Chapter 74 [Investment Q&A Part 1]

Source:https://www.facebook.com/100063294665283/posts/719573626829120/

[The Origin and Today of James] Chapter 74 - [Investment Q&A Part 1] (10/16/2023)

Hi James

Hello, teacher, I am a new friend. When I had dinner with my friends this year, I listened to your video introduced by my friend. I couldn’t stop watching it. Many of your ideas repeatedly impacted my original thoughts. I really benefited a lot from watching it. It’s a pity that I didn’t get to know you earlier and start learning investment earlier.

I started watching the first episode, and I’m currently at 233. Because it dropped a lot a while ago, I wanted to know your thoughts. I started watching back from 400 in the past few days, and now I’m at 390. In order to avoid my question being asked before, you have to spend more time to answer me again. Originally, I wanted to wait until I have watched all the Youtube videos before asking the question at once, but because the teacher mentioned that you have plans to close the teaching course in the near future, therefore, I decided to ask you the questions I have in my mind first. The following are my questions. Because I am a novice investor, I have a lot of questions. Some of them may make the teacher dumbfounded. Please bear with me. Thank you in advance for spending your precious time to read the letter. In addition, because I have not watched all the videos, if my questions are mentioned in your videos, I would like to apologize to you in advance. I will watch the videos as soon as possible. I look forward to receiving your reply. Thank you.

1. You said that I agree with buying stocks in the index, but for me, the difficulty of buying stocks is not only overcoming the fear of falling, but also the regret of not selling when making money, and then falling again. In addition, it is also possible that the stock falls after buying it, and when the cost rises, I sell it first because I am afraid of being stuck again. Who knows that after selling, it rises again, so I dare not chase higher, which is another regret. Do you have any methods to avoid these regrets?

"James replied: Your mentality is common to ordinary investors. It's also normal.

First of all, you need to know that the market is random in the short term. There are hundreds of millions of people in the market, and everyone's mentality changes at any time (A's buying causes B, C,... to change their mentality. This is a changing market, changing every second.). Investors enter and exit randomly as the market moves, (the market fluctuates, don't follow it.) Otherwise, they will be controlled by the market and controlled by people's psychological control (fear, greed). In the short term, they usually cannot escape the fate of chasing highs and selling lows.

Be sure to ignore short-term market neuroses. Realize clearly that the market is crazy, so don't get nervous.

Investors should not be constrained by the market. As long as we understand that the market will always rise, just like our human growth, there is no limit and cannot be changed by short-term traders. The market will keep rising, so don’t enter or exit in the short term.

Therefore, buy good assets and never sell them. The market decline is only a short-term phenomenon, and the long-term rise is inevitable. Ignore the short-term market and focus on "beating it to death without selling it."

You buy a house for $1 million, and ten years later it becomes $2 million. Even if you don’t sell it, you still make money, right? Therefore, investment profits do not come from the operation of buying and selling. You can make profits by increasing assets without selling.

Therefore, if the index fund is regarded as a fixed asset composed of 100 and 500 large companies that will always be strong, it is like real estate. If it is not sold, it will continue to make money.

Therefore, if you don’t sell when the price rises, although it will fall, it will hit a new high again after a while. You will never sell, buy, or sell real estate, just do it back and forth! 』

Okay, I will try to adjust my mentality ^^

2. Because I started watching the first episode, the teacher said before that in Taiwan, 0050 can be bought, but then he said that it is not recommended. Is it because he is not optimistic about Taiwan's stock market? Because when you are stuck buying 0050, you can comfort yourself by saying that it doesn’t matter if it falls and just let the dividends go. The cost of the stock price will get lower and lower. But there is no dividend when you buy 00662. When the stock market falls, you can only wait for it to rise back. I think when buying 00662 is falling, you need to make more mental adjustments. Moreover, there is a dividend when buying American QQQ, but there is no dividend when buying 00662. Doesn’t the teacher still recommend that we in Taiwan re-entrust us to buy US stocks?

『James: I recommended 0050 before because Taiwan 00662 00646 is not very mature yet and there are no other good ETFs, so I would recommend Taiwanese investors to invest in 0050. Later we found that 00757 came again 00662 00646, so this is related to the increasing internationalization of Taiwan's financial market. Our initial recommendation to Taiwanese friends to invest in 0050 was also limited by Taiwan's financial environment.

QQQ's dividend is not high (0.72%). Part of it is used for management fees, and part of it may be added to the net worth. If you re-entrust yourself to buy QQQ, 1/3 of your dividends will also be withheld by the US government. There is also the issue of a minimum tax system in the future. Of course, you can realize capital gains when you make a profit of NT$1 million (there is no need to declare overseas income within NT$1 million.) and make a sell or buy action (another transaction fee).

Dividend distribution is not the source of investment profits. In the end, total return performance is the key. As long as you invest steadily for twenty years, the performance of 00662 and 00646 will exceed 0050. If you believe in the United States. 』

Question: Maybe it’s because you can use the excuse of receiving dividends to comfort yourself when it falls, and you won’t be too sad, so you want to buy 0050. In addition, it is also an index fund. I have a question about performance. I see that both 0050 and 00646 have been issued since 2018. , the lowest point of 0050 is 67.25 to the highest point of 152.4, which is 1.26 times, while the lowest point of 00646 is 24.6 to the highest point of 59.55, which is 1.42 times. I feel that the performance is about the same, or is it because the time I watched is too short, so I don’t feel much?

『James: 00662 was released late in Taiwan, but the QQQ he was tracking was available very early! If you compare the performance of the issuance starting at 0050 with the performance of QQQ, as shown in the figure below, you can see that the return of QQQ is 500%, SPY180%, and 0050 is only 102%. 』

3. The teacher’s older videos only recommend 00662, but the more recent videos recommend that everyone should not only buy 00662, but also allocate part of the funds to buy 00646?

『James: 00662 The stocks of a hundred companies generally rise faster when they rise, but they also fall much when they fall. This is what is called higher beta (it doesn’t matter if you don’t understand!), which means larger fluctuations. Some people may not be able to accept the pressure of a 35% market drop in 2022, so a choice with less volatility is 00646 (with five hundred companies, the volatility will be less.).

Many people will say that they can withstand the shock, so they can just buy 00662. This is the overconfidence of the average investor. Investors usually don't know themselves. Only after experiencing a market crash do they realize their overconfidence and lack of risk tolerance.

Beginner investors are usually very brave and say that they can withstand the market drop (these are beginners and do not know how to respect the market). They also believe that they will take sleeping pills when the market drops by 35%. If the market falls by 70% in the future like in 2000, investors will completely forget that they said they can "bear it" and end up selling at the lowest point, so don't be too confident in yourself. 』

Question: I would like to ask the teacher, the only difference between 00662 and 00646 is that 00662 tracks the top 100 companies in the United States by market capitalization, while 00646 tracks the top 500 companies in the United States by market capitalization. Is this correct? If you are someone who can accept larger market fluctuations, can you just invest in 00662?

『James: Before, you said to people who nervously sell when the market drops slightly, and people who rush to run when the market rises back to the cost, how can you have the confidence to think that you are a person who can accept larger market fluctuations?

If you have already bought all 00662, don't move. Next, if you have money, you can buy some 00646."

4. The teacher keeps saying not to buy insurance. I agree with the teacher that insurance is for the poor. The rich can use their own money to insure themselves. I would like to ask the teacher, did you not buy any cancer insurance or accident insurance before you became rich? At that time, were you not worried that if an accident happened, you would not have enough money to cover it, or would you have to spend a lot of your own money to cover it?

"James: I've never bought insurance. Taiwan has such convenient and cheap national health insurance, and there is no need to buy insurance (usually the insurance we really need is additional insurance, that is, you have additional insurance in addition to the main contract (life insurance, savings insurance, etc.) that makes a huge loss. Without the main contract, you cannot buy what you really need, such as accident insurance, etc. (Insurance companies are not charities).

Young people, in particular, should save their insurance money and invest it in the future when they are older (usually they have the opportunity to spend big money on medical care only when they are 70 years old). At that time, your investment assets will be enough to pay for your medical needs in old age.

Question: My mother gave me NT$1 million when he retired at the age of fifty-five, and I helped him invest it. After twenty years, he started using this fund to take care of his mother and father (operating eight or nine times, and being hospitalized no less than a dozen times. All of them stayed in self-paid single wards, braces, knee replacements, PRP spinal surgeries, surgeries on lungs, gallbladders, and carotid arteries. The average monthly cost ranged from NT$100,000 to NT$150,000 (I wrote so many things to let everyone know, I am old) There will be a lot of medical expenses), which cannot be solved by buying insurance, otherwise you will have to go bankrupt to buy insurance) After more than ten years of expenses, the maximum fund is still over 10 million."

Teacher, do you mean that Taiwan’s health insurance is convenient and cheap, so there is no need to buy additional insurance? But you didn’t buy insurance when you were young, so don’t you worry about not having enough money to pay for it in the future? After all, you hadn’t gotten rich yet, hahaha~~

Because I didn’t buy it when I was young, and now I’m 39, unmarried and have no children. I’m considering whether to buy long-term care insurance to protect myself in my old age. However, because I’m old, any insurance I buy now will be expensive.

Before watching your video, I never thought that I would have the opportunity to become rich one day, so I have always been worried about my old age, such as retirement or housing-related financial expenses. I am very afraid that the money I earn now is not enough for retirement. Thank you very much for breaking my old thinking and opening up a new path for me, which is to invest well from now on and use money to insure myself in the future. Thank you very much.

『James: Everyone invests well. In the long term, twenty or thirty years, the money earned from investment is far more than what is needed. Why do you need to give money to insurance companies in vain?

Because I have been there, and based on my age and the experience of taking care of my parents who are close to 90 years old, I know that only investment can take care of you and your parents throughout your life.

After taking care of my parents for more than ten years, I know clearly that you cannot rely on insurance. Insurance is a nice thing to say, and there are upper limits and conditions for the payment. (We can afford low costs ourselves, but high costs require insurance, and insurance is not responsible. Even if you use all your assets, you cannot buy the unlimited and complete insurance you want. If all you have is insurance, you will have no money to retire.)

It is safest to keep the money and invest it yourself. The long-term return on our investment is 10%, which can reach tens of millions or even hundreds of millions in the long term. If this cannot protect ourselves, what kind of protection do you think the insurance company's 2% or 3% return, coupled with such a large office building and high insurance brokerage commissions, can give you. 』

5. If you invest in Taiwan stocks now and hold them for more than 20 years, do you need to consider the geopolitical risks in the Taiwan Strait?

『James: Are you saying that assets are safe in Taiwan? Only when you have hundreds of millions of assets do you need to worry about Taiwan Strait issues! If you don’t have money, you won’t have to worry about it, and you won’t be able to move forward. So making yourself rich is the most important thing. 』

Question: Maybe it’s because I’m too obsessed with dividends, so I’ve been looking for index funds that offer dividends, so I bought 0050. Thank you for the teacher’s advice.

"James: According to the advice I gave you, invest in 00646 and 00662, investments with relatively high long-term stable returns. Thirty years later, you will understand what I am saying." 』

6. I am currently 39 years old. Because I don’t know how to invest, I only have two expired savings insurances and cash. I originally planned to use these two savings insurances as pensions, so this means that the funds will not be used in the short term. Would the teacher recommend canceling the savings insurance and buying all of 00662? If so, what I am currently considering is to keep a savings insurance as an emergency reserve fund. If there is an emergency, I can terminate the contract. Is this OK?

『James: You can keep one as an emergency fund. First cancel one contract and buy 00662. All the funds in your hand can be fully invested, and the other can keep the continuous 2.5% return as an emergency reserve fund. If you have a savings insurance as an emergency reserve fund, you don't need to keep too much cash as an emergency reserve fund. 』

7. I am currently employed, with an annual salary of NT$1.1 million, single with no children, no loans, and annual expenses of about 200,000 to 250,000. However, my parents are 70 years old. Although my parents are currently in good health, my parents also have savings, but not much. Do I need to include my parents’ risk expenses in my emergency reserve fund? If so, does the teacher have a recommended amount? (At present, in addition to the funds invested in stocks, the funds I have available include 300,000 in cash and two savings insurance policies. Both policies have expired and can be canceled at any time. However, the amount of interest depends on the length of time of cancellation. I have calculated that if the policy is left open for 20 years, the annual interest rate will be approximately 2.5%.)

『James: Only by investing well can you be able to retire safely and take care of your two elderly people! Your emergency reserve fund is to prepare for half a year to a year's expenses (you can use a portion of your savings insurance as an emergency reserve fund), and the rest of the cash on hand can be fully invested. 』

Question: It is true that the annual interest rate of 2.5% cannot fight inflation, but because I didn’t know how to invest before I came into contact with the teacher’s videos, buying savings insurance seemed to be the best way for me at the time. So is it enough to set aside half a year to a year of my personal expenses as an emergency fund? Do I not need to consider my parents’ physical expenses and leave a little more? Although their health is now fine.

『James: There is no need to set aside expenses for taking care of your parents yet. Your parents' health will not collapse suddenly, there will be a process, and you will know when you will start to need funds (don't be too cautious about these things, prevention in advance is ineffective, because you don't know). By then, if you have enough investment assets, you won’t be too nervous and you can sell as much as you need. 』