00530 Believers Believe, Non-Believers Lose! Still Dreaming of Getting Rich with VT?

I. Current Topic

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The core theme of this session is to break free from a labor mindset and establish a rich mindset. Traditional wisdom suggests that one needs to work hard, save money, and invest to get rich, while the core of a rich mindset is understanding how to utilize financial leverage. Teacher James illustrates with specific examples how a small principal (e.g., $30,000) can be used to spend far more than the principal (e.g., $1,000,000) through long-term low-interest borrowing (such as stock-backed loans), while the principal itself compounds in the market over the long term, with its future value sufficient to cover all debts. This financial operation of “borrowing to spend, never selling assets” is where the real big money is, far superior to the “peanuts” earned from stock picking and short-term trading.

II. Briefing Content

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Core Principles and Mindset of Investing

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• Focus on one, eliminate distractions: The only investment target is the Nasdaq 100 index fund (e.g., QQQ). Ignore market fluctuations, financial news, analyst opinions, financial reports, and any other recommended ETFs (such as VT, SPY, VTI, and various 0098x and other “demonic” codes in Taiwan). The teacher guarantees with 40+ years of investment experience that if there were a better target, he would have recommended it long ago.
• Trust in predecessors’ experience, avoid self-trial and error: Beginners should first accept the warning “don’t touch fire,” meaning don’t touch investment targets not recommended by the teacher. Asking questions won’t teach you anything; you should calmly watch hundreds of videos first, and then the questions you have will be genuine. Learning from the wisdom and experience of predecessors (e.g., reading classics like “Tao Te Ching,” “The Bible”) can help avoid detours, which is the cheapest way to learn in life.
• Be highly vigilant of the financial system: You’re alert when you receive a scam call, but you completely trust what financial advisors and insurance agents tell you, and that’s the scariest scam. View the financial industry, insurance industry, and government as a united potential “scam group,” and be vigilant about any products they recommend.
• Advice for newcomers: New friends can start by watching video 00451 on our YouTube channel to build a basic understanding.

Asset Allocation and Account Management

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• Asset Consolidation: All funds and individual stocks should be converted into an asset allocation based on QQQ.
• Account Configuration Recommendations for US Investors:
  • Leveraged Funds (QLD, TQQQ): Should be 99.99% placed in tax-advantaged retirement accounts (e.g., Roth IRA).
  • Cash: Can be placed in any account, but for different purposes.
    • Cash in Roth accounts: Used for “smart rebalancing.”
    • Cash in Stock-Backed Loan Accounts (Pledge Account): Used to reduce account volatility and prevent margin calls.
    • Cash in Taxable Accounts or Traditional IRA: Used to slow down the appreciation rate of that account, which helps with tax planning.
• Warning for Non-US Residents:
  • Do not open accounts with US brokers: Non-US tax residents will face up to 40% estate tax on assets in the US, and accounts may be frozen at any time. The process for descendants to handle inheritance is extremely cumbersome and complex, and lawyer fees may deplete most of the assets.
  • Keep money close: Assets should remain in your country of residence. If you live in Taiwan, keep your money in Taiwan; if you live in Hong Kong, keep your money in Hong Kong.
• Importance of Financial Education: Educating children about finance is more important than academic performance. Children can have poor grades, they can be lazy, but they cannot be ignorant of financial management. In a capitalist society, knowing how to grow assets is more crucial than having a high degree but being a “pauper.” Cultivate independent thinking and judgment.

Breaking Free from a Labor Mindset, Establishing a Rich Mindset

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• Misconceptions of traditional labor mindset: Believing that one must work hard, save diligently, and invest diligently to have money to spend. This is a passive and inefficient mindset that prevents an easy life.
• Core of Rich Mindset – Financial Operations:
  • The Art of Borrowing: The core of borrowing is not to consider the interest rate first, but that the loan term should be as long as possible. If a loan can be repaid principal and interest in 40 years, even if the interest rate is as high as 8%, it’s worth borrowing because inflation and asset appreciation will far exceed the interest cost.
  • Leveraging Small Capital for Large Assets:
    • Example: You currently have $30,000. At an annualized return of 15%, it will grow to nearly $7,000,000 in 40 years. Based on this enormous future asset, you now have the ability to borrow $1,000,000 to spend, as long as this loan is long-term, or even never requires principal repayment (like a stock-backed loan). Your asset growth rate will exceed your debt growth rate.
    • Conclusion: Don’t spend your $30,000; let it snowball. The money you spend is borrowed. This is the essence of financial operations, which involves tens of millions or hundreds of millions of dollars.
  • Stop Focusing on Small Money: Don’t dwell on stock picking, short-term trading, and other behaviors aimed at earning price differences. These are insignificant like sesame seeds compared to the grand scope of financial operations.

III. Q&A Session

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Washington

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• Question 1: Regarding workplace salary, I asked my boss for a $20,000 raise and a $50,000 bonus. My boss agreed to the raise but refused the bonus, which I accepted. I felt that the long-term nature of salary was more important than a one-time bonus. I’d like to ask for Teacher James’s opinion.
  • Teacher James’s Reply: Your decision was absolutely correct. Supervisors are usually willing to give raises because the money belongs to the company, not them personally. A fixed salary increase is permanent, while a bonus is one-time and can be canceled by the company at any time. This aligns with our philosophy of long-term investing, which seeks stable and continuous growth (15% annually) rather than short-term spikes (a single day’s surge). You’ve grasped the key point.

Li

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• Share 1: I only discovered the teacher’s channel in late August and felt like I’d struck gold. Within a week, I invested all my funds into the market and plan to invest the money from cashing out my endowment insurance.
  • Teacher James’s Comment: Excellent.
• Share 2: I shared the teacher’s philosophy with a beauty industry group I founded, hoping my peers could also benefit, as many in our industry receive advance payments from clients, which serves as excellent interest-free cash flow for investment. However, some people left the group as soon as they heard about investing, which made me feel frustrated and regretful.
  • Teacher James’s Comment: This is a very typical reaction. Topics like investing and politics should not be shared casually in non-homogeneous groups. Every group has its inherent attributes, and abruptly introducing unrelated topics, like discussing politics in a group, will inevitably cause a “commotion.” You must anticipate such a reaction. Also, a reminder: for advance payments received by businesses, you need to reserve sufficient working capital for operations and not over-invest.
• Question 1: A client of mine, almost 50 years old, thinks this investment method is too slow and that one doesn’t have many 40-year periods in life. I’d like to hear the teacher’s insights. Also, should the funds from my surrendered endowment insurance all be invested in 00865B (Taiwanese short-term government bond ETF) as cash, or do I need to keep some in a savings account at the bank?
  • Teacher James’s Reply: Regarding your client’s question, this is a difference in mindset. For fund allocation, cash does not need to be kept in the bank. 00865B has excellent liquidity; if you sell today, the money arrives the day after tomorrow, so it can be used entirely as cash. For daily expenses, try to use credit cards, and then sell 00865B once to repay the bill. Your subsequent income can be vaguely and randomly invested into 00662, 00670L, and 00865B, no need to be overly precise, for example, rotating among the three every four months.

Lilian

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• Question 1: I’m 53. Due to government housing policies, I’m considering selling my self-occupied home in Taoyuan at a low price and renting instead, which would give me about 5 million in cash. Should I use this money to pay off my car loan and personal loan first, and then invest the remaining money using a 70/30 or 60/13/30 strategy? Also, I pay a lot for insurance every month, and some policies are nearing their maturity. What should I do?
  • Teacher James’s Reply: You can sell the house and invest the money. But absolutely do not use the money from selling the house to pay off any loans. Borrowed money is “someone else’s chicken”; let it lay eggs. Your own money is “your own chicken”; let it lay eggs too. Use your future salary from re-entering the workforce to make monthly installment payments. For insurance, immediately, right now, surrender all of it; take back whatever you can. As long as you stop paying, you win, and you’ll have tens of millions more in the future.

Tina

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• Question 1: Regarding the order of placing leveraged funds in accounts, why would Traditional IRA/401k be prioritized over a Brokerage Account? This seems to contradict the idea of “putting cash in a Traditional account to slow appreciation.” Moreover, future withdrawals from Traditional accounts are taxed at Income Tax rates, which are higher than Brokerage’s Capital Gain Tax rates.
  • Teacher James’s Reply: This question is more complex. The core reasons are: 1) Leveraged funds cannot be used for stock-backed loans. Placing leveraged funds in a Brokerage account would “pollute” this account, which might be used for pledging in the future. 2) Leveraged funds have high volatility and will inevitably require rebalancing, which would incur taxes if done in a Brokerage account. Although the future tax rate in a Traditional account is higher, it provides a “tax deferral” effect, allowing you to operate freely internally without tax worries. More importantly, you don’t need to allocate leverage in every account. The core is to maintain the overall investment portfolio’s Beta value at 1.0. You can achieve Beta 1.0 through leveraged funds in Roth accounts and cash or QQQ in Traditional/Brokerage accounts. This results in the same return but with a superior tax structure and risk control.

Jenny

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• Share 1: After listening to the teacher’s class, I decided to cancel a life insurance policy I had paid for 7 years, at CAD 20,000 per year. Although I lost CAD 100,000, I felt relieved. My husband also agreed because I calculated for him that even if we only got back a portion of this money, its value in 40 years would far exceed the CAD 1,000,000 insured amount. I don’t regret my past decisions because they were made with the knowledge I had at the time, but now my understanding has upgraded.
  • Teacher James’s Comment: Excellent sharing and decision. Having tens of millions in assets while alive is far more meaningful than receiving a million in insurance after death.
• Question 1: I’m 50 and plan to sell an investment property, expecting CAD 900,000 in cash. How should I allocate this large sum into my planned configuration of 40% QQQ, 15% QLD, 10% TQQQ, and 35% cash?
  • Teacher James’s Reply: For someone nearing retirement, safety is paramount. First, calculate how many years of living expenses you’ll need after retirement and prepare at least 10-15 years of cash. For example, if you spend 60,000 a year, you’ll need 600,000 in cash for 10 years. Set this money aside first, and then allocate the remaining funds according to your asset allocation ratio.

Peter

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• Share 1: I spent two weeks manually typing the 120,000 words of Mr. Huang Pei-Yuan’s book “The Bible of Financial Management,” published in 1996, into an electronic version because its content is highly consistent with the CLEC philosophy. I want to share it with everyone, but I have concerns about copyright.
  • Teacher James’s Reply: Thank you very much for your effort. Sharing it internally within our closed study group is fine; it’s not public dissemination and doesn’t involve profit. You can post it, noting “Please inform us if there is any infringement, and it will be immediately deleted.”

Damon

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• Share 1: My short-term trading for the past 10 years ultimately amounted to nothing, but in the past two years, I switched to long-term QQQ investing, yielding substantial returns.
• Question 1: I leveraged an additional NT$15 million from real estate in Taiwan, with an interest rate of 2.88%, renewed annually, with no principal repayment required. Is it feasible to invest this money and then use a portion of the investment profits to pay the interest, continuing this operation? Also, I am currently in the US, with most of my assets in Taiwan. Is this long-term plan suitable?
  • Teacher James’s Reply: Short-term operations are feasible. But in the long run, if you and your children will eventually settle in the US, assets should ultimately be transferred to the US. This is primarily to simplify estate planning and avoid Taiwan’s relatively high estate tax on large cash assets. The US estate tax exemption is much higher than Taiwan’s. You need to be aware of the potential risks and penalties of not declaring overseas assets to the IRS and plan accordingly.

Jun

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• Question 1: I’m new to the teacher’s philosophy and plan to transfer all my funds. Should a large sum (e.g., $1 million) be invested all at once, or in batches?
  • Teacher James’s Reply: Immediately, right now, buy all at once. Investing in batches leads to poorer performance and is a tormenting process. You can adopt a 70/30 strategy, meaning 70% of the funds are bought immediately, and the remaining 30% is held as cash (invested in a money market fund). Don’t be afraid of buying at a high point; looking back a few years from now, any current price will seem low.

Dian

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• Question 1: After putting all my cash into the market, should my future living expenses be paid by taking out a 2% stock-backed loan?
  • Teacher James’s Reply: Yes, that’s the correct approach.
• Question 2: US stocks might enable 24-hour on-chain trading in the future. How does this affect us long-term investors?
  • Teacher James’s Reply: No impact. This is just technological progress, like moving from phone orders to online orders. It doesn’t change the long-term investment strategy itself.

Xi

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• Question 1: In the US, for investment purposes, would forming one’s own company (e.g., LLC) be better than individual investment? For example, one could establish a Solo 401K, etc., to put more tax-free funds.
  • Teacher James’s Reply: Absolutely not. This is an unnecessary complication that will only bring endless trouble, such as accounting, tax filing, company maintenance, etc. For long-term investors who don’t sell, a personal Brokerage account is already very tax-optimized, so there’s no need to complicate things for a little extra Roth space. The benefits are minimal, and the drawbacks are numerous.

Curiosity

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• Question 1: In the teacher’s simulation, the final asset multiple of the 433 configuration without pledging (5.8x) was higher than that with pledging (4.somethingx). So why should we still choose stock-backed loans?
  • Teacher James’s Reply: The simulation results depend on the historical market path. Our simulated period (starting from the 2000 high) was a “volatile market” with a sharp ten-year decline followed by a slow recovery. In such a market, “mindless rebalancing” (without pledging) performs better because it dares to buy heavily during downturns. However, in a long-term bull market (e.g., 1980-2000), “smart rebalancing” (with pledging) would outperform. The most important reason we choose pledging is not to pursue the highest return, but to ensure survival in extreme markets and avoid liquidation.
• Question 2: When actually taking out a stock-backed loan, where does the monthly interest come from? Is it reserved from the $200,000 borrowed?
  • Teacher James’s Reply: No. The interest should also be borrowed. Your total loan limit is very high (e.g., $6 million on $10 million in assets), and you only borrowed $200,000. The monthly interest, a few hundred dollars, can be directly borrowed from your available credit limit. This way, your debt will increase slowly, but your assets will grow at a faster rate.
• Share 1: A supplementary piece of information: In the US, if underage children have earned income, Roth IRA accounts can be opened for them, starting compounding early.

Nhu

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• Question 1: Regarding car loan interest at 8%, life insurance, and the Canadian ETF HXS.TO.
  • Teacher James’s Reply: Car loan interest at 8% is too expensive. Don’t take out a loan at a car dealership; consider buying a Tesla, their interest rates are much lower. Life insurance is for dead people; living people don’t need it, it’s meaningless. Canadian investors can buy HXS.TO.

Vincent

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• Question 1: Can I exclude cash from my 662 asset allocation?
  • Teacher James’s Reply: No, you must have 30% cash. This is a very important part of asset allocation, used to stabilize the portfolio and hedge against risk.

Other

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• Question 1: Can pension and Social Security be counted as part of the cash component in asset allocation?
  • Teacher James’s Reply: No. They are your cash flow, not your cash assets. They can reduce the amount you need to withdraw from your investment portfolio annually, but they cannot replace the cash position that acts as a stabilizer in asset allocation.

IV. Key Insights

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You currently have 300 dollars, you should be able to spend 10,000 dollars. – Teacher James

This insight concisely explains the power of financial leverage. Your purchasing power should not be determined by your current cash, but by the potential future value of your assets.

Hard work has no future… Making money work hard is what truly matters. – Teacher James

This insight overturns traditional values, emphasizing the importance of passive income and asset appreciation. The core is to make capital work for you, not the other way around.

You’re even vigilant when you receive a scam call, but you completely trust what your financial advisor tells you, and that’s what’s truly terrifying. – Teacher James

This insight uses a strong contrast to warn investors that they must maintain independent judgment and critical thinking towards all financial institutions’ advice, not blindly trusting them.

The financial industry, the insurance industry, and the government, combined, are a scam group. – Teacher James

This insight, in an extreme way, reminds investors to be highly wary of complex products recommended by all financial institutions, as their goal is usually to earn your fees and commissions, not to serve your best interests.

The Beta is the same, the volatility is the same, the return rate is the same. – Teacher James

This insight is the scientific core of asset allocation. The return of an investment portfolio is determined by its overall market risk exposure (Beta), not by how many “magical” leveraged products it contains.

I actually didn’t feel much pain, discomfort, or regret… because that was the decision I made based on my understanding at the time, but now I’m different. – Jenny

Jenny’s reflection when sharing her decision to surrender a loss-making insurance policy embodies the process of an investor’s mental maturation: not being trapped by past sunk costs, but bravely making the right decision based on a higher level of understanding now.

If it’s not a truth you’ve realized yourself, there’s no extra profit in it for you, because it belongs to others. – Teacher James

Emphasizes the importance of independent thinking and truly understanding investment philosophy. Following the crowd or using strategies one doesn’t understand, even if profitable in the short term, cannot be sustained in the long run because it doesn’t fall within one’s own circle of competence.

V. Summary

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This gathering was a profound course in reshaping financial intelligence. Teacher James fundamentally challenged the traditional notion of “work hard, save money to get rich,” clearly advocating a rich mindset centered on “financial operations.” Through the strategy of “borrowing to consume, never selling assets,” investors can break free from dependence on active income, allowing assets to calmly compound in the market over the long term. The Q&A session served as a rich case study, applying this core concept to diverse real-world scenarios such as salary negotiations, insurance decisions, large-sum asset deployment, and cross-border asset management, providing listeners with extremely valuable practical guidance and mindset building. The entire sharing was not just about “technique” (how to invest), but more about “philosophy” (how to think about wealth).