Stock-Collateral Loan Questions: Reply rev 1.0

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Pledged borrowing reply https://docs.google.com/file/d/1X0UmnG5XTjzENAnjw20OiZiHzVctnd2v/edit?usp=docslist_api&filetype=msword

Over the past few years, our videos have repeatedly discussed methods and issues for securities-backed lending. Today I provide some simple information for reference. But this is not the only thing you should know; there are many details and risks. You should continue watching our earlier videos, because investing is not only about profit. Risk is the primary issue to consider first.

Every time we discuss pledged borrowing, we talk about a maximum borrowing limit of 20%. Our earlier videos mention this. It is a simple rough rule: even if the market falls 70%, the maintenance ratio can still stay around 150%.

If you use securities-backed lending, you must pair it with leveraged funds and cash. If you borrow through pledged assets, you must keep a very high cash level. Borrowers must have cash, and cash must be far greater than or equal to the borrowed amount. This avoids forced liquidation during market declines and also provides funds to invest when the market falls.

If You Want to Use Pledged Borrowing, Carefully Watch the Two Videos Below to Avoid Bankruptcy Risk

Cash has two functions: avoiding forced liquidation during market declines, and providing funds to invest when the market falls. Therefore cash must be far above the amount already borrowed against pledged assets. You must also use smart rebalancing every year. For detailed allocation, see video 00454. If you have already borrowed against pledged assets, refer to the example in presentation 00464: first set aside twice the borrowed amount, with half in cash and half in a 2x leveraged fund. Only then allocate the remaining funds according to scenarios 1 through 3.

If you want to use pledged borrowing, it is best to understand the following two videos clearly so you do not face bankruptcy risk.

00004 Special Topic: How to avoid bankruptcy risk from securities-backed lending: know, understand, and control the risk. January 3, 2024, CLEC Investment Channel https://youtu.be/8nOzj19z01M?si=ZIl0Eyg_pjYNQ3v1

00452 Cash can defend against risk: how to keep cash while maintaining 100% investment return, Beta 1.0. January 6, 2024, CLEC Investment Channel https://youtu.be/AyYnET7Mg3w?si=DPktAk5GIeCjk46v

As long as your pledged stock assets are far greater than your debt, you can keep borrowing and never need to repay. Banks want you to borrow money; they do not hope you repay immediately. Later, your estate amount is calculated from assets minus debt. Your descendants can continue pledging and borrowing.

00454 The most important investment lesson: asset allocation, leverage, pledging, cash ratio, smart rebalancing, and risk control. January 20, 2024, CLEC Investment Channel https://youtu.be/VY2NZm7gu1I?si=bvHBIdDqR3KwUzsF

If you are in Taiwan and your pledged stock assets reach a certain level, usually I suggest above NT$10,000,000, or in the United States above US$1,500,000, you should be able to use securities-backed lending through your brokerage account.

We also have related information in video 00097, which can answer your question: 00097 Short Topic: Taiwan securities-backed lending Q&A, January 19, 2024, CLEC Investment Channel https://youtu.be/WUea5JgDubE?si=t_ODkBg7D3B_Zj7M https://youtu.be/WUea5JgDubE?si=t_ODkBg7D3B_Zj7M

The Following Video From Another Channel About Taiwan Securities-Backed Lending May Also Be Useful

https://youtube.com/watch?v=l31p3xQ6ZO8&si=uXR9wF2DRtAWfoYb

James