Chapter 18 [Why we only recommend investing in US index funds]

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[James: Origins and Today] Chapter 18 - Why we only recommend investing in US index funds (03/21/2023)

I remember when I was designing products in the American Multimedia Laboratory, I knew very well that American innovation was number one in the world. When we think about a product in the United States, we are definitely not thinking about how to copy other people's products, but we are starting from scratch based on the needs of human nature and starting from the needs of consumers. Start thinking, then enter the design structure, and finally complete the product. Therefore, in the United States, most of the original technologies are started from scratch, and the same innovative technologies are transferred back to Taiwan. Taiwan has no interest in new technology products at all. Taiwan only knows how to mass-produce computers without marketing. As long as it keeps producing Everyone makes the same product, and as a result, everyone cuts prices and competes. This is Taiwan's fate.

So why do we recommend that you only invest in U.S. index funds. The United States is a fair, just and open market. The United States is a very innovative country. When you stretch out your ten fingers, you can count at least eight of the world's top ten high-tech companies. You can hardly think of any company in Europe that occupies a place in this high-tech field. That's why I always emphasize that the return rate of investing in the United States is the highest.

Europe is a country with strong socialism. European companies first serve the country. Most of the company's profits must pay taxes, and then there is labor protection. Europe's labor protection laws may be the most stringent in the world. Therefore, when a company's profits are first used to pay taxes, and then distributed to workers, in the end shareholders may not even be able to drink soup. Although I support the national government to assist low-income and poor people, for investors, what they pursue is the highest rate of return. Moreover, the government’s concept of using subsidies to assist people cannot solve the problem of the gap between the rich and the poor. Instead, it must start with assets. This topic is a bit big, and we will discuss it in a separate chapter later.

Next, I don’t recommend investing in emerging countries. You can understand that the financial regulations in emerging countries are not that perfect, so you will find that insider trading and hollowing out occur frequently. When you invest in a company, the major shareholders and insider trading hollow out the company before it can make a profit. The most common thing is that the major shareholders of large companies raise small companies outside. If those small companies can be listed on the stock market, the bosses of these large companies will be popular and popular. When these small companies do not perform well, these major shareholders will ask the company to buy these small companies to relieve these major shareholders. This is why the return on investment in emerging countries is relatively poor. Because the system is incomplete and there is no rule of law, shareholders' rights and interests are damaged.