Chapter 3: Asset Allocation

Chapter 3: Asset Allocation

Seize the Moment: Buy Whenever You Have Money, Buy Immediately at Market Price

Hello everyone, this is the CLEC Investment and Financial Education Channel. Today is May 7, 2026, and we will continue with Chapter 3 of our “Billion-Dollar Investment Lecture,” the first investment lesson of 2026.

Before we begin, take a look at today’s market performance. The market has risen very strongly — QQQ was up nearly 2% in a single day. It is actually quite rare for a major index to rise 2% in one day, and this once again proves an important point: the market keeps going up over time. Because of this, you must build the correct mindset — when investing in the market, do not hesitate. If you are going to buy, then buy immediately at market price.

Recently, many people have been asking me: “Teacher James, the market has already gone up. If I want to buy leveraged funds, should I wait for a pullback?” “Should I adjust my 4-3-3 asset allocation?”

You need to understand that asset allocation does not need to be extremely precise. “Close enough” is good enough. Most people also do not need leveraged funds at all. The key principle is simple:

Whenever you have money, buy immediately at market price in a lump sum. Then hold it forever and never sell.

Stop waiting.

The Core Concept of Asset Allocation: Cash Is Air, Survival Is Everything

Now we enter the core topic of Chapter 3: asset allocation.

In asset allocation, cash is like air. If you constantly hesitate about whether you should invest now, then simply keep enough cash to make yourself feel secure, and invest the rest immediately at market price.

Asset allocation is really just a form of “decoration.” The true goal is “approximately correct.” Once your overall direction is right, enter the market as quickly as possible. Ever since we started teaching in 2018, we have consistently taught immediate lump-sum investing at market price.

Some people feel psychologically more comfortable investing gradually over time, but academically, studies have already shown that dollar-cost averaging usually produces worse performance. Therefore, the key is not gradual investing — the key is immediate lump-sum market-price investing.

If you are truly worried about market volatility, the solution is simple: keep more cash.

Why Must You Have Asset Allocation?

The most important reason is simple:

To survive.

Every single day, you should imagine scenarios like these: What if the market suddenly crashes 80% tomorrow? What if nuclear war breaks out and global markets stop trading?

Unexpected events often arrive before tomorrow does.

For example, today I received an email from someone whose father suddenly suffered a stroke yesterday. The doctors said he may need a stent procedure for a major artery, costing roughly NT$1 million.

If you do not have enough cash, what will you do?

If the market happens to be rising, perhaps you can still borrow against your stocks. But if disaster strikes while the market is simultaneously down 80%, and you also have no cash reserve, you may truly become desperate.

This is why I repeatedly urge everyone to keep enough cash.

Many people say cash is inefficient. That is true. But ask yourself: Do you want to arrive safely at your destination, or do you want to accelerate recklessly and risk crashing the entire car — or sinking the entire ship?

The primary purpose of asset allocation is to help you survive long enough to reach your destination safely.

Asset Allocation Is Like Seasoning: Personal and Simple

People often ask me: “Teacher James, is my asset allocation okay?”

The truth is that asset allocation is highly personal.

It is like cooking. I can tell you: chili peppers are spicy, vinegar is sour, sugar is sweet, salt is salty.

But how much you add depends entirely on your own taste. When you eat beef noodle soup, you do not ask me exactly how much vinegar or pepper to put in.

What I can do is explain the characteristics of each ingredient so you can mix them yourself:

• QQQ (Nasdaq-100 Index): long-term annualized return roughly 12%–15%.
• QQQI (high-dividend ETF): dividend yield roughly 1% per month.
• Cash: return approximately equal to the central bank overnight interest rate.

You must understand how these “ingredients” work, then create your own mix.

Today we will only discuss the two most common situations:

1. People still working.

2. Retirees needing cash flow.

I will no longer discuss leveraged funds or complicated “smart rebalancing,” because for 99.99% of ordinary people, simple and approximately correct is already enough.

Life does not need to be overly complicated.

Family Harmony Comes First: Handling Opposition From Spouses and Parents

Recently, I have heard many stories about wives beginning to invest, only for their husbands to become extremely angry — sometimes even leading to divorce discussions. This is very unhealthy.

If your spouse or parents strongly oppose your investing, remember two things:

First: Stop discussing investing with them.

Second: Agree outwardly and avoid conflict.

If the market crashes and they pressure you to sell, do not argue. Simply say: “Yes, yes, you are right. I will take care of it.”

They cannot see your accounts anyway. Just go along with them on the surface.

Once you eventually accumulate tens of millions of dollars in assets, I doubt they will still want a divorce.

Changing deeply ingrained thinking is extremely difficult. We should not try to change everyone around us.

Sometimes couples argue casually, but once emotions explode, the marriage itself may be endangered. It simply is not worth it.

The same applies to elderly parents who worry about you borrowing money to invest. Their fears are genuine. On the surface, reassure them. Tell them you will be careful. But privately, you can still follow the correct long-term investment logic.

Avoiding conflict is far more important.

(Disclaimer: We are not professional investment advisors or tax professionals. All investments involve volatility and potential losses in the short term. Everyone must learn independently, make their own decisions, and take responsibility for their own outcomes.)

Asset Allocation for Working People & Breaking the “Premium and Fees” Myth

No matter what kind of allocation you use, cash is air. Investing is about survival, so you must always hold cash, because the next second you may suddenly need NT$1 million for medical expenses.

For young working people who may still need to support parents, the suggested allocation is simple:

• Keep six months to one year of living expenses in cash.

• Invest everything else immediately at market price into broad-based index funds:

• U.S.: QQQ

• Taiwan: 00662

• China: 513100

Recently many Chinese investors have asked about exchange-traded premiums and whether to buy on-market or off-market.

Let me repeat this clearly:

Buy whichever method is most convenient. Ignore the premium.

Even if an ETF trades at a 10% premium, you should still buy immediately at market price.

Why? Because that premium may continue for the next 10 or 20 years. If you wait for the premium to disappear while the market doubles, you lose far more money by waiting.

Your investment returns and the premium are unrelated. Do not miss the forest for the trees.

Some people even try to save tiny transaction fees or complain about platform restrictions, then ask me whether they should open offshore accounts in Hong Kong.

This makes no sense.

Trying to optimize tiny 0.5% fees while creating enormous complexity for yourself is irrational. People want everything to be perfect while paying nothing — that is impossible.

Life is not that complicated. Investing is not that complicated.

Use whatever purchasing method is easiest for you. Stop worrying about fees or premiums. They are not worth your mental energy.

The highest principle in investing is simple: Buy immediately at market price. Sell immediately at market price when necessary.

If you accidentally “overpay” by 20%, so what? The market itself can rise 20% in a month.

The more you obsess over tiny details, the more money you often lose.

We should cultivate a wealthy mindset: Use money to buy happiness, buy time, and reduce stress.

Do not torture yourself trying to save NT$1,000 on a hotel room. Stress destroys your health, kills your cells, and accumulates toxins.

We are aiming for hundreds of millions — even billions — in wealth. A few hundred thousand dollars is already a small number in our channel.

Please cultivate the mindset of a wealthy person. Stop obsessing over tiny transaction fees and start living a happy, stress-free life.

Asset Allocation for Retirees (With Sufficient Assets)

For retirees, whether or not you invest in high-dividend ETFs, you should always keep 20%– 30% of your portfolio in cash.

If your assets are large enough — for example:

• Assets equal 50 times annual expenses (2% withdrawal rate)
• Assets equal 33 times annual expenses (3% withdrawal rate)

Then consider the following allocations:

For a 2% withdrawal rate:

• 80% index funds
• 20% cash

For a 3% withdrawal rate:

• 70% index funds
• 30% cash

This cash must be placed in short-term bonds or money market funds.

Do not try to be clever by replacing cash with high-dividend products. Cash is cash.

Examples:

• U.S. cash holdings: BOXX or SGOV
• Taiwan cash holdings: 00865B
• China cash holdings: E Fund 161115

If your withdrawal rate exceeds 3%, your cash allocation must become very large, reducing overall efficiency. In that situation, I recommend the “high-dividend strategy” discussed later.

Retirees Using Margin Loans Against Stocks

If you plan to use securities-backed lending for cash flow:

For a 2% borrowing withdrawal:

• 80% stocks / 20% cash
• Rebalance once per year using simple “mindless rebalancing.”

For a 3% borrowing withdrawal:

• 65% stocks / 35% cash
• Also rebalance once annually.

If you attempt to borrow 4%–5%, your cash allocation becomes excessively high, causing your portfolio growth to become extremely inefficient.

In that case, using high-dividend ETFs directly may make more sense.

Solutions for High Withdrawal Rates (Above 3%)

If your assets are insufficient and your withdrawal rate must exceed 3%, then you need high- dividend ETFs to generate income.

For example: Suppose your monthly living expenses are NT$50,000.

Multiply that by 100: NT$50,000 × 100 = NT$5 million.

Invest that NT$5 million into QQQI, which may generate approximately 1% monthly dividends — enough to cover your NT$50,000 monthly expenses.

After funding the QQQI position, allocate the remaining assets:

• 70% into QQQ or 00662
• 30% into money market funds such as BOXX or 00865B

Because your QQQI dividends already cover daily living expenses, this remaining 70/30 portfolio can simply grow untouched as a long-term wealth accelerator and future inheritance.

Only withdraw from it during genuine emergencies requiring large sums of money.

Conclusion & Preview of Future Topics

That concludes today’s discussion on asset allocation.

Remember the key principles:

• Lump-sum investing matters.
• Asset allocation only needs to be approximately correct.
• Cash is absolutely critical.

Investing really is this simple: Build your allocation, buy immediately at market price, and then hold.

Do not keep asking whether to invest gradually or wait for a market crash. Understand the logic behind this Billion-Dollar Investment Lecture and simply follow it.

You can download our lecture notes from the comments section.

Some viewers have asked for English translations to share with their children. Thanks to helpful students who transcribe the lectures into text, I will post the transcript in the comments section soon. You can then copy the text and use ChatGPT to translate it into English for family and friends who do not understand Chinese.

If you have questions, feel free to leave comments on YouTube or send me an email.

In our next lecture, we may discuss topics related to the global financial system. If there are specific topics you want included in this investment course, please leave a comment and let me know. I may turn them into independent future chapters.

Thank you, everyone!

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