I. Topic of the Session#
The core theme of this session is the flexibility of asset allocation and the survival rule for long-term investment. Teacher James emphasizes that asset allocation is not about rigid, unchanging numbers but should be dynamically adjusted based on an individual’s cash needs, capital size, and risk tolerance. The central idea is that investors should first determine their cash holding ratio, which will dictate the risk exposure (Beta value) range of their portfolio and their sustainable annual withdrawal rate. For long-term investors, the most important goal is to “survive,” ensuring they can endure the long-term fluctuations of the market, rather than blindly pursuing the highest rate of return.
II. Briefing Content#
Market Information & Community Updates#
- New QQQ ETF in Hong Kong: The Hong Kong Stock Exchange has added a new ETF directly listed by Invesco, ticker 3455, which tracks the Nasdaq-100 index. This provides Hong Kong investors with a direct channel to invest in QQQ.
- Community AI Creations & Resource Sharing:
- Members are using AI and other tools to spread CLEC’s investment philosophy in diverse forms. For example, the “Investment Translator” channel converts audio content into interview programs, and the “Grandpa Chenfeng Tells Stories” channel provides financial literacy education for children.
- The teacher also mentioned podcasts like “A-Liang’s Life,” praising their affability and humor. He encouraged more people to use AI tools (like NotebookLM, which he tried himself to quickly convert YouTube links into new videos) to create their own channels and jointly promote this “capitalist awakening” revolution.
Core Sharing: Flexible Asset Allocation Strategy#
Teacher James focused on explaining two pages from the handout on asset allocation, emphasizing their flexibility and core principles:
The Cash Ratio Determines Everything:
- Your asset allocation should first be determined by your cash ratio, which will set the Beta value range of your portfolio and the percentage of your annual withdrawable amount.
- Basic Principle: The position in leveraged funds should not be higher than your cash position, nor should it be higher than your position in the underlying ETF (QQQ). For example, a 433 allocation (40% QQQ, 30% leveraged, 30% cash) is considered quite aggressive.
- Examples of Allocations and Withdrawal Rates for Different Cash Ratios:
- 30% Cash: Beta range between 0.7 and 1.0.
- With a Beta of 1.0 (e.g., 433 allocation), the maximum annual withdrawal is 2%.
- With a Beta of 0.7 (e.g., 703 allocation), the annual withdrawal can be 3%.
- 40% Cash: Beta range between 0.6 and 0.9.
- With a Beta of 0.9 (e.g., 334 allocation), the annual withdrawal can be 3%.
- With a Beta of 0.6 (e.g., 604 allocation), the annual withdrawal can be 4%.
- 50% Cash: Beta range between 0.5 and 0.7.
- With a Beta of 0.5-0.6 (e.g., 505 or 415 allocation), the annual withdrawal can be 5%.
- With a Beta of 0.7, the withdrawal rate should be reduced to 4%.
- 30% Cash: Beta range between 0.7 and 1.0.
Dynamic Management of the “15-Year” Cash Reserve:
- Ideal State: Hold enough cash to cover 15 years of living expenses to safely navigate any market downturn and consolidation period, while waiting for the investment portion to double.
- Practical Application: If you don’t have a 15-year cash reserve initially (e.g., only 10 years), you should adopt the following strategy:
- When the market rises: Convert profits from investments (especially leveraged funds) into cash to gradually build your cash reserve up to the 15-year level. Once the 15-year mark is reached, there’s no need to add more.
- When the market falls: Absolutely do not invest your only 10 years (or less) of cash into the market. You cannot predict how long a bear market will last, and exhausting your cash too early will force you to sell stocks at a market low, leading to investment failure.
- Core Philosophy: The most important thing in long-term investing is to survive, not the rate of return. A slightly lower rate of return is acceptable; over a long period, your wealth will still be substantial.
Other Important Viewpoints#
- Recognize the Nature of Financial Practitioners: There is a conflict of interest between bank wealth managers, insurance agents, and their clients. Their goal is to sell products, not to maximize the client’s interests. Investors need to strengthen their own financial literacy and use the bank’s services (like loans) rather than buying the financial products they push.
- Advice for the Elderly: Older friends (e.g., 70-80 years old) should spend more money to enjoy life rather than making asset growth their primary goal. With allocations like 505, 415, or even 316, the annual withdrawal rate can be increased to 5-6%.
- Be Greedy When Others Are Fearful: Looking back at the market bottom in October 2022 (QQQ around $260, lowest at $254), there was extreme panic in the market, but it proved to be an excellent buying point. Investors need to train themselves to remain greedy when others are fearful.
- Ignite a Capitalist Awakening: Teacher James believes that the essence of capitalism is the exploitation of labor and emerging nations by capitalists and developed countries through the system. We must learn their “strong ships and powerful cannons” of financial operations to change the destiny of ourselves, our families, and even our nation.
III. Q&A Session#
Derek#
- Question: My son is a senior in college and invests NT$1,500 monthly into 00670L (a 2x leveraged QQQ ETF). He just started two months ago. I’m wondering if he needs to rebalance now, given the small amount, or at what amount should he start?
- James’s Response: With a small initial amount, just keep investing. When the market value of 00670L accumulates to about NT$1 million, he can start asset allocation, for instance, by shifting to a 433 (40% underlying, 30% leveraged, 30% cash) portfolio. As his salary increases, he can continue to invest and perform a smart rebalancing once a year at year-end. Additionally, the teacher encouraged young people, noting that they live in an era of rapid technological development where investment returns are higher than in the past. As long as they know how to invest, their future will be brighter.
CitizenForum#
- Question: If we encounter another crisis like the financial tsunami, will there be any warnings or signs? And what should we do if it really happens?
- James’s Response: Our investment principle is “buy when you have money, never sell.” Since we don’t sell, it doesn’t matter if there are signs or not. We never predict the market, so I can’t answer what the signs would be.
Willy#
- Sharing: Speaking for the first time, 30 years old, working in the Southern Taiwan Science Park. He shared his journey from investing in individual stocks, to the 0050 ETF, to discovering leveraged ETFs and adopting the teacher’s 433 allocation. He fully agrees with the teacher’s entire system (asset allocation, smart rebalancing, stock pledge) and aims to retire at 40 with NT$30 million. He quoted the ancient text Discourses on Salt and Iron: “Wealth lies in strategy, not in physical labor; profit lies in market conditions, not in diligent farming,” to affirm the importance of financial knowledge. He sees the teacher as his “rich dad” and is very grateful.
- Question: He shared that he might be fated to be single (“孤寡命”) but still wants his parents to retire early. He was also curious and asked the teacher how he chose his spouse when he was young.
- James’s Response:
- Encouragement to Speak: He encouraged everyone to practice public speaking, as logic and expression are powerful tools for changing the world.
- About Destiny: An astrological chart tells you your life’s lessons and risks to be aware of, not a fixed outcome. A “fate of solitude” is a reminder to overcome this issue by making more friends and building good relationships, not by resigning to it.
- About Love: The core is to “become someone worthy of being loved.” Don’t set conditions for your partner; improve yourself first to become that person. True love is unconditional giving (“I do”). Learn to listen to your partner and don’t keep score. If you first become a person worthy of love, your partner will naturally love you.
- James’s Response:
Haoqing#
- Sharing: He discussed Trump’s proposed $100,000 application fee for H1B visas. He believes this reflects that America now needs the “elite of the elite,” as many basic jobs will be replaced by AI. However, he thinks that even if one cannot come to the US to work, it’s fine. We can invest in QQQ/00662 and become the “bosses” of these American geniuses, which might be a better choice.
- James’s Response: First, he corrected the understanding of the policy, explaining that the $100,000 fee is mainly for direct overseas hires whom the company doesn’t know, not for graduates who studied in the US. This actually benefits international students in the US. More importantly, he stressed the importance of philosophical thinking: before judging an opinion, first stand in the other person’s shoes to understand why they say it, instead of immediately refuting it. Finally, he humorously taught him how to express love to his wife, starting with silently chanting it to himself as a form of self-hypnosis.
Demo#
Sharing:
- Regarding the H1B news, he noticed that the Chinese-American community initially shared it frantically without understanding the facts. The subsequent clarification from the White House stated the policy mainly targets outsourcing companies. This validates the teacher’s point that “market information is garbage, ignore it.”
- Learning financial literacy requires patience. “Don’t be in a hurry.” He observed that the pace of life in the US is slow and encouraged everyone to learn slowly, one step at a time.
- Borrowing is a great tool, but it requires accumulated financial wisdom. When your capital is large enough, banks will chase after you to lend you money. At that point, you won’t haggle over a 2.1% versus 2.5% interest rate, because your investment return will far exceed it.
- He offered a brilliant analogy: “Strive to become the ’eternal QQQ’ in your partner’s words,” someone they will hold for the long term and never sell.
- James’s Response: Strongly agreed. “Surviving is the most important thing, don’t be in a hurry.” He warned those who have suffered heavy losses in short-term trading or futures not to expect to quickly recover their losses using our method, as this is very dangerous. For those nearing retirement, he also advised against borrowing money to invest due to the high dual risks of repayment pressure and market volatility.
A-Liang#
- Sharing: Visiting the live session for the first time, he shared how he discovered the CLEC channel. He was already doing index investing and using credit and leverage but felt like he was always “stepping on the gas” without brakes or an airbag. The teacher’s “underlying + leverage + cash” allocation method gave him a complete safety system. He retired this month and has started to emulate the teacher by meeting people offline to discuss investment philosophy and help others. He concluded by singing a song for everyone.
- Question: Why is the teacher’s channel called “CLEC”? Does it have a special meaning?
- James’s Response: He highly praised A-Liang’s act of giving back to the community after retirement and encouraged more people to join this “capitalist awakening” revolution. He explained that CLEC stands for California Life Enrichment Club.
Michael#
- Sharing:
- His mindset towards market fluctuations is now “as calm as still water.” He feels peaceful regardless of ups and downs, contrasting with his friends who buy individual stocks and agonize over buying and selling all day. He feels very fortunate.
- He got married and had children in his 40s, feeling like his life had just begun to open up, giving him more motivation. He invested NT$1 million for his child at birth using a 433 allocation, so the child could witness the effectiveness of this investment logic firsthand from a young age.
- After learning the teacher’s investment philosophy, his perspective on things has changed. He no longer limits himself because of “not enough money” or “it’s too expensive,” and is more willing to invest in meaningful things and personal growth.
- James’s Response: He praised his sharing and said that his wife and child brought him “wealth” and that it was a very good fate.
Mako#
- Question:
- I’m preparing to sell my property in Japan. Should I wait for the money to arrive before allocating it with my existing funds, or can I consider this expected income as cash now and adjust my investment positions in advance?
- I’m interested in Zi Wei Dou Shu (Chinese astrology). What do the stars “Di Kong” and “Di Jie” in the self-palace represent? And is “synastry” (comparing charts) for couples useful for determining fate?
- James’s Response:
- Allocate the money after it arrives. Don’t act in advance, as anything can happen in the process. There’s no need to predict.
- About Astrological Charts: Don’t worry too much about minor stars like Di Kong and Di Jie. The most critical thing to look at is which palace the “Huà Jì” (Transforming Envy/Doom) star is in. Huà Jì represents your life’s lesson and weakness, something you need to work hard to overcome, not your destiny. For example, if Huà Jì is in the marriage palace, it’s a reminder to put effort into managing your marital relationship. Looking at your partner’s chart is not for “synastry” but to understand their weaknesses and challenges, thereby fostering more empathy.
Peter#
- Sharing: He expressed gratitude to the teacher, feeling very lucky to live in the internet era, able to learn valuable financial concepts across geographical boundaries. He fully agrees that technology will continue to advance, which is a reason to be firm in investing in high-tech (QQQ).
- James’s Response: He encouraged everyone to buy a Tesla and shared the logic of “spending money makes you richer”: by making purchases with a loan and investing the 3% cash back from a credit card, the compound growth of this small amount over 40 years will far exceed the interest cost of the original purchase. Therefore, the more you spend (provided you can afford it and know how to invest), the richer you become.
Mike#
- Sharing: He recalled a discussion with the teacher about Intel three years ago and now believes that Intel is being propped up by state power, and its fundamentals have not improved. He observed that high-end chip design (3nm) is becoming concentrated in Silicon Valley.
- Question: He asked for the teacher’s prediction on the final outcome of TikTok being acquired by a US consortium.
- James’s Response: This deal must involve some kind of under-the-table agreement between Trump and Xi Jinping. It is a political issue, not a business one. The US will ultimately gain control over the algorithm. He also reminded everyone to be wary of scam videos using AI to fake celebrity appearances.
Chenfeng#
- Question: When promoting the teacher’s philosophy, if friends or family follow the advice to invest but then sell out of fear during a market downturn and blame us, how should we handle this situation?
- James’s Response:
- Start with a disclaimer: Clearly state that you are not a professional advisor and they are responsible for their own risks.
- For friends and family: You must first ask yourself if you are willing to “go to hell” for them. That is, are you psychologically prepared for the possibility of the relationship breaking down? If you are, then do it; if not, don’t give advice.
- A feasible method: You can suggest they start with a small amount of money they can afford to lose and explain the long-term nature of it. You could even verbally promise that if they still have a loss after ten years, you’ll cover it.
- For those you can’t communicate with: Just block them. Make them “unheard, unseen, and non-existent” in your world. Our energy is limited; we should help those who are worth helping.
- James’s Response:
Community Discussion#
- About the Clubhouse Time: The host, Cathy, proposed adjusting the Clubhouse meeting time to accommodate different time zones and schedules. Teacher James agreed and decided to start a poll in the community to let everyone decide on the most suitable time.
IV. Insightful Quotes#
The most important thing in long-term investing is to survive, not the rate of return. – Teacher James
Context: Explaining why one should not add to positions during a market downturn when cash reserves are insufficient, emphasizing the importance of survival first.
Capitalism is enslaving emerging nations… We must learn the truly ‘strong ships and powerful cannons’ of capitalist financial operations to change the destiny of our own generations. – Teacher James
Context: Expounding on his view of the global economic system and motivating everyone to learn real investment.
Wealth lies in strategy, not in physical labor; profit lies in market conditions, not in diligent farming. – Willy
Context: Quoting the ancient text Discourses on Salt and Iron to express his understanding of and resonance with Teacher James’s financial education.
You need to become a person worthy of being loved. – Teacher James
Context: The core advice given in response to a student’s question about how to find a partner.
We can just buy its QQQ… a-and won’t you become the boss of all these geniuses? – Haoqing
Context: An investment perspective proposed during a discussion about US policies attracting elite global talent.
You should think about how you can get your wife, your other half, to say that you are my eternal QQQ. – Demo
Context: Using the “never sell” QQQ from investing as an analogy for an ideal spousal relationship, encouraging continuous effort in relationships.
The weaker the areas in your life palace, the more you need to work on them. That is the purpose of the astrological chart, not to hinder you from doing things. – Teacher James
Context: Explaining how to view “Huà Jì” in Zi Wei Dou Shu, emphasizing that the chart is a tool to guide effort, not a fatalistic judgment.
Spending money makes you richer. – Teacher James
Context: Explaining the compounding effect of investing credit card cash back, articulating a positive view on consumption.
Unheard, unseen, and non-existent. – Teacher James
Context: A decisive method for handling negative relationships, offered in response to the dilemma of being blamed for well-intentioned investment advice.
Teacher is like… in a field of white snow… that one vibrant… red flower… guiding us like a beacon. – A-Liang
Context: A vivid metaphor used to express gratitude for Teacher James’s selfless sharing.
V. Summary#
This session began with a very specific and core technical investment question—“how to flexibly manage asset allocation”—for which Teacher James provided a clear framework based on the cash ratio, emphasizing the paramount principle of “survival before growth” in long-term investing. The subsequent Q&A session was extremely rich, extending from a young person’s first investment to marriage, parenting, life philosophy, destiny, and insights into macroeconomic and political issues. This fully demonstrated that the learning atmosphere of the CLEC community has transcended mere investment management, entering a higher level where investment philosophy is integrated into all aspects of life. The members’ sharing was sincere and profound, showcasing a positive, supportive, and mutually growing community.