From a Million Lost to Deleting the App: Doing Nothing at All Won Back Twenty Years of Tuition

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Today I want to share with you one friend's real investing story.

To protect the person's privacy, the names, place of residence, employer, account details, and exact asset figures in the story have all been removed or blurred.

This friend wrote to me recently:

"Teacher, the last time I wrote to you was already a year ago. Ever since I completed my asset allocation a year ago, I sealed up my brokerage account and only opened it again recently when I needed to rebalance."

When he logged into the account again and saw the numbers inside, he could hardly believe it.

"It is all like a dream. I cannot believe that, having done absolutely nothing, the gains could be so generous."

Because over this year he did not pick stocks, did not guess highs and lows, and did not watch the screen every day. He simply completed his asset allocation, then closed the account and went on living his life.

The result: his investment gains were larger than in more than twenty years of frequent trading.

But this result did not fall from the sky.

Before he found the investing road that suited him, he had already spent more than twenty years taking detours and had paid close to a million in tuition to the market.

The First Investing Lesson: With the Wrong Mindset, Even Regular Fixed Investing May Not Make Money

More than twenty years ago he encountered investing for the first time.

He had just entered the workforce with a modest income, but he already knew he should save, and he started investing a fixed amount in a fund every month.

He kept up the deductions for several years and later, being short of money, had to redeem the fund. The redemption price was below his cost; fortunately exchange-rate movements made up part of the loss, and in the end it roughly broke even.

That was the first investing lesson of his life.

He discovered that regular fixed investing does not guarantee a profit, and that exchange rates can also affect the result.

Later, because his work environment exposed him constantly to financial news, he saw stock-market gurus analyzing the market every day. Listening to them talk so extravagantly, he gradually came to feel that he too could make money in the stock market.

So he began buying and selling individual stocks.

At first it was only small amounts in and out, a little gained, a little lost, and it did not feel like much. It was not until the financial crisis arrived that he truly got to know the stock market for the first time.

With his own money he bought the experience of "halved, and then halved again."

Worse still, in the end he could not bear the pressure and sold when the market was near its lowest point. After he sold, the market began to rebound, and so he missed the large rise that followed.

This is something many investors have been through.

When stocks rise, you feel you bought too little; when stocks fall, you fear they will drop to nothing. In the end you tend to buy when prices are highest and everyone is most optimistic, and sell when prices are lowest and everyone is pessimistic.

From Dividend Stocks and High-Yield Funds to "Taking What Others Discard"

After the financial crisis he no longer dared chase hot stocks and began learning what is called dividend-stock investing.

He chose a large, familiar traditional-industry company, hoping to accumulate wealth slowly through long-term holding and steady dividends.

Unexpectedly, the company's dividend yield then declined steadily.

He held for several years, and when the share price finally came back to his cost he quickly sold.

Then he switched to a high-dividend ETF. After holding it for a while, he again exited entirely when the price returned to his cost.

He thought his problem was that he had not found the right stock, so he started reading more investing books.

Some books told him to choose stocks that others have discarded: the more a company is written off by others, the more investment value it may have. Other books told him to invest in the industries and daily life he was familiar with.

So he began making regular fixed purchases, over a long period, in a shipping company that the market did not favor at the time.

The result: the share price fell steadily from over ten dollars to only a few. The market was full of reports that the company was losing money and might even go under, and that the shares could become wallpaper.

He kept at it for several years and at last saw the price creep back near his cost.

But the pressure of being trapped for so long had exhausted his patience. Seeing the loss about to disappear, he immediately sold all the shares.

And just after he sold, the shipping market exploded, and this stock rose from a few dollars all the way to over two hundred.

Watching the price climb and climb, he was full of regret.

People often say that in a lifetime there may be only a few chances big enough to change your fate. He believes this was one of them, and that he sold it before the chance had truly arrived.

This taught him that all the news in the market tends to make investors hand over their assets at exactly the moment they should not sell.

He also understood that under prolonged pressure people very easily make decisions that look irrational in hindsight.

But that realization did not immediately put him on the right road.

After Selling the Stock, He Actually Started Betting on a Market Fall

After selling the shipping stock, the market mood grew hotter and hotter.

Everyone was buying stocks, and he thought of the "shoeshine boy theory."

He reasoned that when everyone is talking about stocks the market may already be near a top. And since only a minority make money in the market, he should stand on the opposite side from the majority.

So instead of putting his money back into the stock market, he bought ETFs tied to the volatility index, hoping to profit when the market crashed.

He later described himself at that time as truly naive.

Because he thought he was competing with ordinary investors, and only later discovered that he was actually sitting across from central banks with enormous policy tools and unlimited resources.

In the end that volatility ETF was liquidated because its net asset value fell too low, and he could recover only what little residual value remained.

This lesson finally made one thing clear to him:

The stock market rises over the long run, and shorting it long term is very nearly a dead end.

From his first fund purchase to individual stocks, dividend stocks, high-yield funds, shipping stocks, and finally the volatility ETF, he had already spent more than twenty years and accumulated losses approaching a million.

But he did not give up.

He believed that only by continually finding and correcting mistakes would he have a chance to turn his life around through investing.

Waiting for the Perfect Entry, He Left Most of His Money Idle

Later he spent a great deal of time studying monetary systems, the gold standard, the dollar standard, central banks, and the nature of money, and listened to many books on finance and investing.

He gradually worked out an investing strategy of his own.

He decided to make regular fixed purchases of index ETFs and high-dividend ETFs. If the index broke below its half-year moving average he would double the amount invested; if the market fell further he would keep doubling until all his cash was invested.

The strategy sounds disciplined enough.

The problem is that the market does not necessarily follow his script.

He waited empty-handed for more than two years, and the long, deep decline he was waiting for never came. Even when the market did fall occasionally it rebounded quickly, and he had no time to put his money in.

As a result his salary kept rising, his cash kept piling up, and his stock position stayed very small.

In the end his ratio of cash to stocks was close to three to one.

He thought he was waiting for a good opportunity; in reality he had left most of his money idle.

It was at this point that he came across CLEC's investing videos.

He had thought that having studied investing for over twenty years he must understand a fair amount. After finishing the course, he described his own financial literacy as possibly still at kindergarten level.

Because all along he had been studying how to predict the market, how to find the bottom, and how to choose the best stocks, and had never truly understood the purpose of asset allocation.

Asset allocation is not about predicting the market accurately; it is about admitting that we simply cannot predict the future.

Persuading His Partner, and Using the House to Create Investment Capital

He began watching CLEC's long and short content in quantity, and invited his partner to watch the full investing course with him.

Later he proposed a plan: use their own home to apply for a long-term, low-interest home-equity credit line, then adopt a relatively conservative asset allocation so that the house, which had not been working, would start working.

His partner was doubtful at first.

After all, in conventional thinking a mortgage is debt, and borrowing to invest is even more dangerous.

But after finishing the course and understanding the overall plan, his partner finally agreed.

At the time he planned an allocation of 60% stocks and 40% cash or time deposits, with the stock portion spread across several different ETFs.

He wrote to ask my opinion.

At the time I replied:

"Using a home loan to activate your assets is a very good plan. But since you have already adopted a conservative 60% stock, 40% cash allocation, the stock portion does not need to be diluted further into indexes with relatively low long-term returns. You can concentrate on a fund tracking the Nasdaq-100."

"Your investing experience is also the road many ordinary investors have to walk in a lifetime. That you have encountered the right information in time and begun on the road of long-term investing already makes you one of the fortunate few."

The More He Learned, the More Complicated He Made His Investing

He was delighted to receive the reply, and went on rewatching the earlier videos over and over, afraid of missing any important reminder.

However, when a person first begins to understand asset allocation it is very easy to make another kind of mistake: wanting to put every method into their own portfolio.

He divided the family's assets among three brokerage accounts.

The first account held the money borrowed against the house, with a relatively conservative allocation; the second served as the couple's joint fund, covering the children's education, travel, and large family expenses; the third he managed himself, adding leveraged index funds in the hope of higher long-term returns.

He also used an asset-allocation spreadsheet to run repeated simulations and found that allocating one third each to the plain index, two-times leverage, and cash appeared, in certain historical scenarios, to produce a higher maximum return.

So he wrote to me again:

"Teacher, is this allocation better? If the three accounts follow different strategies, does that spread risk and also make the purpose of each pot of money clearer?"

I told him:

"There is no such thing as an asset allocation that performs best forever." Still less does mixing three allocations make you safer! When the time comes you will see one allocation performing well and start trading the other two, and it will cost you more than it gains!

An allocation that does better when markets fall will not necessarily perform better in a sustained bull market; an allocation that shines in a strong bull market may also endure greater swings when the market falls hard.

Every asset allocation may perform well in one kind of market environment and lag in another.

And we know nothing at all about the market to come.

So asset allocation is not about chasing the highest number in a historical backtest; it is about choosing a mix you can genuinely hold for the long term and will not panic-sell even when it falls.

I also reminded him:

"Even if the assets sit in three accounts, you still have to treat all the accounts as a single whole. Three accounts do not mean three sets of assets, and they certainly do not need three independent investing logics."

"If every account has a different allocation, a different strategy, and a different way of rebalancing, it will only make your investing more and more complicated."

Investing can be very simple; do not create trouble for yourself.

After Completing the Allocation, He Sealed the Account for a Year

After hearing this advice he reorganized his investing.

He finally understood: you can have several accounts and record the purpose of each pot of money separately, but a household has only one total pool of assets, and it must be allocated as a whole.

He no longer chased the highest historical return in a spreadsheet, and no longer designed a complicated strategy for each account.

Once the asset allocation was complete, he sealed up his brokerage account.

Over that year he stopped watching the market every day, stopped predicting highs and lows, and no longer changed his investment plan because of news, interest rates, war, or politics.

He logged back into the account only when rebalancing was needed.

The result: when he opened the account again a year later, he found that the nearly one million in losses accumulated over more than twenty years had almost all been recovered within a few months of completing the allocation.

Afterwards he still did not trade frequently, and the paper gains kept accumulating.

In his letter he said:

"It is all like a dream. I cannot believe that, having done absolutely nothing, the gains could be so generous."

The Real Test Is Not the Rise but the Next Fall

Of course I was very glad to see his letter.

But I also have to remind him:

That he could recover past losses so quickly is due not only to asset allocation and long-term holding, but also to a market environment during this period that favored investors.

This does not mean the market will only ever rise.

There will certainly be falls again in future, and there may be pullbacks of twenty percent, thirty percent, or even more.

What really matters now is not how much money is in the account, but whether he can keep following the same principles the next time the market falls.

When markets rise it is very easy for investors to believe they can hold for the long term.

The real test is whether you still believe in your own asset allocation when the news tells you every day that the world is about to end, your account keeps shrinking, and everyone around you urges you to sell at once.

If the moment the market falls you go back to the old road of guessing highs and lows, cutting losses, and waiting empty-handed, then past experience may simply repeat itself.

The Most Precious Gain Is a Life That Has Become Settled Again

This friend says that over the past year, whenever he had time, he listened again and again to CLEC's earlier episodes.

He later discovered that what he gained was not only wealth.

Beyond investing, he also came to understand life, thought, and inner peace differently.

Recently he watched a drama about Huineng, the Sixth Patriarch. Afterwards he had a deeper appreciation of "hearing the Way, realizing the Way, and walking the Way."

He said that each Saturday's class is like a transmission of the teaching.

In the audience some arrive early and some late; some are quick to understand and grasp it at once; some have to go through many mistakes before they slowly come to see.

In fact investing is the same.

"Buy when you have money, get your asset allocation right, hold for the long term, never sell come what may": these words sound extremely simple.

But someone who has never chased highs and sold lows may not know how hard long-term holding is; someone who has never sold at the very bottom may not appreciate how important asset allocation is.

The same sentence means something entirely different to each person, because each has lived a different life.

This friend took more than twenty years of detours and paid close to a million in tuition before he truly understood:

Investing is not a contest over who trades best; it is a contest over who can stay in the market longest with an asset allocation that suits them.

Very often the best move is to make no move; the most important decision is, once the allocation is done, to stop making casual decisions.

What he sealed away was not a brokerage account but the former self who was endlessly afraid, regretful, predicting the market, chasing highs and selling lows.

Once he stopped wrestling with the market every day, his money began working for him instead, and his life became settled again.

So if you are still looking for the next stock that will go up, or guessing every day when the market will crash, it is worth stopping to think:

What you really need may not be more information, nor a more accurate forecast, but an asset allocation you can actually carry out for the long term.

Complete the allocation, stay in the market, then take your time back and live well.

Truly successful investing does not have us thinking about stocks every day; it frees us from fear about money, gives us time to be with family, look after our health, and improve ourselves, and gives us the means to care for more people.

I am very glad this friend has finally set out on his own road to wealth.

And I hope his story can remind everyone still feeling their way along the investing road:

The mistakes you made in the past are never wasted; as long as you are willing to admit them and correct course, it is never too late to start again.

Let us elevate, be healthy, care for others, and be wealthy, together.

I am CLEC James. Thank you all for listening, and see you in the next episode.