26. 433 / 442 / 613 Asset Allocation

26. 433 / 442 / 613 Asset Allocation

There are only two kinds of people in the world: poor and rich. Whoever is in office, QQQ rises.

Having covered the direction and faith of investing, now the more practical question: how should your money be arranged? In the CLEC system there is a compact asset-allocation code: 433, 442, 613. These numbers represent the proportion of your capital across categories, designed for different life stages and risk tolerance. The specific numbers adjust by individual situation, but the core principle is one: the NASDAQ-100 index fund is always your main position; all other allocations are safety cushions around that core. The core position first. Whichever ratio you use, the largest piece is always the NASDAQ- 100 index fund — QQQ in the U.S., 00662 in Taiwan. This piece is the engine of your wealth growth, the backbone of your entire portfolio. Think of it as the trunk of a big tree: branches can be pruned, the canopy adjusted, but the trunk has to be strong and upright. Without a strong trunk, no lush canopy can hold. So why allocate at all? Not for higher returns — for managing your volatility tolerance. The NASDAQ-100 has the highest long-term return and the largest volatility. In bull years it can rise 50%; in bear years it can fall 40% or more. If all your wealth is in this one basket, a 50% drop halves your assets. Mathematically — if you don’t sell — this is not a problem; the market eventually comes back. Psychologically — watching your account go from NT$10M to NT$5M, even knowing you shouldn’t sell, the agony pushes many to make the most wrong decision at the most wrong time.

The purpose of asset allocation is a psychological cushion that lets you hold through the darkest market moments. It’s not a tool to earn more — it’s a safety rope to get you to the end alive. Climbers know the safety rope doesn’t help you climb faster, but it can save your life if you slip. Asset allocation in investing plays the same role — it doesn’t raise your return; it prevents irreversible errors in extreme conditions. Using 433, 442, 613 to illustrate. On the surface they are three sets of numbers; in fact they answer the same question: how to build a core position around the NASDAQ-100 while managing “can you withstand the volatility.” All three use the same toolset: First, QQQ as the core direction (NASDAQ-100). Second, QLD as the leverage tool (2× long NASDAQ-100, effectively 2× QQQ), used to top up equity exposure without pressing all principal into stocks. Third, the cash portion in short USD Treasury / cash-like instruments as a safety cushion, e.g., BOXX or BIL — not parked in checking. The intuition of combining the three: use QLD to dial the gap between “equity-cash mix” and “overall market exposure (Beta)” — closer to or above market exposure (Beta near or above 1.0) by raising QLD; more conservative (Beta below 1.0) by lowering QLD and thickening short-Treasury cushion. Hold a portion in short-duration Treasuries to leave yourself enough “psychological cushion” and “action ammunition.” The real difference between configurations is not direction (direction always points to NASDAQ-100), but the thickness of the cushion and aggressiveness of equity exposure.

The Beta here is the “portfolio-weighted approximation”: treat QQQ’s Beta as ~1, QLD’s as ~2, short USD Treasury / cash-like (BOXX/BIL) as ~0; portfolio Beta ≈ 1 × QQQ% + 2 × QLD%

• 0 × Treasury%. Strictly speaking, real Beta varies with time and market environment; this is to help you grasp overall exposure intuitively. By personal profile: “442” suits younger or working investors with steady cash flow willing to absorb bigger volatility for higher upside elasticity; “433” suits those wanting steadier experience while keeping market exposure near 1.0; “613” suits already-retired or just- retired investors prioritizing lower volatility and drawdown experience. To emphasize: these are not dogma, not rigid formulas. Income, family, age, psychology — all differ; the allocation that suits you is one only you can decide. But several principles do not change. First, the core is always the NASDAQ-100 index fund — non-negotiable. Second, what you adjust is the cushion thickness, not the direction of the core. You can raise or lower cushion based on age and risk tolerance, but you should never substitute something else for the core position. Third, allocation manages volatility, not return. If all your money is in QQQ, long-term return is highest, but can you bear the volatility along the way — that is a separate question. Allocation is to keep you holding in the worst case, alive at the end. Closing one line: there are only two kinds of people in the world — poor and rich. Whoever is in office (Trump or Biden, KMT or DPP, Democrat or Republican), QQQ rises. Political alternation is surface; technological progress and capital appreciation are bottom-layer logic. Your investment decisions should not be swayed by political stance — Apple, Microsoft, Google, Nvidia, Amazon don’t stop innovating or earning because the president changed. Configure your positions, hold to your principles, then hand the rest to time. Cash is air; allocation is staying alive — whether in accumulation or withdrawal, allocation’s purpose isn’t higher return, it’s staying alive in the worst-case market without forced selling at the low. See §22’s retirement-phase expansion. ───────────────────────────────────────

Key Points

One, CLEC’s allocation system (433/442/613) is accumulation-phase — answers “you’re still working and have monthly cash flow.” For withdrawal phase see §22’s 2%/3%/>3% four-tier plan. The two systems complement, do not conflict. Two, allocation’s purpose is not higher return but managing volatility tolerance, keeping you holding in the darkest market moments without making irreversible mistakes. Cash is air; allocation is staying alive — it’s the safety rope to the end, not a tool to climb faster. Three, discipline beats cleverness. Two kinds of people in the world: poor and rich. Whoever is in office, QQQ rises. Configure positions, hold principles, hand the rest to time, don’t be swayed by fear and greed — that is the whole secret of becoming rich from poor.

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The Final Chapter: Legacy and Mission

● Free Earns the Most ● Educating the Next Generation ● Act Now Originally I set out to deliver others; in the end, it was others who delivered me.

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