I. Theme of This Session#
This session revolves around two core ideas. First, on the investment level, market volatility is the driving force for growth. Investors should adopt a long-term perspective, understanding and investing in targets with excellent business models, such as the US Nasdaq 100 index. Second, on a philosophical level, it emphasizes that “those who can change themselves are gods, those who want to change others are madmen.” The only things we can control are our own mentality and actions; we should focus on self-growth rather than trying to change others. When your assets are sufficient for retirement, you should no longer trade your precious life for excess money.
II. Briefing Content#
Investment Vision and Business Models#
- Market volatility is the energy for growth: Every fluctuation is an accumulation of energy, preparing for the next new high. For investors, a market downturn is the true beginning of learning about investment.
- Investing requires a long-term perspective: As Warren Buffett said, if you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. Investing requires the mindset of holding for a lifetime.
- Investing in an index also requires looking at its business model:
- We choose to invest in stocks because their long-term growth potential is superior to other assets like real estate and bonds.
- We choose a broad-based index (like the Nasdaq 100) over a narrow-based one (like an index with only 50 tech stocks) because we don’t discriminate against any industry, as long as the business model is sound and can generate stable profits over the long term. The Nasdaq 100 is not just about high-tech; it also includes companies like Costco.
- We choose the United States based on its historical performance and the excellent business model demonstrated by its national system.
- Our investment logic: We are investing in a superior business model filtered down through layers from the universe, humanity, the United States, to the Nasdaq 100. This is a conclusion reached after long-term research, not a spur-of-the-moment decision.
Investment Principles and Risk Management#
- Core investment principle: For investable money, you should “buy at the market price immediately with any available funds, and never sell.” After buying, just sleep soundly. Don’t use other complex strategies like dollar-cost averaging or market timing.
- Thinking about risk is the top priority: Before investing, you must first consider the risks. You need to reserve enough cash to withstand various extreme risks, such as:
- Natural disasters or accidents destroying your home, requiring you to rent or pay compensation.
- All loans (personal loans, mortgages) still need to be paid monthly.
- The stock market crashes to near zero.
- Sudden unemployment and loss of active income.
- Stock-pledged loans being restricted or unavailable.
- Cash reserve recommendations:
- Young people: Need to decide how many years of cash to reserve based on how long it would take them to find a new job.
- Retirees: It’s recommended to reserve 15 years of living expenses. If your total assets are only enough for 15 years of expenses, your risk tolerance is low. You could allocate 10 years of expenses to high-dividend products, 5 years of expenses to the Nasdaq 100 index, and keep about 2 years in cash.
Life Philosophy and Views on Wealth#
- Those who can change themselves are gods, those who want to change others are madmen:
- The only things you can completely control in life are your own actions, thoughts, and mentality. Trying to change others, even with good intentions, often leads to suffering for both parties.
- Many people’s troubles stem from complaining about their spouse, parents, or children, which is essentially a desire to control others. We should learn to “separate tasks”—other people’s actions are their tasks, how you react is your task.
- Instead of wasting energy trying to change others, invest in yourself. Learn to communicate, listen, and express yourself. Learn to adjust your mindset and accept reality.
- Once financially free, stop trading your life for trash:
- The simple conditions for becoming wealthy are “avoiding pitfalls” and “time.” We can’t go back in time to start investing earlier, but we can extend our investment timeline by living a long and healthy life. Remember to get regular health check-ups (like low-dose CT scans, gastroscopy, colonoscopy, abdominal ultrasound, etc.). Living longer is more important than working more.
- Once your assets reach the minimum retirement threshold (e.g., 15 times your annual expenses), you should start thinking about retirement. The wealth growth from living ten more years is far more significant than that from working ten more years.
- If your assets already exceed 50 times your annual expenses and you’re still dragging your tired body to work, you are trading your life for an excessive inheritance (trash).
- Retirement isn’t about doing nothing; it’s about using your life to do more meaningful things, like spending time with family and pursuing life goals, while your assets continue to grow.
III. Q&A Session#
Peter#
- Sharing: He shared that securities firms in Taiwan are currently tightening “unrestricted purpose loans.” Due to the unusually frenzied market, many investors (including an 88-year-old) are borrowing money to invest in stocks, causing the total credit business of securities firms to approach or reach the 400% of net worth limit set by the Financial Supervisory Commission (FSC). The FSC is imposing restrictions to control risk. In his view, while this restricts capital flow, it also prevents a massive “long squeeze” and a bloodbath if the market reverses.
- Teacher James’s comment: This reflects a huge difference in financial regulatory philosophy between Asia (especially Taiwan) and the United States. In the US, finance is a free market. As long as regulations are met (e.g., sufficient collateral), borrowing is an investor’s right and freedom, and the government should not interfere excessively. Investors need to be responsible for their own actions, not rely on government “protection.” This “paternalistic” over-regulation in Taiwan, though well-intentioned, stifles financial innovation and may inadvertently put some investors who rely on capital flow in a difficult position. The rule of law should be above the rule of man; rules should be followed, and unreasonable rules should be reviewed and amended.
Duke#
- Sharing: He was deeply struck by the teacher’s concepts in mid-May, especially “laborer’s mindset” and the “rat race,” which helped him find the root of his long-term insecurity. Despite a good income, he became more anxious the more he saved because he worried about the future and didn’t understand investing. After understanding that the rich get wealthy through asset appreciation rather than labor, he took swift action. He canceled unnecessary insurance policies, invested 70% of his investable assets into a Nasdaq 100 index fund in mainland China (513300), and kept 30% in cash. He feels his life’s direction and mindset have completely changed.
- Question: He currently has a virtual card from a Hong Kong bank, which gives him the ability to invest overseas. He wants to know if he should continue investing in the mainland’s 513300 or transfer his funds to Hong Kong to invest in a similar product (like 02834.HK). What are the fundamental differences? If his assets are in Hong Kong, how can he conveniently support his life in the mainland in the future?
- Teacher James’s reply: There’s no need to go to Hong Kong specifically to invest. The main advantage of Hong Kong is the ability to pledge stocks. If this tool isn’t available domestically, and you’re only going to Hong Kong to buy an index fund similar to 513300, then it’s unnecessary. Regarding asset allocation, a 70/30 split requires assets to be at least 33 times your annual expenses (because the withdrawal rate is 3%). If you don’t have that much, you can supplement with some domestic high-dividend products to reduce volatility and increase the withdrawal rate. Once you recognize the right investment path, your mental stress will be greatly reduced because you know the future is bright.
Jovan#
- Question 1: He consulted Schwab about their Pledged Asset Line (PAL). They told him he could borrow $800,000 at a rate of 6.55% (including a 0.5% discount). He wants to confirm if this $800,000 credit line is fixed or if it fluctuates with the market value of his assets. How should he use this loan safely?
- Teacher James’s reply: The credit line is dynamic, typically 75% of the market value of your eligible assets (like QQQ). If your assets grow from $1 million to $1.1 million, your available credit will increase; if they fall to $100,000, your available credit will plummet. Therefore, you can’t borrow too much, as the market could drop 80% at any time. A safe principle is that your total borrowing should never exceed 20% of your assets’ peak value. If you only withdraw 2%-3% annually, the risk is low, but a one-time large loan must be strictly controlled within 20%, otherwise you risk a margin call.
- Question 2: Regarding his son’s previous car accident claim, after receiving one payment, the other party recently filed a new claim for $80,000, citing physical therapy costs. He is looking for a lawyer but finds it difficult to find one willing to take on this type of defensive case. What should he do?
- Teacher James’s reply: Don’t worry too much. First, you can negotiate with the other party, asking for detailed itemized bills; they can’t just demand money with a single sentence. Second, you can pay a lawyer to write letters to negotiate. Usually, a few exchanges of letters can resolve the issue without it going to court. The final solution is typically to pay a reasonable settlement amount and sign a legally binding settlement agreement, ensuring the other party cannot make any future claims regarding this matter.
Ling#
- Sharing: She is a beginner who just started attending the class. She doesn’t have any specific questions yet and wants to leave the speaking opportunity to others.
Vicky#
- Sharing: After listening to the teacher’s lesson on “treating matters as if they were your own” last week, her relationship with her husband has greatly improved, resolving a previous emotional block. She deeply understands that changing herself is the most important thing and is learning to communicate better, treating her family like guests by serving and listening to them, and accepting their emotions instead of rushing to offer solutions.
- Teacher James’s comment: He is very happy for her. It’s rare to grasp and practice “treating matters as if they were your own” at a young age and manage a marital relationship well. It is our honor to serve others, and we shouldn’t demand perfection from them. Teacher James also reflected that he is sometimes too direct in his email replies and fails to “catch” the other person’s emotional needs, which is something he needs to continue learning and changing.
Samuel#
- Sharing: He mentioned that he is the type who listens for a long time before slowly taking action. Through repeated emphasis from the teacher and classmates, he has gradually made changes in several areas: 1. He has overcome his struggle with retirement and is more motivated to retire early; 2. He has changed his spending habits, experiencing a flight upgrade for the first time, which felt great; 3. He has overcome his fear of borrowing to invest, making his first pledged loan investment, which was a big psychological step.
- Teacher James’s reply: Well done. Money should be spent on experiences, which is much better than buying luxury brands. And borrowing to invest is a key step from being affluent to becoming truly wealthy; it’s a way to take your wealth to the next level.
Susan#
- Question: Regarding the 80/20 asset allocation, does it refer to investable liquid assets or all money?
- Teacher James’s reply: It refers to all liquid assets. All our money, except for living expenses, should be invested; money should not be left idle. Therefore, all liquid assets should be allocated according to the 80% Nasdaq 100 and 20% cash ratio. A house is not a liquid asset.
Sean#
- Question 1: He is currently using a personal loan with a 5% annual interest rate for investment, and the amount is 45% of his total assets. He wants to know if this ratio is too aggressive. What would be a suitable percentage?
- Teacher James’s reply: As long as your cash flow can cover the repayments, you can borrow. Some young people take out a loan to invest in their first month of work because that money will grow immensely in 40 years. The key is your ability to repay.
- Question 2: He agrees with the logic of holding the Nasdaq index long-term, but with recent market volatility, he finds his mentality fluctuates as well, and he regrets buying too early. How can he reduce the impact of market fluctuations on his mindset?
- Teacher James’s reply: There are two key methods: 1. Safe asset allocation: The amount of money you invest must be an amount you can afford to lose. If you wouldn’t panic if the market dropped 80%, then that allocation is right for you. You can adjust the ratio according to your risk tolerance, for example, 50/50, it doesn’t have to be 80/20. 2. Long-term perspective: You need to see the future, where this investment will grow a hundred or a thousand-fold (add three zeros to the end) in a few decades. Your future problem will be how to spend this enormous fortune, not the small fluctuations of today. Once you think these two points through, your mindset will naturally stabilize.
Jean#
- Question: SpaceX is about to go public and may be quickly included in the Nasdaq 100 index. She doesn’t understand SpaceX’s profit model and worries that if such a large company is not profitable, it will drag down the entire index. Could this have negative consequences?
- Teacher James’s reply: It has nothing to do with us. As index investors, we don’t need to do in-depth research on every single company. The Nasdaq 100 index has a natural survival-of-the-fittest mechanism. If SpaceX performs well, it will push the index up; if it performs poorly, its weight will decrease, and it will eventually be removed. Our job is to own shares in these 100 companies, to be a “hands-off chairman,” not to worry about the operations of every single company. If you worry about the seventh-largest company, should you also worry about the top six? That would defeat the purpose of investing in an index.
IV. Insightful Quotes#
Those who can change themselves are gods, but those who want to change others are probably madmen. – Teacher James
Background: Teacher James points out that the only things we can completely control in life are our own thoughts and actions. Many people’s suffering comes from trying to control and change others (like spouses or children), which is doomed to fail and bring pain. We should focus on self-growth, not on reforming others.
When your assets reach a point where you feel you can retire, then retire, stop working. Don’t trade your life for trash. – Teacher James
Background: When wealth accumulates to a certain level (e.g., 15 times annual expenses or more), the marginal utility of earning more money for improving quality of life diminishes, turning it into superfluous “trash” (inheritance). Life and time are finite and precious; continuing to work is trading your precious life for something useless, which is not worth it at all.
We can’t start investing at age 11 or 7, so let’s just live longer. Live 20 years longer than Buffett, 50 years longer. With today’s technology, it’s possible. – Teacher James
Background: When discussing the two key factors for wealth accumulation, “avoiding pitfalls” and “time,” Teacher James points out that since we’ve missed the window to invest as early as possible, the other controllable variable is to extend our lifespan, thereby allowing compound interest to work for a longer period.
The most important thing in investing is to stay in the market long enough, not to be fast enough. – Teacher James
Background: This quote emphasizes the central role of long-termism in investing. Chasing short-term rapid returns often comes with high risk, whereas true wealth growth comes from staying in the market for the long term and enjoying the dividends of economic growth.
Other people’s actions are other people’s tasks; how you react is your task. – Teacher James
Background: When explaining the psychological concept of “separation of tasks,” Teacher James emphasizes that we should not take on other people’s problems (like a child’s grades) and become overly anxious. We do our part, and the outcome is their task. We should learn to let go.
If I opened a coffee shop for people to come and chat, it would be fine for me to lose money every month. It’s just that I don’t want to open one. I’m just saying, don’t open a coffee shop to make money. If you want to open a shop, you should be prepared to lose money, then go ahead and open it. – Teacher James
Background: When discussing life after retirement, the teacher uses this example to illustrate that after achieving financial freedom, the motivation for doing things should come from passion and interest, not profit. If the purpose of opening a shop is to make money, you’re better off continuing to invest; if it’s to enjoy the process, losing money is acceptable.
Our thinking is about how to escape the laborer’s rat race early, not to keep digging deeper into it, running faster and faster, thinking ‘will I make more money if I run faster?’ No need. Our money doesn’t come from a laborer’s hard work. – Teacher James
Background: This statement highlights the fundamental difference between a laborer’s mindset and a capitalist’s mindset. The laborer’s mindset tries to increase income by working harder, while the capitalist’s mindset gains wealth by having assets work for them. The investor’s goal should be to escape the “working for money” cycle as soon as possible.
As long as you keep pledging assets, money keeps getting printed. There’s no such thing as money that can’t be printed. – Teacher James
Background: When explaining the US financial system, Teacher James points out that money creation primarily happens through credit and collateral. As long as there is eligible collateral, banks can create new money (loans). In theory, the money supply is unlimited, which is fundamentally different from Taiwan’s quota-controlled system.
V. Summary#
This sharing session provided the audience with a complete framework for wealth and life, from both investment strategy and life philosophy perspectives. On the investment side, it reiterated the core strategy of long-term holding of a quality index (Nasdaq 100), explained the business model logic behind it, and gave specific advice on risk management and asset allocation. On the life side, it proposed the profound view of “change yourself, not others,” advocating for “separation of tasks” and self-growth. Most importantly, it integrated investment with life goals, clearly stating that once financial freedom is achieved, the focus of life should shift from “making money” to “living,” to stop trading precious life for superfluous money, and to pursue a more meaningful and happy life.