00547 The Real Risk Is Not the Drop; Only Asset Allocation That Survives Simulation Tests Can Endure

I. Topic of the Episode

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The core of this episode focuses on two main areas: First, emphasizing mindset building for investment and life, specifically shaping one’s wealth and happiness through “positive affirmations” and extreme optimism. Second, sharing updates on investment tools and strategy optimization, particularly the algorithm modification of the backtesting tool and its impact on leverage allocation. It also deeply explores the feasibility of achieving early retirement (15x annual expenses) by combining high-dividend products (like QQQI) with growth assets (like QQQ).

II. Presentation Content

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Mindset Building and Investment Philosophy

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• The Power of Positive Intention: Teacher James opened by emphasizing that our lives and the world are created by our thoughts (brainwaves). One must say positive things to oneself daily, such as “I am the best,” “I am rich,” and “I am happy.” By irrigating the subconscious, we attract positive energy, thereby transforming the external environment into what we desire. This applies not only to investing but to life as a whole.
• No-Brainer Investing: Investing in index funds should adopt a “no-brainer investment method,” ignoring short-term market turbulence, international situations, economic analysis, and financial reports. Admitting one’s “incompetence” in predicting the market allows one to easily obtain long-term market returns.
• Information Channels:
  • Given the excessive ads in some YouTube videos (like 00451), it is suggested that students switch to Podcast or Himalaya platforms for listening.
  • A friend from China (Tree Kevin/Da Shu Kevin) has migrated the audio content to Himalaya, making it convenient for students in mainland China to listen.
  • All important information and links have been summarized in the “Newcomer’s Sunflower Bible” for easy reference.

Investment Tool Updates and Asset Allocation Strategy

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• Major Update to Backtesting Tool:
  • Logic Modification: When calculating the maintenance ratio, the backtesting tool has changed the data benchmark from the previous “monthly closing price” to the “monthly lowest price.”
  • Reason for Modification: In the actual market, asset prices may hit a low point mid-month (e.g., on the 8th or 15th), triggering a Margin Call (liquidation), without waiting for the month-end close. Therefore, using the lowest price for backtesting aligns better with realistic risks.
  • Impact on Asset Allocation: This change does not affect the 80/20 allocation in Taiwan, but it impacts US market asset allocation. The previous 2.0x leverage (pledge loan accounting for 20% of total assets) would fail in worst-case scenarios and needs to be lowered to 1.9x (i.e., borrowing a maximum of $19,000 against $100,000 in assets).
  • Tool Access and Usage: New tool instructions, engine explanations, and GitHub source code links have been provided. Users in mainland China who cannot access Vercel can download the source code via GitHub and use it offline in a local Docker environment.
• Rebalancing Strategy Details:
  • Smart Rebalancing: Switching between Cash and QLD.
  • Flexible Rebalancing: Divided into two scenarios.
    1. Insufficient Cash: During a decline, transfer a portion of QQQ to QLD without consuming cash.
    2. Sufficient Cash: Further divided into two modes:
       • Defensive: Buy with cash when the market falls; switch between Cash and QLD when the market rises.
       • Aggressive: Buy with cash when the market falls; when the market rises, sell QLD and convert directly to QQQ instead of cash.
• Cash Management Strategy:
  • Teacher James personally holds almost zero cash. Daily expenses are covered by pledge loans borrowed only when needed (e.g., the day before credit card payments).
  • Idle cash should be invested in cash-equivalent assets, such as US BOX (BIL/SGOV/SHV) or Taiwan’s 00865B, and sold only when money is needed.
• Critique of Insurance:
  • The teacher believes that buying insurance is a form of laziness and inertia, an attempt to transfer risk to insurance companies. He refers to insurance companies as “poverty manufacturing machines” and “viruses of society,” considering the financial industry to be “licensed scam groups” that investors should not rely on.
• Asset and ETF Information:
  • Non-US Assets: Provided XNAS, CNDX, EQAC, EQQQ, etc., as references, which may not be subject to US estate tax.
  • Hong Kong High-Dividend Alternatives: 3451 or 9451 can serve as alternatives to QQQI; 3416 can also be considered.

III. Q&A Session

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Weng

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• Question: As a young person in Japan, if I use a Home Equity Line of Credit (HELOC) and credit to invest in a Japanese Nasdaq 100 index fund, what should I do if the Yen appreciates significantly later (e.g., from 157 to 100)?
  • Teacher James’ Reply: Absolutely no problem. Your income is in Yen, and your loan is in Yen. As long as your salary is sufficient to cover the monthly loan payments, there is no need to worry. Stock and exchange rate fluctuations are irrelevant to you because you do not need to sell stocks to repay the debt. Even if there is a 30% loss in exchange rates, two years of stock market gains will be enough to cover it, so there is no need for concern.

Lulin

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• Sharing: She began living a retirement life in July 2025 using the method taught by the teacher (about 25x annual expenses), traveling everywhere. She found that the “two-track parallel” approach (part high-dividend + part growth) she adopted at the time coincides with the teacher’s recently shared strategy of “retiring with 15-20x annual expenses.” She personally verified that this retirement lifestyle is very comfortable and free, and that assets continue to grow while being withdrawn, truly experiencing the feeling of “endless money.”
  • Teacher James’ Comment: Excellent! Lulin has reached the highest realm of financial and personal freedom, able to go anywhere she pleases. This proves the feasibility of the 15x annual expense retirement plan.

Huasheng

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• Share 1: Regarding purchasing Nasdaq funds in Hong Kong to avoid US estate tax, he summarized from personal experience that iShares 2834 is the best choice. It is registered in Hong Kong and adopts a dividend reinvestment strategy (has never paid dividends since listing in 2016), effectively avoiding CRS tax issues. In contrast, KQQM carries estate tax risks, and 3086 pays dividends which trigger CRS reporting.
• Share 2: He has helped many Clubhouse students gratuitously by sharing information on Hong Kong investments.
• Question: He has an undeveloped idea: Can he take a portion of assets to buy QQQI to cover all living expenses with its dividends, then put all remaining assets into QQQ (2834), keeping no cash, and handling emergencies via pledge loans?
  • Teacher James’ Reply: No. This approach is very high risk. Apart from QQQI, the other portion of growth assets still needs to maintain a cash position (e.g., a 70% QQQ + 30% Cash allocation). There are two reasons: 1. Psychological stability; having cash prevents panic when the market drops 80%. 2. Dealing with emergencies. If a large sum of money is suddenly needed while the market is falling, taking out a pledge loan at that time is very dangerous. Without a cash buffer, you might be forced to sell assets at a low point or face the risk of liquidation. Keeping 30% cash, whether to use directly or as backing for a pledge, is much safer.

MM

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• Question: She hasn’t retired yet and doesn’t need cash flow. She found through software backtesting that a 4-3-3 allocation (Beta 1.0) performs better than 8:2. Can she adopt the 4-3-3 allocation and open the pledge function at the bank, but temporarily not borrow money (incurring no interest), solely for use when she retires in the future?
  • Teacher James’ Reply: Absolutely. This is a very good practice. Opening the pledge function in advance to prepare for rainy days is a wise preparation.

WW

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• Question: Plans to move to Las Vegas (no state tax) after retirement. Her current state has a 6.8% state tax. Considering the federal tax rate might rise from 35% to 37% after retirement, should she do a Roth Conversion now or wait until after moving?
  • Teacher James’ Reply: Convert as early as possible. Because money in the IRA will continue to grow; 100k not converted this year might become 120k next year, increasing both the total amount to convert and the tax due in the future. The state tax saved by waiting is far less than the future tax burden brought by asset growth within the account. Additionally, it is suggested she sell her current car, take the cash to Las Vegas, and buy a new Tesla with a loan, allowing the cash to be used for investment.

Qing

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• Share 1: Recently re-read “The Bible of Wealth Management” and found that after nearly 20 years, his understanding improved from 20% to over 80%. The book’s views on real estate once prompted him to buy a house, and studying the case of Asian tycoon Tan Yu (Zheng Zhoumin) made him deeply understand the importance of cash flow.
• Share 2: Regarding Tesla FSD (Full Self-Driving), he initially worried it would replace taxi drivers, but later realized human society always progresses, just as cars replaced rickshaw pullers; people will always find new paths.
  • Teacher James’ Comment: The emergence of Robotaxis will make the lives of taxi drivers better. They can transform into fleet owners, buying vehicles to let the cars earn money, while they drink coffee at home, achieving passive income. Humans are not born to work.

Tim

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• Share 1: Recommends a book, “Activate Your Inner Healing Power,” which uses quantum fields, neural networks, and other scientific methods to explain why positive intention is real and effective.
• Question: He has persuaded his father to sell a 47-year-old townhouse (Tou Tian Cuo) that has many problems (severe leaks, tenants not paying rent). However, his father insists on spending money to fix the house completely to sell it for a high price. Should they sell it as-is quickly or follow his father’s advice?
  • Teacher James’ Reply: You must fix the house up before you can sell it quickly. Especially for major flaws like leaks; no one wants to buy without repairs. Selling a house is not about selling for a “high price,” but being able to “sell it.” The price is determined by the market, not the seller. Repairs should be done immediately, and it should be sold upon receiving the first reasonable offer, because the time cost of delay is high. That money can create more returns once invested in the market sooner.

Hling

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• Sharing: As a student who has been learning for over a year, she shared her journey of serious study, note-taking, and strict execution of asset allocation (4-4-2 Beta). She recently completed her first annual rebalancing and confirmed the correctness of her calculations through exchanges with Brother Chen Feng. She encourages new students to systematically watch all of the teacher’s videos step-by-step, as many questions will naturally be answered during the learning process.

Haoqing

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• Question: Due to business needs, he borrowed a high-interest (11-12%) Margin Loan from a brokerage. He went to Schwab to switch to a lower-interest Pledge Loan (PAL) but was told he could only choose one. However, the financial specialist helped him significantly lower the Margin rate to “Federal Rate + 2.25%” (approx. 6%). He asks, in this situation, is it better to use the high-flexibility but high-risk Margin Loan, or apply for PAL?
  • Teacher James’ Reply: This is correct information. Margin Loans come from brokers, PALs come from Bankers; the risk mechanisms differ. A Margin Call can happen instantly and sell at the lowest point, whereas PAL has a certain buffer time. Money borrowed via Margin can be reinvested in stocks, while PAL funds usually cannot. Therefore, Margin is more flexible but also carries higher risk.

Simple

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• Question: He runs his own business and has 100k TWD in monthly passive rental income, basically covering living expenses and mortgage. He just obtained a 5 million TWD credit line (interest approx. 2.5%) in Taiwan and applied for a 200k USD loan in Singapore (also approx. 2.5%, but with the condition of purchasing the bank’s wealth management products). How should he use these funds? Put a lump sum into QQQ/QQQI, or invest in his own business?
  • Teacher James’ Reply: 1. Do not take the Singapore loan, avoid any loan that comes with conditions to buy their wealth management products. 2. The 5 million TWD credit should be fully invested in the stock market (e.g., 00662) and absolutely not invested in your own business, to diversify risk and avoid putting all eggs in one basket. 3. The prerequisite for borrowing is that repayment must come from stable business cash flow, not the already occupied rental income. 4. As a young person in the asset accumulation phase, you should invest in growth assets (00662), not dividend-paying types like QQQI.

DY

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• Question 1: Does the “15-year living expense retirement method” (10 years expenses in QQQI, 5 years expenses in 4-3-3 allocation) mentioned by the teacher only apply to retirees? Can those still accumulating assets allocate based on this ratio (e.g., 2/3 QQQI, 1/3 Growth)?
  • Teacher James’ Reply: Young people in the asset accumulation phase must absolutely not touch high-dividend products like QQQI. Your goal is to pursue maximized growth. QQQI is prepared for retirees who need cash flow.
• Question 2: Her family is afraid of QQQ volatility and feels safer with QQQI’s monthly dividends. What should she do?
  • Teacher James’ Reply: If the money belongs to the family and investing in QQQI is the only way they can accept, then so be it. At least it’s better than not investing, though it’s not the optimal strategy. QQQI’s own volatility (Beta 1.0) is as high as QQQ.
• Question 3: Does QQQI have tax issues in Taiwan?
  • Teacher James’ Reply: It falls under overseas income. Within 1 million TWD annual income requires no filing; over 1 million requires filing, but the basic exemption is very high (7.5 million), so average people don’t need to worry about paying taxes.

Qiming

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• Question: What is After-hour trading? How does it differ from normal trading hours?
  • Teacher James’ Reply: After-hour trading is like a night market; there are few participants, liquidity is poor, and the Bid-Ask Spread is very large. Trading risk is high, and you should absolutely never use Market Orders. Unless there is an extremely urgent reason, avoid trading after hours. When placing a normal order, the system won’t automatically enter after-hour trading; you need to actively check the relevant options.

Meihao

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• Question: Although she feels financially free, she is recently worried and confused by the geopolitical tensions in the Taiwan Strait, feeling unable to consider it “irrelevant to me” as the teacher says. She asks how to view this risk from a spiritual level?
  • Teacher James’ Reply: The probability of such an event is extremely low, like an asteroid hitting the earth. Excessive worry about such low-probability events yields returns disproportionate to the mental effort spent. The only thing we can do, and the most practical preparation, is: Ensure everyone in the family has a valid passport.

Chenfeng

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• Sharing: He created a new personal blog, “Chenfeng Pilot Life Fleet,” integrating all the teacher’s course materials (summaries of long and short videos), an AI interactive bot, all his personal documents and spreadsheets, and opened a forum. This platform is open globally, aiming to break regional restrictions (like LINE groups) so students worldwide can interact, ask questions, find answers, and grow together.

IV. Key Highlights

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Your world and the people and things you encounter are actually related to your brainwaves. So you must think about what you want and what you like in your head. You must use positive statements, and the universe will become what you want it to be. – Teacher James

This viewpoint emphasizes the creative power of thought and language, believing that one can actively shape their reality and financial status through positive self-suggestion.

Buying insurance is laziness, it is inertia. You are essentially trying to transfer risk to the insurance company… Insurance companies are poverty manufacturing machines, viruses of society. – Teacher James

The teacher criticizes the role of traditional insurance in financial management with very sharp language, believing it is not an effective tool for wealth growth and may instead erode assets.

Living this retirement life with this method for half a year has been truly very comfortable… The level of relaxation in my life is truly different. – Lulin

As a retired student, Lulin shared her real feelings after practicing the teacher’s investment method, proving that financial freedom brings not just money, but a fundamental change in the state of life.

After Robotaxis come out, the lives of these taxi drivers will be better… We humans are not born to work; let the cars go to work and help him earn money. – Teacher James

Addressing concerns that technological progress might lead to unemployment, the teacher offered a counter-intuitive but visionary perspective: Technology will ultimately liberate humanity, letting assets work for us.

If (geopolitical war) happens… should I have overseas assets… but what the teacher says makes sense… my effort is not proportional to my return. – Meihao & Teacher James

This dialogue highlights how individuals should assess their actions when facing macro, uncontrollable risks. Instead of over-planning and agonizing over low-probability events, it is better to make the most basic and practical preparations (such as keeping passports valid).

V. Summary

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In the first class of 2026, Teacher James started from the “heart,” once again emphasizing the decisive role of positive intention in successful investing and a happy life. The course content combined philosophical height with practical depth, not only updating the algorithm of the core weapon—the backtesting tool—and clarifying the safe boundaries of leverage usage, but also providing a clearer, lower-barrier “15x annual expense” retirement path for students who are about to or aspire to retire. The Q&A session was lively and in-depth; the real experiences shared by students and the profound questions raised collided with the teacher’s answers to spark wisdom, covering everything from macro risk management to specific product selection, showcasing the vibrancy of a mutual-aid learning community.