00553 How to Use QQQI + 433 Asset Allocation to Build a Retirement Cash Flow of 15x Annual Expenses?

I. Topic of the Session

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This session primarily explores how to build a robust cash flow system for retirement, specifically using QQQI combined with a 433 asset allocation model to achieve the goal of having retirement funds equal to 15 times annual expenses. The core idea is to invest the majority of retirement funds (e.g., 10-12 times annual expenses) into high-dividend ETFs (like QQQI) to generate a stable cash flow for living expenses, while the remaining funds are actively invested for growth (e.g., a 70/30 or 433 allocation). This approach ensures living expenses are covered while allowing assets to continue growing.

II. Briefing Content

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Investment Mentality and Market Volatility

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• Ignore Market Fluctuations: The only constant in the market is its continuous fluctuation. Investors should learn to ignore short-term market volatility and international situations, focusing instead on long-term goals. Cultivate a state of “mind as still as water,” unaffected by market ups and downs.
• Investing is a Form of Cultivation: Investing is a place for self-discovery and mental cultivation. Market downturns are a test for investors; only those who can withstand the pressure and not be scared out of the market will reap the final rewards.
• Always Be Extremely Optimistic: Firmly believe that the market will always go up in the long run. Even if the market drops by 70%, maintain a mindset of eating well and sleeping well, and patiently wait for the market to recover.

Retirement Planning and Tax Issues

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• The Importance of Retirement Tax Planning: Many people only consider living expenses when planning for retirement, overlooking tax issues. For example, a Roth Conversion from a Traditional IRA/401k can incur significant taxes.
• Strategies to Cope with High Taxes:
  1. Withholding Taxes (Not Recommended): Directly withhold taxes during the conversion. However, this reduces the principal that goes into the tax-free (Roth) account, losing the potential for future permanent tax-free growth.
  2. Utilize High-Dividend ETFs: Allocate a portion of assets (e.g., 1-2 million) to high-dividend ETFs like QQQI. Use the cash flow generated to pay taxes and living expenses without touching the funds in the tax-free account.
• Calculating Assets in Taxable Accounts: For taxable accounts like Traditional IRAs and 401ks, their asset value should be calculated at 70% (deducting about 30% for taxes) to more accurately assess the actual available retirement funds. For example, a 5 million asset in a taxable account should be considered as 3.5 million.

Asset Allocation and Investment Targets

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• Asset Allocation Doesn’t Determine Final Performance: The key determinant of performance is the future direction of the market. Since the future is unpredictable, the primary goal of asset allocation should be to make you feel “comfortable,” not to pursue the theoretically highest return.
• Retirement Cash Flow Allocation Plan (Example with 15x Annual Expenses):
  • Background: Assume annual expenses of 600,000 TWD and retirement funds of 15 times that, which is 9 million TWD.
  • Allocation Plan:
    1. Invest 10 times annual expenses (6 million TWD) into QQQI, which can generate about 12% cash flow annually (around 600,000-700,000 TWD), sufficient to cover living expenses.
    2. The remaining 5 times annual expenses (3 million TWD) are allocated using a 70/30 or 433 strategy for long-term growth. 30% of this portion still needs to be held as cash.
• Reference for Investment Targets in the Chinese Market:
  • High-Dividend Funds: Invesco Great Wall Dividend Growth Low Volatility Index A (007751), Huatai-PineBridge CSI Central SOE Dividend ETF (561580).
  • Short-Term Bond/Money Market Funds: E Fund Secure Return Bond A (161115), with an annualized return of about 3.2%, can be an option for parking cash.
• Stock Pledging in Canada: RBC (Royal Bank of Canada) offers Security Based Lending, but it requires clients to have over 1 million CAD in assets.

Loans and Debt Management

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• Long-Term Loans vs. Short-Term Loans:
  • Long-Term (over 15 years): If the loan term is long and the bank does not demand principal repayment, you can choose an “interest-only” plan. Use the principal for investment to create higher returns through compounding over time.
  • Short-Term (less than 10 years): It is recommended to choose a “principal and interest” repayment plan. The market is not guaranteed to rise within 10 years. If the market is at a low point when the loan is due, being forced to sell stocks to repay the principal would cause huge losses.

III. Q&A Session

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Ray

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• Sharing: He has been following the teacher’s investment philosophy for nearly a year. Through repeated study, from the “lecture worth 100 million” to various investment principles (like never selling, the more you borrow the better), his investment approach and life have been profoundly changed. At 35, his net worth has reached nine figures (TWD), and he has found that the more assets he has, the more willing banks are to offer low-interest loans. He was also spiritually inspired, realizing that “wealth is a gift, happiness is a human right,” and began to focus more on creating meaning in life. Through health checks (LDC-T, continuous glucose monitor), he improved his lifestyle habits and discovered that curry rice was the culprit for his blood sugar spikes.
• Question 1: About spending money. Although his assets have increased, he felt empty after trying to shop at luxury stores. He finds more happiness in spending money to save time (like taking a taxi instead of the subway) or improve his quality of life (buying a Tesla). He asked the teacher if, after achieving financial freedom, the direction of spending is mainly to “be able to not do things you don’t want to do,” rather than pursuing more material goods.
  • James’s Reply:
    1. Spending for the sake of spending leads to emptiness: When you have no real need and just spend for the sake of it (like buying unnecessary luxury goods), you will feel empty. You should think three times before buying something to confirm it’s a “need” and not a “want.”
    2. Spending money to buy time is worthwhile: Exchanging money for time, allowing you to do more important things or get rest, is very valuable.
    3. Spending on others brings more happiness than spending on yourself: Spending on family (like parents, children) and creating beautiful memories together brings a lasting and more meaningful kind of happiness. For example, treating your parents to a nice meal or buying them clothes they like.
• Question 2: What advice do you have for people in the 35 to 40 age group?
  • James’s Reply: The most important thing at this stage is family relationships, especially with your spouse and children.
    1. Nurture the spousal relationship: Treat your spouse as you would your own child, with love and tolerance. The spousal relationship is the foundation of the family; only when it’s good can children’s upbringing be healthy. Don’t keep score, because relationships are reciprocal.
    2. Understand your parents: As you get older, spend more time with your parents and understand their silent waiting and love.

Lu

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• Sharing: Echoing Ray’s sharing, she added that her schedule is very full in retirement and she feels energetic. She shared her experience of spending time with her parents; her mother prepares three meals a day for the family, and she expresses her love by giving her parents pocket money and spending time with them. She believes that sharing wealth with family and friends, such as arranging trips and treating them to meals, creates shared memories and is a wonderful thing. She also mentioned that if wealth doesn’t bring happiness, one might need to seek meaning on a higher spiritual level.
• James’s Comment: You don’t necessarily have to spend money; it’s okay not to. Warren Buffett, for example, is not used to spending money and drives the same car for many years. Spending money should be a natural and happy thing. If it becomes a burden and a job, of course, you won’t be happy.

Jenny

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• Sharing: Since adopting the teacher’s methods, she has reorganized her family’s asset allocation and life philosophy, and life has become easier, more pleasant, and more secure. Previously, she was nervous when buying or selling investments, and her emotions fluctuated with the market. Now, using a “buy and don’t touch” strategy, she feels the ease of investing. She realized that the human brain is naturally inclined towards tension and anxiety, and it needs training to live in the present and enjoy peace. After this shift in mindset, she began to appreciate things she used to find annoying, like the long winters in North America and university, finding tranquility and beauty in them. She also shared that her mortgage rate in Canada is a fixed rate in the 3.8% range.
• James’s Comment: Our brain is divided into a primitive brain and a civilized brain. The primitive brain keeps us alert and provides intuitive reactions, but in interpersonal communication, quick intuitive reactions can lead to conflict. We should use our “civilized brain” to overcome the impulses of the primitive brain and think calmly. When communicating with others, learn to appreciate and affirm them first, rather than directly refuting them. The opening of a conversation should be “That’s great,” “Thank you,” not “That’s not right,” “It’s not like that.” First admitting “I might be wrong” can make communication smoother.

Doris

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• Question: She has two accounts, a Brokerage and an IRA/Roth, each with about 50% of her assets, representing about 12 years of annual expenses each. She plans to retire at 55 and use the funds in the Brokerage account to live on before she can access her IRA/Roth at 60. Her plan is to invest 60% of the Brokerage assets into QQQI to cover 100% of her annual expenses. How should the remaining 40% be allocated? Is cash needed? Is backtesting necessary?
  • James’s Reply:
    1. Roth Conversion: After retiring at 55, you should immediately start doing Roth conversions from your Traditional IRA. This is especially important for families with children, as a Roth account is more beneficial as an inheritance for future generations.
    2. Asset Allocation: The remaining 40% of assets can be combined with the assets in the IRA/Roth account for an overall asset allocation (e.g., 70/30 or 433).
    3. Cash Reserve: The 30% cash can be held in any account, including the Traditional IRA. If you need money urgently, you can withdraw the principal from your Roth account (penalty-free) or borrow against your stocks in the Brokerage account without having to sell them.
    4. Backtesting Simulation: For a complex allocation involving QQQI and leverage, it is recommended to use the asset allocation backtesting simulation software provided by the teacher. You can treat QQQI as a part of QQQ in the model for backtesting to verify its safety in different market environments.

Frank

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• Question: His daughter, after working for a year, wants to take out a loan to buy 00662 and then take an unpaid leave of absence to study abroad for one to two years. The family will help with the loan payments. Is this strategy feasible?
  • James’s Reply: It’s very feasible. Since your daughter has her own dreams and aspirations, as a family, you should encourage and support her. Investing is not the only thing in life. It’s a great thing for her to go out and explore the world while she’s young. Let her know that home is always her safety net.

Haoqing

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• Sharing and Question: After attending an AI lecture, he heard experts emphasize the importance of “Curiosity” and “Communication” in the AI era. In the future, most jobs may be replaced by AI, and asking the right questions will be more important than solving problems. He is concerned about how the next generation will enter the workforce and accumulate experience. He speculates that in the future, society may no longer measure wealth by money, but by “honor” and contributions to humanity. He wanted to hear the teacher’s views on personal development in the AI era.
  • James’s Reply:
    1. Young People Should Embrace AI Immediately: I recommend that young people set up their own AI Agent (like OpenBot). Once you have an AI Agent, you are essentially the general manager of a “one-person company.” You can command it to perform various tasks like starting a company, preparing financial reports, writing proposals, and attending meetings.
    2. AI is a Tool, Professional Skill is the Foundation: AI will not replace professions; it will enhance them. You must have the “professional skill” in a field to effectively command AI. For example, if you don’t understand accounting, you can’t get AI to produce meaningful financial reports. AI just allows you to do what you could already do, but faster.
    3. Curiosity and Execution are Key: A person’s core value lies in their curiosity, learning attitude, and ability to execute. A curious person will proactively explore and use new tools like AI, thus standing out. AI will not change a person’s essence; it is just a powerful enabling tool.

Grace

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• Sharing: Back in Penghu, she recalled that it was here a year ago that she began to seriously study the teacher’s investment philosophy. She shared that as someone who left her hometown, it took her some years to slowly appreciate the importance of spending time with her parents. When she was younger, she would always hang out with friends when she came home, but now she spends more time with her aging parents. She believes this realization comes with time and encourages younger students not to rush it.

Andy

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• Sharing: Before encountering the teacher’s philosophy, he had spent money on classes but repeatedly lost money in investments. After discovering C-squared in mid-2023, his whole family embraced the teacher’s philosophy as a belief, sold their house that was beyond their means, and held on to quality assets like TSMC. In just a few years, their assets have reached 50 times their annual expenses, and retirement feels within reach instead of being a distant dream.
• Question 1: When using ChatGPT for asset planning, the AI suggested using 00865B (a bond ETF) for pledging, not 00662 (QQQ) as recommended by the teacher. Is this correct?
  • James’s Reply: The AI’s suggestion is based on the conservative thinking of an average person (borrowing to buy high-dividend stocks or for a fixed deposit). It doesn’t understand our “leverage + rebalancing” strategy. The AI is not smarter than you; its answers depend on the depth and context of your questions. If you don’t tell it that you need to do dynamic rebalancing, it will naturally give the most conservative answer. When you are an expert in a field, you will find that the AI is “dumber” than you.
• Question 2: ChatGPT suggested that when the loan utilization rate from pledging reaches 10-15%, it should be repaid. This conflicts with the teacher’s philosophy of “don’t repay.”
  • James’s Reply: Similarly, this is because the AI doesn’t understand our long-term growth strategy of “buy, borrow, don’t repay, reinvest.” You need to provide the complete strategic context to the AI for it to potentially give advice that meets your needs.
• Question 3: Regarding the timing of using 00670L to add to a position. If your cash is exactly 15 times your annual expenses, and after adding to the position once it drops below 15 times, can you no longer add more?
  • James’s Reply: This involves the “Flexible Rebalancing” strategy. It is explained in detail in the “Backtesting Briefing PPT” on page 17 of the “Sunflower Manual.” The briefing and simulation software distinguish between rebalancing rules at different cash levels (like “Smart Rebalancing” and “Flexible Smart Rebalancing”). I recommend reading the briefing in detail and using the simulation software for backtesting.

Chenfeng

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• Sharing: As a software engineer with over 30 years of experience, he shared his experience using AI. He believes that AI can indeed greatly improve efficiency (work that used to take months now takes a day or two), but this doesn’t mean past experience is wasted. On the contrary, it is precisely because of his deep professional knowledge that he can effectively command AI and avoid “Garbage in, garbage out.” He emphasized that AI is an assistant, but the ultimate goals and direction must be decided by humans, and this is the core value that will not be replaced by AI in the future. He also shares content on his blog about investing, Zi Wei Dou Shu (Purple Star Astrology), and AI applications.

IV. Highlighted Quotes

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Spending money on yourself isn’t the happiest thing; spending it on others will make you happier. – James

Background: When answering a student’s question about feeling empty from consumption, James pointed out that the happiness derived from spending on family and creating shared memories is far more valuable and lasting than mere material satisfaction.

You have to act like a general manager. The moment you go to work, you have to behave like you are a general manager. – James

Background: When discussing the development of young people in the AI era, James emphasized that young people should have the vision and breadth of knowledge of a CEO, proactively learning cross-disciplinary knowledge (like finance, marketing) to effectively use AI tools and become the leader of a “one-person company.”

AI won’t be smarter than you. If you know how to ask, it means you already understand; you just don’t want to do the hard job. – Chenfeng & James

Background: When addressing a student’s confusion about AI giving different investment advice, the teacher and the student jointly pointed out that the quality of AI’s answers depends on the questioner’s level of expertise. A good question itself implies a deep understanding of the problem; using AI is more about saving the effort of execution rather than seeking unknown answers.

The human brain is not naturally designed to let us live a peaceful, serene, and happy life; it always has a state that keeps our brain tense. – Jenny

Background: Student Jenny, sharing her transformation from investment anxiety to inner peace, realized that the human brain has a primitive “alert” instinct. To achieve happiness, one needs to deliberately train the brain to focus on the present, rather than worrying about the past and future.

The spousal relationship is the most important… If you are willing to sacrifice for them, what else is there to quibble about? – James

Background: When giving advice to people in the 35-40 age group, James emphasized the importance of nurturing the spousal relationship, suggesting that one should treat their spouse with the same care as their own child—selflessly giving without keeping score, which is fundamental to maintaining a happy family.

Investing is not the only thing in life, so it’s great for him to go out and explore the world while he’s young. – James

Background: In supporting a student’s daughter’s decision to take an unpaid leave to study abroad, James expressed encouragement for young people to pursue their dreams, believing that life experiences and personal growth are equally important, and that financial management should serve broader life goals.

V. Summary

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Starting from a specific retirement financial goal—“building a cash flow of 15 times annual expenses”—this session systematically explained how to combine a high-dividend tool (QQQI) with a growth-oriented asset allocation (433 model) to achieve this objective. The course not only provided actionable investment strategies but also delved deeper into the often-overlooked tax issues in retirement planning. During the Q&A session, through interaction with students, the topics expanded to multiple levels, including consumption habits, family relationships, personal growth, and how to face the challenges of the AI era. It emphasized the importance of an investment mindset, lifelong learning, and managing one’s life. The entire session was filled with a belief in long-termism and an active pursuit of a better life.