is approximately equivalent to 15 years’ worth of living expenses. This is not due to pessimism about the market; on the contrary, the market may rise even faster in the future. This is the result of the CLEC investment system’s “DNA evolution” after being tested by the market, making it better able to withstand future extreme risks.
• Question 2: She saw other financial bloggers advocating for market timing using “economic indicator signals” and is worried that buying TQQQ at a market high will lead to significant decay.
  • Teacher James’s Reply: Don’t refer to other people’s investment systems; they won’t be compatible. Within the 433 asset allocation, there is no so-called “decay” problem for TQQQ because the large cash reserve acts as a buffer, and the actual drop of the portfolio during a downturn will be less than that of 100% QQQ.

Tina

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• Question 1: She is 43 and just immigrated to the US. Her 401k and IRA accounts have very little money. To implement the 433 allocation, it seems she can only buy leveraged ETFs in a taxable brokerage account. Is this acceptable?
  • Teacher James’s Reply: Yes. In the early stages when funds are insufficient, you can use a 433 allocation in a brokerage account to maintain a higher Beta and sufficient cash. Although rebalancing will generate taxes, the priority is to “make money first.” However, you must do smart rebalancing every year, because a 30% leveraged position is very risky and cannot be left unattended.
• Question 2: For dollar-cost averaging for an 11-year-old child, the teacher previously recommended QLD. Why not the better TQQQ?
  • Teacher James’s Reply: TQQQ has extremely high volatility. Calculating from the 2000 peak, it might take over 20 years to break even, whereas QLD breaks even faster. For a child’s long-term investment of over 20 years, both are acceptable, but the premise is that you must persist in buying continuously, regardless of market ups and downs. If the investment horizon is uncertain or you want to be more conservative, QLD is the safer choice.

Xin

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• Question: Should high-net-worth families be concerned about the 40% US estate tax? Should they set up an irrevocable trust in advance to avoid it?
  • Teacher James’s Reply: First, the US estate tax exemption has been permanently set at $15 million per person, meaning a couple has a $30 million exemption. Most families don’t need to worry. Second, he does not recommend setting up an irrevocable charitable trust because they usually require an annual donation of 5% of assets, which is a huge burden and constraint on the children. A better way is to use the annual gift tax exclusion (e.g., $20,000) and start gifting early. Over the long term, the growth of the gifted assets will far exceed the estate tax exemption amount.

Bill

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• Question: When the market drops and rebalancing is needed for the TQQQ in a Roth account, if the annual contribution limit of $7,000 is not enough, can funds be converted from a Traditional IRA?
  • Teacher James’s Reply: Yes, that is exactly the correct operation. You can use the annual contribution limit, and if that’s not enough, use a Roth Conversion to supplement the cash.

Lucy

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• Question: She (in Canada) obtained extra cash for investment through a home refinance. Can the interest on this portion of the loan be deducted as an investment expense for tax purposes?
  • Teacher James’s Reply: Only when you sell an asset and generate a realized capital gain do you have taxable investment income against which related expenses might be deducted. If you just hold and don’t sell, there is no taxable event. Canada’s Tax-Free Savings Account (TFSA) is similar to the US Roth IRA, and investment and rebalancing operations should be conducted within it.

Vincent

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• Question (from the comment section): With 30 million TWD in assets, if I withdraw 2% for living expenses, 600,000 per year is not enough. Do I have to wait until my assets double to 60 million to live a good life?
  • Teacher James’s Reply: Not necessarily. You can increase the withdrawal rate by adjusting your asset allocation. For example, you can change the 433 allocation (Beta=1) to a 424 or 514 allocation with a higher cash percentage, which lowers the portfolio’s volatility (Beta<1). Once the volatility is reduced, the annual withdrawal rate can be safely increased to 3% or 3.5%.

Student

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• Question (from the comment section): Is it okay for a 12-year-old child to dollar-cost average into 00670L (a 2x leveraged ETF in Taiwan)?
  • Teacher James’s Reply: If you can ensure continuous investment for over 20 years (e.g., until age 32), it is acceptable. However, if the investment horizon is shorter (e.g., until they become independent at 24), it is recommended to do half-and-half (half leveraged, half non-leveraged) or invest entirely in the non-leveraged ETF to reduce risk.

IV. Highlighted Quotes

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Wealth is a gift, happiness is a human right, and health is the foundation of life. – Teacher James

Context: At the beginning of the class, the teacher explained the relationship between investment and life, emphasizing that our ultimate goals are happiness and health, while wealth is an innate right and a tool to achieve those goals.

Are you living your own life, or a life defined by the external environment? Don’t be led by outside information. – Teacher James

Context: The teacher advised students not to be engrossed in media and online information all day, as that is living a life defined by others, not their own. One should return to their inner self and focus on their own life.

Envy is a really stupid sin. – Teacher James (quoting Charlie Munger)

Context: When answering a student’s question about “comparison,” the teacher quoted Munger’s famous line, pointing out that comparing oneself to others is a source of unhappiness and a foolish act.

You are what you think you are, and that is more important than how others see you. If you don’t even believe in what you are, how can others believe in what you are? – Teacher James

Context: The teacher encouraged students to build self-confidence. He believes that personal value is determined by self-perception, not by external evaluations or labels like academic degrees.

When borrowing money, we don’t fear high interest rates; we fear that the term is too short. – Teacher James

Context: When answering a question about loans, the teacher stressed the importance of the loan term. As long as the term is long enough, even with a higher interest rate, the long-term growth of assets is sufficient to cover the costs, whereas short-term loans carry immense risk.

Be clear about what you want. For everything else that is different from what you want, you don’t need to care, you don’t need to mind, and you don’t need to compare. – Chen Feng

Context: Student Chen Feng shared this perspective when explaining how he avoids the “comparison” mindset. He believes that as long as you are clear about your own goals, you will not be disturbed by external factors unrelated to them.

If you keep following our DNA, your DNA will evolve. This is how you can prepare for potential future risks and changes. – Teacher James

Context: When explaining why he now recommends holding more cash (30%), the teacher compared the CLEC investment system to a biological DNA. This system continuously evolves after being tested by the market, becoming better adapted to various future environments. Therefore, students need to keep learning to acquire this “evolved” and robust system.

If you are 100% in leveraged funds, you might go to hell; it would be like a dream that ends in 30 years. – Teacher James

Context: When reminding students of the risks of leveraged funds, the teacher seriously pointed out that being fully invested in leveraged funds without asset allocation and rebalancing could ultimately lead to a total loss in a major market crash.

V. Summary

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This session once again emphasized the core of the CLEC investment philosophy: investing is simple, mindset is supreme. Starting from a high-level life philosophy, Teacher James guided everyone to shift their focus from the complex noise of the market to the simple purity of their personal lives, fostering the belief to “live for yourself.” The course not only shared profound insights on children’s education and self-worth realization but also delved into the practical application of financial tools like “reverse mortgages” and “pledged loans.” It also provided detailed explanations on the risk control and long-term operational principles of asset allocation (especially the 433 strategy involving leveraged funds). Through active questions and sharing from students, many practical confusions—such as allocation in different accounts, tax issues, and retirement cash flow planning—were clearly answered. Ultimately, the course returned to a fundamental point: build a strong inner self and adhere to the right principles, and wealth will naturally follow.