00532 Retirement Cash Flow Options: Reverse Mortgages; Only by Evolving Your Investment Genes into a Higher DNA Can You Survive in a Hostile Market Environment.

I. Main Topic of This Session

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The core theme of this session is the evolution of investors. Teacher James compares investors to biological organisms, proposing that they need to evolve from “single-celled lower animals,” easily eliminated by market fluctuations, into “higher animals” capable of withstanding any market environment. This evolution is achieved by learning the correct investment philosophy and risk management. The key to this transformation is a firm belief that the market will rise in the long term, adopting a “buy, hold, never sell” strategy, and establishing an asset allocation that can withstand extreme risks (such as a market drop of 80% lasting for 10 years).

II. Briefing Content

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Core Investment Philosophy: The Market Always Goes Up

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• Belief is Paramount: The market has no peak; it only goes higher. It won’t hit a ceiling; it will only rise ceaselessly. Investors should ignore external analysis and short-term market turmoil because no analysis can beat the power of “holding shares and doing nothing.”
• The Ultimate Strategy: The simplest strategy is the most effective—buy, hold, and never sell. As long as you do this, you will become wealthy.
• Future Outlook: QQQ is now near 600, will soon reach 1000, and in the future, we will see 6,000, and even 60,000. Human progress is limitless, and the market’s growth has no ceiling.
• Advice for Newcomers: New friends, please start by watching video 00451 on our YouTube channel.

The Evolution of Investors: From Single-Celled to Higher Animals

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• Extinction of Lower Animals: The vast majority of investors in the market are “single-celled” or “lower animals.” They have not been tempered by the harsh market environment and lack the ability to cope with extreme risks. Therefore, in every financial crisis (such as the 1996 Asian Financial Crisis, the 2000 Dot-com Bubble, and the 2008 Subprime Mortgage Crisis), these “species” are wiped out in batches.
• Survival Principles of Higher Animals: Becoming a “higher animal” means possessing an investment system that has been tested over the long term and is capable of evolving. The core lies in truly understanding risk and building an asset allocation that can withstand the worst-case scenario (a market drop of 80% lasting for 10 years).
• CLEC’s Positioning: The philosophy and system of our channel are a “higher animal” system, tested and evolved over 40 years in the market. We directly elevate our students to the highest level of investing, allowing them to avoid the fate of “slaughter” and “extinction” at the bottom of the market. We are not engaging in a brutal “Normandy Landing” battle; instead, we are “taking the elevator” directly to the Mount Everest of wealth.

Tools and Principles for Asset Activation

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• HELOC (Home Equity Line of Credit) vs. Reverse Mortgage:
  • HELOC: Suitable for young people with stable jobs. It poses a risk for retirees without a steady income, as the bank may require principal and interest payments after a few years. If the market is down at that time, it will create immense cash flow pressure.
  • Reverse Mortgage: More suitable for older individuals without a stable salary. It converts real estate into a steady monthly cash flow, significantly enhancing the security of retirement life. This money can be used for living expenses or reinvested, making it an effective way to activate property assets.
• Advantages and Red Lines of Securities-Based Lending (Pledging Stocks):
  • Advantage: The process is convenient and can be done with a few clicks, without needing the bank’s approval.
  • Core Principle: Strict risk control and asset allocation are mandatory. The amount you can borrow is linked to your cash ratio:
    • 30% Cash: Can use 2%-3% of assets annually.
    • 40% Cash: Can use 3%-4% of assets annually.
    • 50% Cash: Can use 4%-5% of assets annually.
  • Serious Warning (for U.S. Investors): In the United States, it is absolutely forbidden to reinvest money borrowed from a securities-based loan back into a securities account. This is a serious violation. If discovered, the lending privileges may be revoked, and immediate repayment may be demanded, leading to a financial catastrophe. Regulations in Taiwan permit reinvestment, but it is strictly prohibited in the U.S.
• Principles for Using Credit Loans:
  • Short-term credit loans should be repaid with a stable salary to ensure healthy cash flow.
  • Beware of the “High Dividends Covering Loan Interest” Trap: Many experts advocate taking out loans to buy high-dividend products. While the dividend yield (e.g., 7%) may seem higher than the loan interest rate (e.g., 3%), they ignore that repayment requires both “principal and interest.” The dividend alone cannot cover the monthly payment, which can easily lead to a cash flow crisis.
  • Example of Flexible Use: For instance, if you need $100,000 to buy a car, you could apply for a credit loan of $800,000. Use $100,000 for the car payment and invest the remaining $700,000. Later, you can use a securities-based loan from your investment portfolio, borrowing 2% annually to help repay the car loan, thus achieving more efficient use of your assets.

Wisdom and Insights from “The Bible of Financial Management”

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• The Divide Between the Rich and the Poor: A key factor distinguishing the two is whether they have been taught the correct concepts of financial management. Wealth is a “natural gift” that everyone can possess.
• The Essence of Investing: Investing is not a field where more diligent research leads to better performance. The key is having the right direction and a deep understanding, after which it becomes “autopilot.” 99.99% of external information is not worth listening to.
• The Prerequisite for Wealth: You must invest your assets in high-return targets. This is why we choose QQQ, not SPY or VT, because the latter’s returns will make you relatively “poorer.”
• CLEC’s Mission: If the government wants to narrow the wealth gap, it should instill the correct financial management concepts in the public. This is precisely what CLEC is doing. We are committed to financial investment education as our social mission.

III. Q&A Session

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Kat

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• Sharing: I found at today’s seminar that the biggest problem for most people is that they “can’t hold on.” This might be due to being stuck by certain “limiting beliefs.” I suggest that when you are still a “seedling,” you should not discuss our philosophy with outsiders who don’t understand it. They will only tell you to “take profits” or “stop loss.” Regardless of whether the market goes up or down, the external environment is not conducive to long-term holding. If you have questions, you should come back and ask the teacher or the “higher animals” in the community.
  • Teacher James’s Comment: Absolutely correct. We are the “higher animals” of investing. Isn’t it ridiculous for a higher animal to ask a lower animal for a prescription? It’s like a Rolls-Royce owner asking a financial advisor who rides a motorcycle or takes the bus for financial advice. Your circle determines your cognition. If you have questions, you must come back and ask those who have already made big money in this market.

Bruce

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• Sharing 1: I am very excited that my family (son, daughter-in-law) and I have all joined the CLEC family. I believe it’s a “treasure trove”—the more people who join, the more treasure there is, rather than a cake that gets smaller as it’s divided.
• Sharing 2: I reviewed the videos where the teacher talked about “risk management” and “the person hiding in the cave” (session 00523). I think they are incredibly valuable and have listened to them many times. I’ve realized that to become truly wealthy, one needs to experience several bear markets to achieve a state of inner calm.
• Sharing 3: Regarding the teacher’s comment that “whether you leave 20% or 30% cash in the end is not important,” my understanding is that it depends on the size of one’s total assets. For someone with assets of 1 billion, leaving 5% cash might be enough to live on for 20 years.
  • Teacher James’s Reply: Your understanding of the cash ratio is correct. The core idea is to calculate how many years your remaining cash can support your lifestyle; we typically use 10-15 years as a benchmark. For example, with 30% cash, if you use 2% per year, it will last 15 years; if you use 3% per year, it will last 10 years. The teacher also praised Bruce’s proactive learning attitude, believing he will definitely succeed.

Janie

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• Questions (Canadian Investor):
  1. In my IBKR account, is it correct to directly buy HXQ (the Canadian version of QQQ) in Canadian dollars as my core fund?
  2. For the cash portion, I want to buy a non-dividend-paying Money Market fund. I could only find HSAV to buy with Canadian dollars, but its price fluctuates, which I don’t quite understand. Should I convert to USD and buy BOXX instead?
  3. Someone reminded me that Canadians holding U.S. assets face estate tax issues. What are your thoughts on this?
  • Teacher James’s Reply:
    1. Buying HXQ with Canadian dollars is correct.
    2. It’s recommended to convert most of your cash (e.g., 25% of total assets) to USD and buy BOXX, as it has a higher interest rate and is non-dividend-paying, which avoids tax complications. At the same time, keep a small portion (e.g., 5%) of Canadian dollar cash in a Canadian money market fund for emergencies.
    3. Estate tax is a valid concern, but it can be effectively managed by opening a “Joint Account.” Since you have already opened a joint account with your husband, you don’t need to worry too much about this issue. For leveraged funds, Canada’s QQU and TQQQ.TO are also usable options.

Haiwai

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• Sharing: I’m 34 years old. After my assets reached 10 million TWD last year, I went all-in on 00662. I’ve been through two downturns but my conviction is stronger, and I haven’t sold a single share. He pointed out that many people in Taiwan are superstitious about 0050, but in reality, nearly 60% of 0050 is TSMC, making it highly concentrated in risk, far more so than QQQ. The entire market cap of the Taiwan stock market is less than that of Apple alone.
• Question: I’m concerned about the risk of war across the Taiwan Strait. I’ve researched and found that historically, even in cases of defeat or occupation, the occupying force usually recognizes the stock assets of the citizens. Is this understanding correct?
  • Teacher James’s Reply: Your understanding is correct, but more importantly, the 00662 (QQQ) we invest in is a U.S. asset, holding the top 100 companies in the United States. Even if local assets in Taiwan are damaged, our U.S. dollar assets are safe. Therefore, it’s more important to be prepared for personal safety (e.g., ensuring your passport is valid). From another perspective, when Taiwanese people invest in U.S. assets, it’s a “patriotic” act because it helps to activate Taiwan’s vast foreign exchange reserves, creating greater value for the entire society.

Juan

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• Question: I currently have a 6-1-3 allocation (60% core fund, 10% leveraged, 30% cash). For my monthly salary contributions moving forward, can I directly buy only the leveraged fund 00670L, as long as I ensure the total value of the leveraged fund does not exceed the core fund and cash, and then do a rebalance once at the end of the year?
  • Teacher James’s Reply: Yes, that’s perfectly fine. No problem at all.

Watson

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• Question 1: QQQ and TQQQ are both at all-time highs right now. Would it be better to rebalance now rather than at the end of the year or early next year?
  • Teacher James’s Reply: Don’t have your own preconceived notions. If QQQ rises to 800 by the end of the year, do you think now is better or the end of the year? So just stick to your plan. Don’t try to time the market.
• Question 2: Last year, I converted $100,000 from a Traditional IRA to a Roth IRA. Should I continue the next conversion in January 2026?
  • Teacher James’s Reply: Yes, that’s correct.

Paul

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• Sharing: Quoting a book, he said that index investing allows people to focus on the more important “investment strategy decisions,” namely asset allocation and psychological fortitude. He shared his change in mindset after completing his allocation: he used to get emotional over trivial life matters (his child not doing homework, arguments with colleagues), but now he feels “it doesn’t matter, it’s whatever, anything is fine.” This is because he knows he will be wealthier than them in the future, and his heart has become very calm and strong.
  • Teacher James’s Reply: This is exactly a happy state of life.

Damon

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• Sharing: He shared the huge shift in his perspective after investing. He no longer requires his children to pursue high-paying jobs but encourages them to do what they love, because he can provide a solid backing for them through his investments. He explained compound interest to his son using the story of “raising a golden chicken.” After listening, his son said, “Dad, you make me feel that spending money is not funny.” He believes this financial liberation has made him a “complete person.”
  • Teacher James’s Reply: Very well said. It’s normal that “having money makes us find spending money boring.” When money is no longer a constraint, life is not boring; you can do anything meaningful. This is true for people like Buffett and Musk. The ultimate purpose of wealth is to gain freedom of the mind, to define your own value rather than being defined by society’s values.

Key Q&A from the Chat Room

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• Question: How can U.S. users join the Taiwan LINE group?
  • Teacher James’s Reply: LINE has regional restrictions. You need to register with a Taiwanese mobile number. Consider buying a Taiwanese prepaid card or eSIM to solve this.
• Question: If I already have enough cash to cover 15-20 years of living expenses, do I still need to rebalance?
  • Teacher James’s Reply: You don’t have to, but continuing to rebalance would be safer because, during a major market crash, the drawdown of leveraged funds can be very large.
• Question: What are your thoughts on the relationship between studying and working?
  • Teacher James’s Reply: You study for your own life, not for a job or for investing. Of course, in a utilitarian society, finding a decent job helps gain social respect. Just seek a balance.
• Question: How should one invest in a 401K account?
  • Teacher James’s Reply: You should max it out, including the Roth 401K. For investment choices, you should select Large-Cap Growth funds, not Mid-Cap Growth, because the former performs better in the long run.

IV. Insightful Quotes

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We are the higher animals of investing, so isn’t it ridiculous for a higher animal to ask a lower animal for a prescription? – Teacher James

This view emphasizes the importance of cognitive circles; investors should learn from those who have already succeeded, not listen to the advice of ordinary people in the market who lack successful experience.

Investing is a very special thing. The more you study and research, the worse your results might be… The harder you work, the poorer your performance. – Teacher James

This view points out the difference between investing and traditional work. In the field of investing, the right direction and philosophy are far more important than blind effort.

When faced with a market that drops for 10 years, and the decline is 80%, will your asset allocation still keep you alive? This is the most important thing for an investment that lets you sleep well at night. – Teacher James

This is the ultimate test of risk management and the cornerstone for building a secure asset allocation.

It doesn’t matter, it’s whatever, anything is fine… because I know I will be richer than you all in the future. – Paul

A student shares the powerful inner strength and transcendent mindset that comes with investment success. The certainty of wealth allows one to face life’s trivialities with composure.

Dad, you make me feel that spending money is not funny. – Damon’s son

This phrase vividly reveals the ultimate power of compound interest and long-term investing—when wealth grows to a certain point, the thrill of consumption itself greatly diminishes, and people turn to pursue more meaningful life goals.

Investing in the United States is a patriotic (to Taiwan) act… you are essentially helping Taiwan’s central bank solve the problem of its foreign exchange reserves and activating those assets. – Teacher James

This perspective assigns a positive social significance to individual investment behavior from a macroeconomic point of view.

For rich people, spending money is moral; not spending money is immoral. – Teacher James

This view encourages wealth holders to promote economic circulation through consumption, which is a social responsibility.

Longevity is the cornerstone of wealth, the most fundamental thing. – Teacher James

Time is the best friend of compound interest, and a long and healthy life is the most important prerequisite for achieving exponential growth of assets.

V. Summary

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This session was a deep dive into the evolution of investment philosophy. Through the vivid “animal evolution” metaphor, Teacher James clearly analyzed the fundamental difference between successful and unsuccessful investors. It’s not about how sophisticated their techniques are, but whether they can build a powerful system that can withstand extreme risks and endure through time cycles. The core strategy remains the beautifully simple “buy and hold” of a quality index fund (QQQ). At the same time, the course provided very practical guidance on asset activation and warned of the associated risks. Ultimately, investing is not just about accumulating wealth, but about gaining freedom of the mind to face life with composure and realize one’s true value.