I. Theme of the Session#
The core message of this lecture is that “The Key to Successful Investing is Inaction.” Teacher James emphasizes that investors should minimize decision-making and ignore all market noise, such as economic data, international situations, and interest rate hikes or cuts, as these are irrelevant to long-term investing. The correct approach is to do nothing after buying quality assets. However, the prerequisite for “inaction” is a deep understanding of market risks. One must prepare for the worst-case scenario (e.g., an 85% asset decline lasting for ten years). Only through rigorous asset allocation and maintaining sufficient cash flow can one ensure survival in this prolonged test.
II. Briefing Content#
Pre-class Reminders and Sharing#
- Course Number: The number for this sharing on YouTube is
00539. - Scam Alert: The teacher once again called out a scam account (ID changed to
James.James.1), reminding everyone that he would never engage in any form of proxy trading, charge fees, or ask for money transfers. Anyone doing so in his name is a scammer. - Munger Wisdom Video Recommendation: The teacher highly recommended a video (1 hour and 23 minutes) about Charlie Munger’s life wisdom. The video focuses more on interpersonal, family, and marital relationships and life philosophy rather than just investing, and the teacher found its content to be very accurate and profound.
- Encouraging Content Creation: The teacher shared the example of a student, “Wen Yan,” who used an AI tool (notebooklm) to turn a two-hour lecture video into a ten-minute short, which achieved excellent reach on Xiaohongshu and Bilibili. The teacher encouraged everyone to use the channel’s public materials for secondary creation and dissemination to promote correct investment philosophies.
Investment Philosophy: Less is More, Wealth Through Inaction#
- The Fewer Decisions, the Better: In investing, the most successful strategy is to “make no decisions.” When the market panics and everyone is discussing various macroeconomic issues, the best response is to ignore them.
- The Core of Investing: The most important and difficult thing in investing is to “stay put” after buying, which requires immense discipline. Any attempt to operate, change, or predict the market is almost destined to lower final investment performance.
- Practicing “Inaction”: The core skill to practice in investing is “inaction.” Your feelings are worthless in the face of the market, even “garbage.” You must be emotionless to invest successfully.
Risk Awareness: Preparing for the Worst Tomorrow#
- The Duality of the Market: In the long run, the market will inevitably hit new highs (there is no highest, only higher), which is a natural consequence of human societal development. But this doesn’t mean the market won’t fall.
- The Inevitability of Extreme Risk: In an investor’s lifetime, they will inevitably encounter an extreme situation where the market drops 85% from its peak, and this downturn could last as long as ten years.
- Qualification for Investing: You are only truly qualified to invest when you can face an 85% drop in your assets without a rebound for ten years, still adhere to the principle of “never sell,” and live a normal life. If you cannot accept the decline, you should not invest.
- The Only Antidote to Risk: The only way to combat this extreme risk is asset allocation. You must assume the worst-case scenario will happen tomorrow and allocate your assets accordingly, ensuring you have enough cash (e.g., enough to live on for ten years) to get through the crisis.
Capitalist Awakening#
- Designed Laborers: Teacher James pointed out that the entire capitalist society educates the public to be diligent laborers, not capitalists. The financial system and government operations are essentially designed to make the masses work hard, pay taxes, and take out loans for housing, thereby tying them firmly to their jobs.
- The Trap of Traditional Financial Advice: Following the traditional path of “work hard, save in the bank, buy insurance” will ultimately lead to poverty. Savings are eroded by inflation, and money earned through labor and time can never achieve true financial freedom.
- A Shift in Mindset: The purpose of this channel is not just to teach how to get rich, but to awaken a “capitalist consciousness.” Once you establish a capitalist mindset, even without great wealth at present, you are already on the path to riches and can achieve inner liberation and happiness.
III. Q&A Session#
Cady#
- Sharing: She observed two extremes in people: one is “having money but not knowing it,” being afraid to invest or spend; the other is “having no money but spending recklessly,” lacking awareness of their financial situation. She emphasized that to keep up with the teacher’s investment pace, especially with leverage, one must study hard, fill knowledge gaps, and build sufficient conviction and understanding. Otherwise, fear will paralyze action at both market highs and lows.
Chenfeng#
- Sharing: He has recently been studying Charlie Munger’s wisdom in depth and advises everyone to listen to the views of wise people rather than getting caught up in whether the market is at a high point. He believes that in a bull market, investors should examine their own capabilities and risk control to avoid excessive borrowing.
- Question: Charlie Munger repeatedly warns against using leverage and borrowing money to invest. This seems to differ from the channel’s concept of “pledging assets for a loan to invest.” How does the teacher view this difference?
- Teacher James’s Reply: What Munger opposes is the kind of leverage that could cause you to lose your freedom or go bankrupt. For example, a property developer who bets everything and goes bankrupt due to soaring interest rates, or an ordinary person who takes out a loan for a luxury house beyond their means to save face, ending up trapped by the loan and losing the freedom to quit their job. Munger’s core idea is “don’t lose your freedom because of debt.” The borrowing we advocate is based on extremely strict risk control: you must be able to assume that the stock market could drop to zero and stay there for 15 years, and you would still be fine. Only then can you borrow that money. This requires investors to have adequate asset allocation and cash flow and is not suitable for those nearing retirement. Therefore, the core spirit of both views is consistent: emphasizing survival and freedom in the worst-case scenario.
- Sharing: He mentioned that a legislator in Taiwan is recently promoting an investment plan for infants aged 0-10, where the government and parents would each contribute 4,000 TWD/month into an ETF.
- Teacher James’s Comment: This direction is correct, but requiring parents to contribute places a huge burden on young families, which is a flaw. He suggested a better way would be for all listed companies to increase their capital by 1% annually, inject these shares into a “Taiwan ETF pool,” and then distribute them to newborns. This way, neither the government nor the parents have to pay; the capitalists invest in the country’s future, which would face less resistance.
Demo#
- Sharing 1: He believes the current AI development is just the beginning of a great era, far from being a bubble. He is willing to endure short-term fluctuations of 20-30% in exchange for potentially 10x returns in the future.
- Sharing 2: He shared his transformation from an “employee mindset” to a “capitalist mindset.” In the past, society taught us to pursue high income, then buy a nice car and a nice house, but this is actually a trap that keeps you working for capitalists. He shared how he once sold a luxury car and invested the 2 million TWD into an index fund, a decision that became one of the best of his life.
- Question: There’s recent discussion in Taiwan about calculating the supplementary health insurance premium based on total annual dividend income. How does this affect investors in high-dividend ETFs like 0056? What are the teacher’s suggestions?
- Teacher James’s Reply: First, he criticized the unfairness of this tax system, as it specifically targets vulnerable groups who rely on dividends, while capital gains are not taxed. He believes all income should be taxed fairly. Second, he proposed a solution: where there’s a policy, there’s a countermeasure. If dividend taxes or premiums become too high, investors can consider investing in US-listed high-dividend ETFs, such as JEPQ or QQQI, through a “sub-brokerage” service. The income from these would be considered overseas income, which has a high tax exemption threshold in Taiwan.
- Follow-up Discussion: A student pointed out that dividends from products like JEPQ purchased through a sub-brokerage might be subject to a 30% withholding tax, and some brokers (like Cathay) do not assist with tax refunds. Therefore, the teacher emphasized that before undertaking such an operation, one must confirm the tax policies with their broker. If the tax is withheld and cannot be refunded, it is not a suitable investment.
Sam#
- Sharing: He started investing in 2021, experienced a 20-30% paper loss but held on, and has now not only recovered but also seen good returns. This has built his confidence in long-term investing. After discovering the teacher’s channel, he felt a “moment of enlightenment,” as if freed from a hamster wheel, and his financial anxiety has significantly decreased. He also successfully shared this philosophy with his family, who have started buying 00662.
- Teacher James’s Comment: Helping those around you is great, but you must also know when to “let go.” For those who cannot be persuaded, don’t force it. The core of investing is the spirit of “holding on for dear life”; inaction leads to wealth, while frequent trading can lead to nothing.
Iam#
- Question 1: He has seen families turn against each other over inheritance. He is puzzled why wealth can harm families and asked for the teacher’s perspective on the phenomenon where the first generation strives, the second is harmonious, but by the third, disagreements and conflicts arise in wealth succession.
- Teacher James’s Reply: Property disputes usually happen when the heirs are in dire need of money. For them, any slight injustice is magnified. The most troublesome assets are illiquid ones like real estate. For elders who wish to distribute their assets according to their will, they must plan ahead while alive through trusts or gifts. Once a person passes away, everything can only be distributed according to the law. As children, the best approach is to follow legal procedures to avoid disputes.
- Question 2: He observed that even business owners work like laborers, constantly working and expanding. Others who are financially free dare not stop, feeling useless without work. Is this the result of capitalist indoctrination?
- Teacher James’s Reply: As long as a person needs to go to work every day, even if it’s their own company, they are still a “laborer,” and they even bear the risk of their own capital, which is a double risk. A true capitalist has no responsibilities and lets money work for them. This “workaholic” mindset is shaped by decades of education and work environment and is indeed hard to change. Munger also reminds us not to neglect family for the sake of making money, or you might win wealth but lose at life.
Mike#
- Sharing: He shared the story of his 78-year-old American landlord. The landlord placed all 13 properties he built into a family trust, managed jointly by his descendants, to maintain family cohesion and wealth. He compared this model to the teacher’s preferred QQQ model and marveled at how wise his decision was to sell his property and switch to QQQ, which has freed him from excitement or fear over market fluctuations.
- Teacher James’s Reply: The landlord’s approach was one of “necessity.” Holding a large amount of real estate presents problems like difficulty in division and high inheritance taxes. Setting up a trust for descendants to manage essentially turns them into “laborers,” bound by these properties for generations. If he had held QQQ, wealth succession would be much simpler, easily done through annual gifts, and his descendants wouldn’t have to toil to manage the assets, allowing them to truly enjoy the freedom that wealth brings.
IV. Insightful Quotes#
“To succeed in investing, the fewer decisions you make, the better. Making no decision is the best decision.” – Teacher James
Context: At the beginning, the teacher explained his core investment philosophy, emphasizing that in an environment of information overload and market volatility, maintaining “inaction” is the best path to success.
“You must assume that the market will start falling tomorrow, that it will fall by 85%, and that it will last for 10 years. Only if you can still make your investments and asset allocations under this assumption… are you qualified to invest.” – Teacher James
Context: When discussing risk control, the teacher proposed an extremely harsh psychological and financial test. Only investors who can pass this “stress test” are truly prepared.
“Your feelings are garbage as far as the market is concerned. So in the market, don’t talk about feelings. You should have no feelings to be able to invest.” – Teacher James
Context: The teacher sharply pointed out that investing is a rational domain, and any judgment based on personal feelings or emotions is worthless, or even has negative value, in the face of Mr. Market.
“In a capitalist society, everyone is educated to become a diligent laborer. The banks and the government essentially want to empty your pockets so you can work hard for the country.” – Teacher James
Context: The teacher offered a profound critique of the current socioeconomic system, arguing that it encourages people to become laborers who are then systematically “harvested.”
“What Munger is talking about with borrowing is that you will lose your freedom… You must not lose your freedom because of borrowing, this is very important.” – Teacher James
Context: In explaining Munger’s opposition to leverage, the teacher grasped its core message—the biggest risk of leverage is not financial loss, but the potential loss of personal freedom.
“Saving is a very bad thing. So if you put your money in the bank, it gets thinner and thinner with inflation. How can you possibly become rich? It’s impossible.” – Teacher James
Context: The teacher challenged conventional wisdom, pointing out that in an era of inflation, keeping money in a bank is tantamount to asset depreciation and is a major obstacle to wealth creation.
“As long as you need to get up and go to work every day, even if it’s your own company, you are a laborer.” – Teacher James
Context: When answering a student’s question about whether a boss is a capitalist, the teacher gave a clear definition: a true capitalist makes money work for them, not the other way around.
V. Summary#
This lecture, starting from the core investment philosophy of “inaction,” builds a complete system of investment thought. Teacher James not only emphasized the importance of long-term holding and ignoring noise but also spent a significant amount of time analyzing the most critical and often overlooked aspect of investing—risk awareness. He demanded that every investor confront the market’s cruelest possibilities and build their investment portfolio based on that benchmark. In the Q&A session, through in-depth interaction with students, the lecture’s content was greatly enriched and deepened. Whether it was the interpretation of Munger’s “no borrowing” wisdom, or discussions on wealth succession and tax planning, the session was full of practical guidance and thought-provoking philosophy. Ultimately, the lecture returned to a fundamental question: we invest and manage our finances to achieve true freedom, not to be enslaved by wealth.