00562 Buy When You Have Money, Never Sell: Why Can't You Do It?

I. Topic of the Session

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This session’s theme revolves around the core investment philosophy of “Buy when you have money, never sell,” delving into why the average investor finds this seemingly simple principle so difficult to execute. James points out that the main obstacles are the torment of human nature, fear of market volatility, and the distortion of information as it is passed along. Through the recent example of “cycle trading,” he allowed students to personally experience the difficulty of buying and selling, thereby re-emphasizing that for the vast majority of people, the simplest and most effective method is to hold for the long term and remain unshaken. Additionally, this session also touched upon the impact of the AI revolution on the future of work, asset allocation, the correct way to use stock pledge loans, and how to make decisions regarding assets like real estate.

II. Briefing Content

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Investment Mindset and Discipline

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• Ignore Market Noise: Market fluctuations, international situations, economic data, financial reports, etc., are all irrelevant to long-term investors. The core is to adhere to the principle of “Buy when you have money, never sell,” and ignore the market’s ups and downs.
• Investor’s Mentality: Investors should always be extremely optimistic, always face the sun, and firmly believe that the market will eventually rise. Wealth is worth waiting for, and patience is the key to investing.
• Lessons from “Cycle Trading”:
  • James pointed out that having everyone experience “cycle trading” (selling and quickly buying back) was to let them personally feel the difficulty of trading.
  • Many students, even those who closely follow the course, found it difficult to “buy back immediately,” which proves the fragility of human nature and the difficulty of execution.
  • This experience warns us not to easily suggest complex investment operations to friends or family who have not studied in depth. The best advice for them is “Buy when you have money, never sell,” to prevent them from falling into panic and mental confusion due to incomplete information.
  • If you can avoid making a move, don’t. This cycle trading experience might be one of the few in a lifetime, with the purpose of making everyone realize the infeasibility of short-term trading.

Asset Management and Allocation

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• Calculating Loan Interest Rates: James reminded everyone to be wary of the rhetoric from loan brokers or bank managers and personally demonstrated how to use an investment calculator to reverse-engineer the true annualized loan interest rate. He emphasized including extra costs like processing fees into the total cost to avoid being deceived by high-interest “cockroaches.”
• Handling Real Estate:
  • A student shared their experience of selling a house, stressing the importance of making a clean break. The opportunity cost of missing out on investing the funds in an index fund for the sake of selling for an extra 10% is enormous.
  • James commented that, like a broken elevator, you shouldn’t expect it to go up another floor. You should immediately sell bad assets at market price and immediately buy quality assets (like index funds) at market price. This is the crystallization of his 40 years of investment experience.
• Principles of Stock Pledge Loans:
  • Not Suitable for Low-Asset Individuals: Investors with insufficient assets (e.g., under NT$7-8 million in Taiwan, or under US$800k-1 million in the US) are not advised to use pledge loans because the risk is high and the cash flow generated is insignificant.
  • Pledge Loans are a Booster, Not a Gravitational Pull: For high-asset individuals, a pledge loan is a tool to accelerate wealth growth; for low-asset individuals, it can become a dragging force of gravity.
  • Core Discipline: Once you start borrowing via a pledge loan, do not sell your own assets to repay the loan or pay interest. The interest should also be paid by borrowing more. The purpose of borrowing is for investment or to improve your life, not for repayment. You should reinvest all spare cash, such as credit card cash back, to understand the immense power of compounding.

AI Revolution and the Future of Work

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• The Disruptive Nature of the AI Revolution: The AI revolution is different from the Industrial Revolution; it directly “replaces” human beings, potentially leading to mass unemployment of knowledge workers. Even the people who design AI may be replaced by AI.
• Wave of Layoffs at Tech Giants: Large companies like Google, Meta, Microsoft, and Amazon are using their own AI technology to lay off employees on a large scale to reduce costs. The era where one person commands hundreds of AIs is already here.
• How Individuals Should Respond:
  • You must build your own “Noah’s Ark” (i.e., a passive income system) as soon as possible.
  • The meaning of work is no longer for a salary. You should pursue diverse jobs that you are interested in, such as a barista, carpenter, plumber, or other skilled jobs that are not easily replaced by AI.
  • It is impossible to accumulate wealth through work; true wealth comes from investment. Not a single penny of Warren Buffett’s wealth came from a salary.

III. Q&A Session

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Leon

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• Question 1: When investing in the Nasdaq 100 index fund in mainland China, there are issues with premiums and purchase limits. I’m also worried about tax issues with investing through a US brokerage. How should I handle this?
  • James’s Reply:
    1. Regarding Premiums: Don’t worry about it at all. The Nasdaq index funds in China have had a premium for years; this premium has been internalized as part of the price. You should ignore the premium and buy at the market price as soon as you have money.
    2. Regarding Purchase Limits: If there’s a limit (e.g., 50 yuan per day), you can invest that amount daily to accumulate over time. If you have a large sum of money, just buy it all at the market price.
    3. Regarding Overseas Brokerages: It is not recommended for investors in mainland China to open accounts with overseas (especially US) brokerages. Although there is no capital gains tax on the buying and selling itself, China will tax your overseas income at 20%. More importantly, opening an account with a US brokerage (by filling out the W-8BEN form) exposes you to US estate tax and complex inheritance procedure risks. It’s advisable to transfer your funds back to China and invest and use them within China.

JJ

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• Question 1: I don’t understand the statement about needing to keep twice the amount in cash when pledging 00865B (a US Treasury bond ETF). Where does this “twice” come from? Is it related to exchange rate or interest rate fluctuations?
  • James’s Reply: There is no fixed rule of “pledging with twice the cash.” You may have misunderstood. The correct approach is to have a proper asset allocation, such as a 70/30 or 80/20 model, and then borrow based on that allocation (e.g., a 65/35 allocation allows for a 3% loan). Once allocated, you just need to do a “smart rebalance” annually, and the system will guide you. There is only one special case where you need to reserve cash: if you are in the middle of your investment journey and take out a large, one-time loan (e.g., borrowing $1 million against $10 million in assets), then this $1 million needs to be backed by $2 million in cash, and the remaining $8 million can be put into an 80/20 allocation. If this is not your situation, you don’t need to consider the so-called “twice the cash.”
• Question 2: Your saying, “Accept short-term uncertainty; the future is what’s certain,” is very philosophical. But my friend is afraid to enter the market after it has gone up. What should I do?
  • James’s Reply: This is why “don’t move” is the highest principle. Some people were bound to get hurt in this cycle trading exercise. For friends who haven’t taken our course, the best advice you can give is “Buy when you have money, never sell.” Don’t mention complex concepts like cycles or asset allocation to them; it will only cause them mental confusion and make them get off the train, never to get back on.

Chen

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• Sharing: He shared his complete journey from first encountering James’s philosophy last August, to liquidating his A-shares to go all-in on the Nasdaq, and then using domestic credit loans to borrow and invest. He was awakened by James’s words, “You have so many assets, why are you afraid to borrow from the bank?” and gradually built confidence in the CLEC investment philosophy.
  • James’s Comment: Chen is a very successful investor. His execution is strong and he moves forward without hesitation, which is the wisdom needed for investment success.
• Question 1: When doing asset allocation at HSBC in Hong Kong, is it necessary to allocate to QLD (2x leveraged ETF)?
  • James’s Reply: I don’t mandate the use of leveraged funds. But if you can tolerate the volatility, allocating 5%-10% to a leveraged fund is acceptable.
• Question 2: If I allocate to QLD, selling it during year-end rebalancing will incur a 20% capital gains tax. Should I buy it at HSBC Hong Kong, or go to a US brokerage like IBKR to avoid CRS?
  • James’s Reply: You should buy it at HSBC Hong Kong. Although there is a tax issue, you avoid the risks of US estate tax and inheritance procedures. The risks of opening an account with a US brokerage are far greater than the tax costs.
• Question 3: When doing a 433 allocation, should I include my A-share Nasdaq index fund (513100) in the calculation? If so, do I need to sell a portion of 513100 and then buy QLD and cash in Hong Kong?
  • James’s Reply: You can include it. The key is whether you can quickly transfer funds from China to Hong Kong when your pledged assets in Hong Kong need a margin call. If there are foreign exchange controls (like the $50,000 annual limit), preventing you from replenishing your margin in time, you risk being liquidated. Therefore, to be safe, it’s best to keep most of the 30% cash for risk hedging (like SGOV or other money market funds) in your Hong Kong account.

Sarah

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• Question: The market dropped in April and I wanted to buy, but I hesitated, wanting to wait for a lower point. The market then rose rapidly, and now that it’s up, I’m afraid to buy. I’m very frustrated. What should I do?
  • James’s Reply: I can’t give you specific advice on “how to buy,” because you have to be responsible for your own decisions. But you need to think clearly about one fact: QQQ will reach $6,000, and even $60,000 in the future. If something will be worth $600,000 in the future, does it matter if it’s $550, $600, or $650 now? The answer is already clear. You have to overcome your human nature and stop letting your money suffer along with you. Don’t wait until it’s $6,000 to ask the same question again.

Stella

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• Sharing: Regarding the tax payment method for a Roth Conversion, she consulted her company’s payroll department and learned that she can have the estimated tax amount spread out and deducted from her monthly paychecks in advance.
  • James’s Comment: I don’t recommend this. You should wait until you file your taxes next year and pay it all at once. Although there might be interest (a penalty), this interest is calculated based on the federal funds rate, which is very low. It’s equivalent to borrowing money from the government at an extremely low cost to invest for a year. Owing the government money is the best; the later you can pay your taxes, the better.

Qing

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• Sharing: She summarized 11 principles of long-term investing she has learned: don’t time the market, don’t pick stocks, don’t watch the market, don’t predict, don’t read the news, don’t listen to tips, don’t trade, don’t be indecisive, don’t pay back loans, and don’t forget the above principles. The core is to “live with your heart, don’t trade.” She also advised everyone that the best time to invest was ten years ago, and the second-best time is now.
  • James’s Comment: A very good sharing. Trading is a sin; don’t use more difficult things to test an already fragile human nature.

Tao

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• Question: In Australia, my current asset allocation is 50% VGT, 30% QQQ, 20% SPY. If I sell now to switch to 100% QQQ, it will trigger capital gains tax. Could you please tell me how the risk and long-term return of this portfolio compare to 100% QQQ?
  • James’s Reply:
    1. In the long run, there is no risk, only a difference in the rate of return. From 2004 to today, QQQ’s return is about 17x, VGT’s is about 16x, and SPY’s is about 5x.
    2. VGT and QQQ have similar long-term performance. Considering the tax cost, you can keep the VGT.
    3. You must get rid of SPY. Although you have to pay taxes, the long-term return gap between 5x and 17x is too large. The biggest risk is not switching—that’s the risk of you becoming poor.
    4. Regarding Estate Tax: You bought on IBKR (a US brokerage). Although Australia and the US have a tax treaty ($15 million exemption), you still face the extremely complex US inheritance process (Probation), which requires a lot of time and money. Be aware that the unexpected can always arrive before tomorrow.

Peter

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• Sharing:
  1. Warning about Pledge Loans: He received a warning email from his brokerage that Pledge Loan funds cannot be used for investment, although he did not engage in such operations. This is a reminder that the brokerage’s internal AI monitoring system may have false positives.
  2. Silicon Valley Job Situation: Layoffs are rampant at big tech companies now, and jobs are no longer stable. Many capable people are starting to jump to startups, seeking to achieve their financial goals before being completely replaced by AI. He himself has started learning skills like electrician and plumber, as these licenses are hard to obtain and thus create a kind of moat.
  • James’s Comment: It’s true that there are no absolutely secure places anymore. Big tech is unstable, and startups are also high-risk. Just follow your heart and do what you want to do.

Matthew

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• Sharing: He started investing with James’s guidance in 2021 and has been holding QQQ with great results. He has been using a Pledge Loan more recently. Although his cash position is still greater than his borrowings, he feels a bit scared and wonders if it’s dangerous.
  • James’s Reply: Don’t be afraid. Control two key points: 1. Your cash position must be large enough; 2. Your Beta value (stock market value as a percentage of total assets) should not fall below 0.5. QQQ is the speed at which the airplane is ascending, cash is your distance from the ground, and debt is the ground that is constantly rising. Your speed must be fast enough and your distance far enough to ensure safety.

Xu

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• Sharing: He shared his journey from an extremely conservative asset allocation to learning from CLEC, using pledge loans to improve his life, and bravely organizing an offline meetup in Kaohsiung. He found that taking the first step proactively yields the most knowledge and rewards. CLEC classmates are like old friends, happily sharing and progressing together.
  • James’s Comment: Excellent! Xu bravely took a step forward and built a social life. Because of their shared philosophy, CLEC classmates easily resonate with each other, and this kind of interaction, free from conflicts of interest, is very beneficial.

Diamond

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• Sharing: Inspired by James’s concept of “enlightenment” (悟), he contemplated the philosophical question of “who we are.” He believes that in investing, one should have “no self-image, no image of others,” and not be attached to one’s own ideas. He compares himself to clay that can be molded, but also wonders if “choice” itself is a form of attachment.
  • James’s Reply: Your thoughts are very good. From encountering CLEC to eventually having “no CLEC,” you reach a state of “abiding nowhere, yet the mind arises.” Investing becomes as natural as breathing. Life is an experience. When you treat every day as your last, many worries cease to exist. You are one with the universe, but you are not the universe. Each person is a unique world; just experience your own life well.

Julia

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• Question 1: A dilemma regarding Roth Conversion. She found that doing a large conversion after retirement would make her income too high, thus disqualifying her from affordable Medical Insurance, making premiums extremely expensive. She is torn between paying a high tax rate (e.g., 50%) to convert before retirement, or doing small annual conversions after retirement but facing high insurance premiums.
  • James’s Reply: Don’t throw away a whole chicken for a chicken foot (saving on premiums).
    1. You must convert: Your traditional IRA amount is huge and must be converted systematically every year; otherwise, the future tax problems will be even more severe.
    2. Don’t sacrifice tax benefits for insurance premiums: Spending millions or even tens of millions more in taxes just to save a few tens of thousands on premiums is getting your priorities backward.
    3. Medical insurance is not a must: American health insurance is a huge pitfall. You can choose not to buy it. With a few tens of thousands of dollars, you have more than enough to travel to Taiwan for medical care and check-ups. Alternatively, you can use $250,000 of assets to buy QQQI, and the annual dividends would be enough to cover the premiums. You need to solve the big problem (taxes) first, then consider the small problem (premiums).

Jenny

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• Sharing: She chose not to act during this cycle trading period because she found she couldn’t tolerate the emotional fluctuations that came with trading. She shared her experience of feeling anxious for having cash, and eventually chasing the market to buy high, learning the importance of “buy immediately when you have money.”
  • James’s Comment: This is all part of the learning process. Through this experience, you will understand yourself better and know which strategy suits you best.
• Question: In Canada, IBKR has estate tax issues, and TD Bank is also starting to offer pledge loans. Should I choose TD in Canada, or stick to the original plan of doing the pledge loan at HSBC in Hong Kong?
  • James’s Reply: This involves complex issues of taxation, identity, and long-term family planning. But overall, if conditions permit, operating directly in Hong Kong would be a better choice, as it allows for better tax planning and asset segregation.

Linda

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• Question 1: Confusion about learning and investing. She mistakenly joined a paid channel and is confused about issues like not repaying loans, penalties, whether to buy QLD, and when to start a Roth.
  • James’s Reply:
    1. All our content is free; you’re in the wrong channel.
    2. Fidelity is not suitable for pledge loans; I suggest transferring to Charles Schwab.
    3. Don’t buy QLD; you are not ready for it yet.
    4. You should start a Roth IRA from the first day you start working.
    5. First, go watch the systematic courses on our YouTube channel (starting from 00451). Detox your brain, build the correct understanding, and then come back with questions.

Hao

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• Sharing: He compared the different life paths of two acquaintances. One is a Korean colleague, 47, who has accumulated $3.8 million in assets through consistent investing and lives a relaxed life. The other colleague, in pursuit of his “dream” of opening a restaurant, invested a lot of money and energy, tying up his whole family. The restaurant has yet to turn a profit, and his life has become harder and harder.
  • James’s Comment: A great sharing. Successful investors first know what “not to do”: don’t speculate on gold, don’t trade short-term, don’t start a business, don’t buy annuities. When you avoid all the pits, the right path naturally appears. Buying QQQ is equivalent to successfully starting the world’s top 100 companies immediately. Why take the risk of starting your own business?

Sandy

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• Sharing: Echoing James’s point, we receive too much junk information every day. We must protect our instinct and know what to say “no” to. The moment of investment is eternity. Don’t get hung up on the ups and downs after buying. Once it’s done, move on and do more meaningful, energy-boosting things.
  • James’s Comment: That’s right. We don’t have to do anything. When faced with information, first ask, “Can I afford not to know this?” Less is more; knowing too much just brings trouble. Doing nothing at home is the best state. Eat well, sleep well.

IV. Highlighted Quotes

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The best time to invest was ten years ago. The second-best time is now. If you invest today, the you of ten years from now will be very grateful for the decision you made ten years ago. – Qing

In her sharing, student Qing encouraged everyone not to hesitate because the market has risen, emphasizing the importance of immediate action. This statement is a powerful rebuttal to the idea of “market timing.”

Don’t throw away a whole chicken for a chicken foot. – James

When answering a student’s question about whether to forgo a major Roth Conversion tax plan to save on health insurance costs, James used this vivid metaphor to emphasize the principle of distinguishing priorities and focusing on the big picture.

We don’t have to do anything. – James

When discussing information overload, this highly subversive point from James reminds us that people have the right to choose “inaction,” to reject unnecessary information and tasks, thereby protecting their energy and focus.

Owing the government money is the best; the later you can pay your taxes, the better. – James

Commenting on a student’s practice of paying Roth Conversion taxes in advance installments, James pointed out the essence of tax deferral—it’s equivalent to borrowing from the government at an extremely low interest rate to invest, revealing an important tax concept in the mindset of the wealthy.

In the long run, there is no risk; there is only a difference in the rate of return. The risk is that you fail to earn as much as you could have. – James

When comparing the long-term performance of different index funds, James redefined the concept of “risk.” For long-term investors, the biggest risk is not short-term losses, but the long-term opportunity cost incurred by choosing low-return assets.

People who will succeed in investing usually know what not to do as soon as they hear it. – James

Commenting on a student’s sharing of a failed business venture, James pointed out that avoiding all known “pits” (like short-term trading, starting a business, bad financial products) is the primary prerequisite for achieving investment success.

Buying QQQ is equivalent to successfully starting the world’s top 100 companies immediately. Why bother starting your own business? – James

This sentence vividly illustrates the huge advantage of investing in index funds—sharing in the growth dividends of top companies in the simplest way, without bearing the enormous risks and hardships of entrepreneurship.

The instant is eternity. If you had the impulse to buy it in that instant, that is eternity. You shouldn’t think about how it will do today, tomorrow, or the day after. – Sandy

Student Sandy used Zen-like language to interpret the investment discipline of “buy when you have money,” emphasizing the importance of living in the moment, making decisive decisions, and reducing internal friction.

QQQ will reach $6,000, and even $60,000 in the future. If something will be worth $600,000 in the future, does it matter if it’s $550, $600, or $650 now? – James

Facing a student’s anxiety about not daring to buy after missing a dip, James used a powerful long-term vision to broaden the investment perspective, making short-term price fluctuations seem insignificant.

You are just too busy, and that’s why you attract some demons and monsters. – James

When correcting a student who had mistakenly joined a paid channel, James pointedly noted that seeking too much information and being too “busy” studying can easily lead one astray by misinformation, emphasizing the importance of keeping things simple and focused.

V. Summary

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This Clubhouse session was a profound review of investment psychology and practice. Through the real-world case of “cycle trading,” James vividly revealed the common dilemma of “knowing is easy, doing is hard,” once again confirming the wisdom and value of the “Buy when you have money, never sell” principle. For the vast majority of investors, the most reliable path is not to try to beat the market, but to give up forecasting and trading, and grow with the market. At the same time, from the macro perspective of the AI revolution, the lecture reminded everyone to prepare for the future transformation of work models, making investment the core strategy for building a personal “Noah’s Ark.” Whether dealing with real estate, planning taxes, or facing daily consumption, one should maintain a long-term perspective, focus on the big picture, and avoid being penny-wise and pound-foolish. Ultimately, the goal of investing is to achieve a happier, freer, and healthier life, and being simple, focused, and unshakable is the best path to this goal.