00558 Investing Is Not Trading, It's Risk Management: A Comprehensive Upgrade of Cyclical Thinking

I. Topic of the Session

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The topic for this session is “Investing Is Not Trading, It’s Risk Management: A Comprehensive Upgrade of Cyclical Thinking.” Teacher James emphasizes that the essence of investing is risk management, not the frequent buying and selling of trading. He shares the evolution of his investment philosophy from “buy whenever you have money and never sell” to a mindset of cyclical risk management. This evolution doesn’t negate the original concept but rather optimizes asset allocation at key turning points to navigate market volatility more smoothly. Once the cyclical adjustment is complete, investors can return to a state of “ignoring the market” and live with peace of mind.

II. Presentation Content

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The Evolution of Investment Philosophy and Cyclical Thinking

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• Core Concept: 99.99% of the time in investing, one should ignore market fluctuations and adhere to the principle of “buy whenever you have money and never sell.” Market shocks, international situations, economic data, and most other information are irrelevant to long-term investing.
• The Role of Cycles: Cyclical thinking is an advanced form of risk management, not a strategy for trading by buying low and selling high. It only comes into play at critical market turning points (like the cycle from 2022 to the present), helping investors cross “a bridge between mountain peaks” instead of enduring the ordeal of “going down into the valley and climbing back up.”
• Evolutionary Process:
  1. First Stage (Single-celled organism): Buy whenever you have money and never sell. This is the foundation of investing, like practicing the horse stance in martial arts.
  2. Second Stage (Multi-celled/multi-organ organism): Learn and apply cyclical thinking. This is an evolution built upon the first stage, enhancing risk management capabilities.
• Execution Points: Once you have completed the asset allocation adjustment based on the cycle (for example, reducing beta and increasing cash before March 2026), you should “finish the job and walk away,” returning to a state of ignoring the market until the next turning point appears. Investors should choose one method and stick to it, avoiding wavering between “never selling” and “cyclical trading,” as this could lead to “falling off a cliff.”

The Key to Learning and Growth

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• The Complexity of Cycles: Truly understanding cycles is extremely difficult and requires comprehensive knowledge, including consumer cycles, industrial cycles, capital investment cycles, credit cycles, real estate cycles, market sentiment, and technical analysis. This is like a traditional Chinese medicine doctor taking a pulse; it requires a great deal of practical experience and cannot be mastered by reading books alone.
• Methods of Learning:
  1. Extensive Reading and Independent Thinking: Read a wide variety of books, maintain curiosity, and apply a process of questioning, thinking, verifying, and dialectical reasoning to any information (including the teacher’s views).
  2. Emergence: When knowledge and information accumulate to a certain level, your own unique insights and thought processes will naturally emerge. This is a phenomenon of “emergence.” Many excellent sharers (like Shiguanzhang, Investment Translator, etc.) exhibit this phenomenon.
  3. Put in the Effort: The “Dao” (the way) is a path you walk yourself. A teacher cannot directly instill it in you; you must put in the effort to learn and practice on your own.

Views on the Current Situation

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• Geopolitical Background: The teacher analyzed the deep-seated reasons for the situation in the Middle East, arguing that it is not just a regional conflict but a life-or-death struggle concerning the consolidation of the “petrodollar’s” status.
  • United States: Needs to flex its “muscles” to maintain its global leadership and the hegemony of the dollar.
  • Iran and other countries: Are challenging the dollar settlement system, seeking their own space for survival.
  • Israel: Its actions have profound religious and historical motivations, with the goal of rebuilding the Temple, which directly conflicts with the holy sites of the Islamic world.
• Relationship to Investing: Although these macro situations may seem unrelated to us, they can affect global financial markets at critical moments and become a factor in judging cycles. But once we have made our asset allocation adjustments, these disturbances are once again irrelevant to us. We are investing in the assets of American companies, not the US dollar. A depreciating dollar will actually push up the price of assets denominated in dollars.

III. Q&A Session

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Austin

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• Sharing 1:

  1. He shared his experience trading during the market decline in 2022. At that time, panicking about continuous interest rate hikes, he sold some of his holdings at a low point. It wasn’t until early 2023, when he saw the market recovering and the AI trend emerging, that he hastily bought back in at a 10% higher price, and he couldn’t even buy back his entire position, making his actual cost even higher.
  2. He compared this to a friend working at Apple, who remained very calm during the market turmoil, consistently investing a fixed amount in VTI each month, and ultimately weathered the storm with significant profits. This made him realize that if you can’t make the right judgment at the first moment, sticking to a “never sell” dollar-cost averaging strategy might be a better choice.

• Sharing 2:

  1. He shared that after following the teacher’s advice, his wife underwent a low-dose computed tomography (LDCT) scan, which revealed a 2.2 cm early-stage lung nodule (ground-glass opacity).
  2. This experience caused immense fear and anxiety for him and his family. Fortunately, after surgery, it was confirmed to be Stage IA, the earliest stage, requiring only regular follow-ups.
  3. This event completely changed his attitude towards life. He used to be an extremely anxious person with a severe sense of scarcity, always worrying about not having enough money and his children’s grades. But after “almost losing the person I love most,” he learned to let go, stopped worrying about small things, and his sense of financial scarcity greatly diminished. He deeply understood that compared to the health and companionship of his family, everything else is not that important. He shifted from his old habit of comparing upwards to learning to look downwards and cherish the happiness he possesses.
  • Teacher James’s Comments:
    1. Regarding investment trading, the teacher pointed out that cyclical trading is very difficult. If you can’t act in the early stages of a market decline (e.g., 3-5%), and instead sell after a 15-20% drop, then buy back after it rises, you often end up worse off, or even lose more. If you don’t have foresight, it’s better to “lie flat” and do nothing.
    2. Regarding the health sharing, the teacher once again emphasized the importance of LDCT, recommending everyone and their families to get it done. He mentioned that lung cancer has a long incubation period, and those with a family history should get checked early. The teacher stressed that as long as you can live healthily and breathe smoothly, that is the greatest happiness. Family harmony and health are far more important than money.

Winnie

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• Question: As a professional woman with an MD and PhD, she shared her views on the division of labor in a family. She believes that when both spouses work and grow together, they can share the family’s financial and emotional pressures, making life easier. She doesn’t quite understand why some families choose for one partner not to work and asked for the teacher’s opinion.
  • Teacher James’s Reply: The teacher believes there is no absolute right or wrong family model. Whether one partner works or both do, the core is that “there is love in the family.” A family full of love can be very happy and fulfilling even if only one person works; conversely, if love is lacking, the family may be full of conflict even if both partners work. Money and material possessions are like fleeting clouds; family relationships are what matter most. In a society like the United States, as long as you are willing, survival is not difficult (e.g., driving for Uber), so there is no need to worry excessively about money.

Jeff

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• Sharing:

  1. He is “Shiguanzhang” himself and shared his journey since he started learning the CLEC investment philosophy in November 2025. He previously used a leveraged ETF strategy of “half 713, half 2x leveraged,” experiencing a drawdown of up to 55%. Although he made it back through rebalancing, the huge volatility made him uneasy.
  2. After encountering the teacher’s philosophy, he felt he had found a method truly suited for him, resolving his inner confusion. He adjusted his asset allocation in mid-March 2026, reducing his beta from 1.1 to 0.6. He was very happy when he later heard the teacher also recommend deleveraging, feeling as if he had received a “reassuring pill.”
  3. Inspired by the teacher’s philosophy of “when you prosper, you should help the world,” he began to share actively and started his own YouTube channel (JF Shiguanzhang), hoping to help more people. He shared the amusing story of how the teacher “discovered” him: the teacher’s phone auto-played his channel at 3:30 AM.
  • Teacher James’s Comments: The teacher confirmed that Jeff is indeed Shiguanzhang and joked that discovering his channel was purely “the will of heaven.” He praised Jeff’s channel for being well-made and very helpful for new friends, and encouraged everyone to follow it.

Brook

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• Sharing:
  1. He mentioned that his friends in the military have already begun deploying towards Iran, believing a ground war may be unavoidable.
  2. He thought of some internet celebrity phenomena, like the recently deceased Zhang Xuefeng and Ni Haixia whom the teacher had mentioned before, and felt that many people only have faith in words, whereas the teacher’s teachings are very practical and heart-touching.
  3. He worried that the development of AI might trigger a new “Luddite movement” (a social movement resisting new technology), but admitted this was beyond his control.
• Question: About a year and a half ago, the teacher mentioned stablecoins. Considering the recent situation and the teacher’s statement that “investing is not about the US dollar,” he wanted to confirm the prospects for stablecoins and whether they are related to investing in QQQ.
  • Teacher James’s Reply:
    1. Stablecoins have their specific circulation needs, especially in countries with unstable fiat currencies (like Venezuela), and they will continue to exist and develop.
    2. The future payment system will see a hundred schools of thought contend. To maintain monetary sovereignty, all countries will develop their own digital currencies or stablecoins. This is a major trend.
    3. The development of stablecoins is not directly related to our investment in QQQ (the assets of the 100 strongest companies in the US). Our investment target is the company assets, not the currency itself.

Sean

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• Question: Following the teacher’s advice from the previous two weeks, he liquidated his TQQQ position, reducing his beta from 4.2 to 1.42. He is now holding cash and waiting for the cycle to turn back up before buying into 2x leveraged ETFs again. He wanted to confirm if this was the right thing to do.
  • Teacher James’s Reply: The teacher stated that there is no absolute right or wrong. Since you have made a decision, it is the right one. Once you’ve done it, you must see it through. Holding cash and waiting now is the correct subsequent step.

LCY

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• Sharing:

  1. At the end of January, she followed the teacher’s advice, transferred her assets back to Taiwan, made a lump-sum investment for asset allocation, and also collateralized assets to cover future expenses.
  2. She recently successfully applied for a 10-year personal loan of 500,000 from Rakuten Bank at an interest rate of 5.05%. She asked the teacher if this rate is acceptable.
  3. She shared her recent experience of falling ill: she suddenly became sick when returning from a trip abroad, with full-body tremors and severe pain. She endured it until she got back to Taiwan before calling an ambulance to the emergency room. In the wheelchair and on the hospital bed, she deeply realized the importance of health. She recalled building her position at the high point in late January, the subsequent market decline, and the pressure of family expenses, which had made her anxious. But she chose not to look at or care about the losses and adjusted her position according to the teacher’s advice. She realized that the hardest part of investing is actually “staying alive for a long time”; a healthy body and mind are more important than stock price fluctuations.
  • Teacher James’s Reply:
    1. Regarding the loan, the teacher thinks a 5.05% interest rate is very cheap from a US perspective and is completely acceptable. Borrowing to increase cash flow can enhance security.
    2. Regarding the illness experience, the teacher reminded her not to tough it out next time and to seek help early. He also pointed out that medical care in Taiwan is very convenient, so she shouldn’t delay due to fear of trouble.

Linda

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• Question: Asked where to find the audiobooks.
• Sharing: She shared a heartbreaking example of a friend. Her friend had a cold but toughed it out and didn’t see a doctor in time. By the time an ambulance was called, it was too late, and he unfortunately passed away. She also mentioned that many people, after being infected with COVID-19, may have internal damage even without symptoms. When she had her own lung check-up, a 2mm nodule was found, which the doctor speculated might be related to a previous asymptomatic infection. She used this to warn everyone not to tough it out when feeling unwell.
  • Teacher James’s Comments: The teacher replied that the audiobooks can be found in the Playlist on the YouTube channel. He also advised her to get a follow-up check on the nodule in two years, and if it grows, it will need to be addressed. He once again emphasized that life is precious and one should not tough it out when feeling unwell.

IV. Insightful Quotes

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Investing is not trading; trading is a sin. We do asset allocation, not trading; we follow cycles for risk management, not to buy low and sell high. – Teacher James

Background: Teacher James repeatedly emphasized the distinction in his core investment philosophy during this session. He believes that frequent buying and selling in an attempt to profit from price differences (“trading”) is a mistaken speculative behavior. The right path in investing is “asset allocation” based on long-term planning and “cyclical risk management” at critical moments.

If you cannot feel or know that critical moment, then it means you can’t do cyclical investing either. In that case, the market has nothing to do with you, and you can just lie flat. – Teacher James

Background: When explaining cyclical thinking, Teacher James pointed out that cyclical trading has extremely high requirements for timing and perception. For most investors who cannot accurately judge critical turning points, choosing to “lie flat”—that is, sticking to the “buy whenever you have money and never sell” strategy—is simpler and safer.

I suddenly felt like I had let go. I felt like… I was so close to having the one I love almost leave me. … From then on, my perspective changed completely. – Austin

Background: Student Austin shared the profound transformation in his mindset after his wife was diagnosed with early-stage lung cancer. This experience changed him from someone full of anxiety about money and the future into someone who cherishes the present and is grateful for his family’s health, deeply illustrating how “experience” can reshape one’s outlook on life.

To be happy in life, you can never win by always comparing upwards. But when you look down and see people who have it harder, you will truly feel, ‘Wow, I am so fortunate.’ – Austin

Background: After experiencing a family health crisis, Austin shared his new perspective on “comparison.” He believes that happiness doesn’t come from comparing oneself to those who are better off, but from reflecting on and being grateful for what one has when seeing the misfortunes of others.

You can still breathe, so what do you have to worry about? You can take a smooth, deep breath like this. Let me tell you, many people can’t even take one breath in. – Teacher James

Background: When commenting on the student’s health sharing, Teacher James used this vivid metaphor to remind everyone that being healthy and alive is itself a huge fortune and happiness. We should feel happy for having the most basic and precious thing: our health.

Choose the beauty over the throne. This means you love your family so much that you could give up all your wealth, but you must still love your family. – Teacher James

Background: When answering the question about whether both spouses should work, Teacher James emphasized that the importance of family relationships far outweighs money. He used this classic phrase as a metaphor to say that any material sacrifice is worth it to maintain family harmony and love.

We are equal in spirit, but absolutely not in the market, because the market rewards value, not effort. – Brook

Background: Student Brook shared a quote he saw elsewhere that aligns very well with Teacher James’s investment philosophy. It points out the essence of the investment market: returns are not determined by how much effort you put in (like frequent market watching and trading), but by the intrinsic value of your investment itself.

V. Summary

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This lecture was a deep dive into the evolution of an investment philosophy. Building on the solid foundation of “buy whenever you have money and never sell,” Teacher James introduced the advanced concept of “cyclical risk management.” He clearly stated that cyclical thinking is not speculative trading, but a one-time optimization of asset allocation at critical market turning points, aimed at navigating major market fluctuations more smoothly. The core idea of the lecture is that investors should choose a strategy that suits their circle of competence: either stick to the simple principle of “never sell” or learn to apply cyclical thinking at key moments. Whichever path is chosen, once the plan is set, one should return to a state of “peace of mind,” focusing life’s priorities on family, health, and personal growth. The heartfelt sharing from several students, especially their reflections on health and family, added a warm touch to this session, profoundly interpreting the ultimate goal that “investing is for a better life.”