Let me be direct.
If someone claims they have it all figured out in this relentless and unforgiving game, they're either deceiving you or just a fool experiencing a fluke of beginner's luck.
I'm simply sharing my knowledge with those who, I acknowledge, have earned their right to it.
I don’t pretend to be the top dog or the wisest of all. I’ve just managed to survive with enough rewards to sustain me, which suits me just fine. We all have different goals and measures of success. Those are mine.
Enough with the preamble.
This essay is for everyone and yet not for everyone.
It’s available to all, open for anyone to read.
But it’s not suitable for everyone because without certain prerequisites, it’s impossible to grasp fully. In the worst case, you might even further damage your investments, or even your life. From my extensive experience, however, I believe you might mess up your life with or without my advice. If you can learn something along the way, perhaps that’s a slightly better way to do it.
I wrote this guide as a token of appreciation for those who have been with me on this journey. Just a select few of you. And no, I’m not talking about my X.com followers. If you thought so, you’re not one of them.
You'll know if you're one of the chosen few. If you're uncertain, perhaps review the prerequisites.
Prerequisites for This Guide
You aim for long-term vision investing, meaning you avoid trading and attempting to time the market.
You understand that good things often take time—sometimes a long time—to yield results.
You recognize that mathematics is a universal truth applicable to everything in our known universe.
You are familiar with the four pillars of object-orientation: abstraction, inheritance, polymorphism, and encapsulation.
You are reasonably rational and capable of controlling your emotions. You don’t need to be devoid of feelings, but keeping your composure is essential. At the very least, you should be aware that biases exist and can influence your decisions.
You don’t manage your portfolio alone, recognizing the importance of having a dependable partner to help navigate this challenging journey. If you prefer to go solo, then this guide isn't for you. Honestly, this entire endeavor might not be suitable for you either.
You can code in any programming language and are technologically savvy to some extent.
You can speak at least two languages fluently, with a preference for those that are not your native tongue. English is a given, but you should also be proficient in another language.
You possess expertise in at least two different genres or fields, with a depth of knowledge that could potentially generate income. Ideally, your horizons are continually expanding to other areas. I'm not referring to literally earning money, but rather to the level of expertise you maintain in those fields.
Finally, you recognize that this is a never-ending journey and a continuous learning process. You're not in search of quick fixes or shortcuts to success.
As you can see, only a fraction of you would meet these criteria.
Me? I meet all of them. I’m not boasting; I’m just stating the facts.
One final note: I have a preference for Soulsbourne players, and if you’ve read the entire Three Body Problem series and understand who Sophon is and what she's capable of, even better. I'd like to list these as prerequisites, but they’re not mandatory. Think of them as bonus buffs with incredible mileage.
One more thing: if you're into AI, you're significantly advantaged. If you're not, you're missing out on a lot of potential.
Final Warning for Those Not Qualified
As briefly stated above, some of you might feel you gained some insights from this guide. No you didn't. Just keep that in mind for a day you will realize that you didn't.
Just remember, I warned you and I never recommend you to follow this path.
This path is already perilous with prerequisites. Without them, it's essentially a guaranteed death sentence.
Final Warning for Anyone Who Thinks They're Qualified
No, you're not. I'm not saying this to be mean or to discourage you. I'm saying it because I care about you. I don't want you to die. I don't want you to suffer. I don't want you to lose everything you've worked so hard for.
However, you will. You will die. You will suffer. You will lose everything.
I did. I lost everything. I suffered. I died. But I came back. I learned. I grew. I improved.
You're aming for the same thing, right? You want to learn. You want to grow. You want to improve.
That I guarantee you will. Whether you will survive or not, that's up to you.
Another Warning for Debaters
I don't care whether you agree or not, so please save your breath and don't bother to debate this. You'll be ignored.
If you're truly skilled in this area, your track record should speak for itself. So proceed with your methods. Why waste time debating with a lesser soul like me, right?
The real players understand that debating is simply not worth the time.
Furthermore, you need to fine-tune your perspective to find your path, which means everyone's journey is different.
If you're a genuine player, you already know this. If you're not, you probably never will.
Debaters? They're just showoffs in this game.
The Ultimate Markers for Long-Term Vision Investing
Here are three fundamental premises for entering what I call the death arena:
1. Long-term Upward Movement: Despite short-term fluctuations, the market trends upward over the long haul.
2. Inherent Risk: From the moment you enter the market, the total risk remains constant regardless of your investment strategy.
3. Objectification: Treat everything as an object—you can abstract, inherit, polymorph, and encapsulate these objects.
To fully trust the first premise, you must distance yourself from unreliable entities, including your own country. Investing domestically is often just a familiarity bias. You might find better investment opportunities in countries you trust more than your own.
I, for one, do not invest in my home country. The governance issues, even in its most prominent companies, are telling. Consider the chaebols' history: their repeated wrongdoings go unpunished, indicating they never learn. My advice? Avoid investing in companies plagued by governance issues.
This first premise relies on the expectation that the GDP of the country where the market is located will grow over time, alongside the indices and market caps of the companies of interest. Understanding this interrelationship allows you to predict the dynamics of all three elements.
However, if you cannot trust the governance of the country or the companies necessary for your investments, then you can't rely on the growth of GDP, indices, or market caps. It's as straightforward as that.
Consider those who recklessly gamble with shareholders' money: have they faced consequences? Often, they have not, yet they return to positions of power.
Forget nationality—it's irrelevant, not just in investing, but in all aspects. If you're truly qualified, you'll understand why. I won’t spell everything out, assuming you can follow. If not, you simply don’t meet the criteria.
Let’s delve into the second premise about risk management in investing.
In this game, the deadliest element is often yourself. Regardless of where you invest—be it in stalwarts or startups—risk remains ever-present. Both can fail; there is no safe haven. The most perilous risk is the one that comes from your own decisions. Remember, the factor that makes this game lethal is you.
For those who are qualified long-term vision investors, you already understand the simplicity and gravity of these equations:
- 1 x 2 x 3 x 4 x....n x 0 = 0
- -1 x 200 = -200
I won’t dwell on why you should avoid leverage; if you're qualified, you know the dangers it poses.
The focus here is on the inherent risks of investing, even for those not leveraging and committing to long-term strategies. Ironically, the very commitment to long-term investing increases your vulnerability to losing everything if you misunderstand or underestimate risk.
Consider the analogy of the Titanic, once deemed a forever stalwart that ultimately sank. The notion of "too big to fail" holds little weight in this unforgiving environment.
If the level of risk remains constant, your goal should be to maximize potential rewards. This is the only way to survive in this ruthless setting.
Ultimately, you are the primary risk that needs managing. Effective risk management in this sphere equates to managing yourself. If you are reckless, nothing is safe. You are the most potent weapon, a ticking bomb in this scenario.
If you cannot manage yourself, your downfall is inevitable.
If you can manage yourself, not only can you survive, but you can also thrive.
Then consider this: if you are capable of managing yourself, why settle for low-return investments under the guise of securing peace of mind? Trust me, that peace is illusory.
Pause and consider why I advise against investing directly in indices. Once you're involved in this game, the tendency is to escalate risk continually.
Strive for the highest reward possible to justify the consistent level of risk you accept.
Now, about the third premise, it ties closely to one of the prerequisites: the principles of object orientation. Everything can be viewed as an object—you can abstract, inherit, polymorph, and encapsulate them.
If this concept baffles you, you might want to reconsider if you're cut out for this. You're likely not ready.
In this framework, concepts like growth, evolution, or development are treated as objects.
Consider human evolution as a parallel to technological evolution. The growth of GDP, market indices, and corporate market caps can be similarly conceptualized as objects.
What do objects do? They grow, evolve, and develop, acquiring new characteristics through polymorphism while hiding their complexities through encapsulation.
If you truly understand this, the next concept should resonate with you:
Every growing entity reaches certain critical thresholds—growth landmarks that must be surpassed to ensure survival.
This applies to technology, GDP, indices, and company market caps.
Visualize a point soldier planting the army's flag in the battlefield. That flag becomes a rallying point. The army consolidates around it, stabilizing their hold on the territory. They might lose ground, but as long as the flag stands, they will regroup.
The flag symbolizes the ultimate marker, the objective around which strategies are formed.
When initiating any endeavor, you aim for such markers. This same logic applies to investing.
From a broader perspective, a country’s GDP offers the initial clue, influencing indices, which in turn reflect GDP growth. The market caps of companies you are interested in also adhere to this principle, functioning as ratios to the GDP.
Beware of indices and market caps that advance beyond their "flags" into uncharted territory without solid backing—they often revert to established benchmarks. Further growth is only feasible if the foundational markers move forward.
Therefore, keeping a close eye on these flag bearers is crucial. They dictate the potential and direction of your investments.
Let's discuss a specific case: Apple.
To clarify, I am not bullish on Apple, and I would never invest in it—end of story.
Apple has historically been a flag bearer, achieving market cap milestones of 1 trillion, 2 trillion, and recently 3 trillion dollars. However, it eventually lost the title of the most valuable company to Microsoft. Currently, the flag remains planted at the 3 trillion mark.
There are three groups rallying around this flag: the flag bearers (those who have reached or are reaching these milestones), the flag bearer candidates (those on the verge of achieving such milestones), and the rest.
You ideally want to align with the flag bearers or the flag bearer candidates, not the rest. But here's the catch: membership in these groups is always subject to change.
If you believe you can pick a stock and hold onto it indefinitely, you're mistaken. Even the most valuable company cannot be trusted indefinitely.
A fundamental truth to remember is that the membership of any elite club can change. IBM, once a flag bearer, is now just one of the rest. History is littered with similar examples, and while the future may tell a different tale, as of now, IBM does not rank among the flag bearers or candidates.
Reflect on any flag rallying game in market history: when a flagbearer first surpasses the 1 trillion mark while the second and third groups lag significantly, a market correction is almost guaranteed. While you can't predict the exact timing, you can anticipate this through simple mean reversion. Once the majority rally around the flag and stabilize the gained ground, the market can advance again, assuming GDP growth supports this movement. Remember, the market is inherently forward-looking.
What about the 2 trillion and 3 trillion milestones? The same principle applies. Historical market trends confirm this, and indeed, it's a statistically supported fact and common sense that indices, as ratios to GDP, cannot grow indefinitely. If they stretch too far ahead, akin to an overextended rubber band, they must eventually snap back to align with sustainable growth markers.
And did I emphasize that membership can change? Yes, particularly among the flag bearer candidates. This fluidity is essential to understand as it impacts investment strategy and risk assessment.
Now, take a moment to ponder this question: Why should you potentially focus more on flag bearer candidates than on the flag bearers themselves?
Tick tock. Tick tock. Tick tock.
If you haven’t given this any thought, then you might not be ready for this level of investing. Click away and save your time.
Due to the principles of risk management discussed earlier, where the aim is to secure the highest possible reward relative to the risk, consider this retrospective scenario: at the time Apple reached the 1 trillion market cap landmark, investing in it would have yielded a 100% return by the time it hit the next landmark of 2 trillion. However, investing in flag bearer candidates—those trailing with hundreds of billions in market cap—would have resulted in multiples of that return by the time they reached the 2 trillion mark, with some achieving gains exceeding 1000%.
Had you predicted the progression to the 2 trillion and 3 trillion market cap landmarks when Apple first hit 1 trillion, your strategic move would have been to invest in the second group: the flag bearer candidates. Historical performance of these companies would show that many are now transitioning to become the flag bearers themselves. Remember, the membership can change.
As we stabilize around the three trillion mark and prepare to push forward, the next major milestones are likely the 4 and 5 trillion marks. But as we've discussed, good things take time, necessitating a series of healthy market corrections to allow other companies to catch up.
Regardless of short-term market dynamics, the overarching trend will see the GDP grow, and with it, the indices and market caps.
Companies will either surge forward, keep pace, or fall back. But the essential markers—the next set milestones of 4 and 5 trillion—remain unchanged.
To estimate the time and dynamics it will take to reach these next markers, assess whether the GDP and global economy can support such growth within that timeframe. If not, expect market corrections; if so, the market will continue to advance.
Consider the role of evolutionary landmarks, such as technological advancements, in fueling this growth. The tech bubble burst of the early 2000s was due to a premature march, not a lack of evolution. The market eventually corrected and continued its forward march once the technological evolution justified further growth.
Now, in the AI era, the evolution landmark justifying the next phase is clear. The market will periodically correct itself given the rapid advancements, but the overall march will persist driven by continual evolution.
Insight into why Microsoft overtook Apple as the most valuable company: Microsoft invested heavily in AI while Apple focused elsewhere. The current traction in market evolution is largely propelled by AI advancements. Simple as that.
Here's your next pop quiz: If you're convinced that the next significant market cap milestones are set at 4 trillion, where would you choose to invest—among the indices, the flag bearers, the flag bearer candidates, or the rest—and why? Remember, membership can change.
This time, I won't provide the answer. If you're truly qualified, you should be able to deduce the best course of action on your own.
Changing Membership
If you're equipped to digest this essay, you've likely already been well-informed on this topic. So, let me just reiterate a simple truth: choose a company that can justify its potential for future growth. Ideally, this company should be helmed by a founder CEO with obsessive-compulsive traits. My disdain for companies that part ways with their founder CEOs is deep-seated—I have OCD myself and understand how obsessives operate. Genuine geniuses like Michelangelo, Leonardo Da Vinci, or Antoni Gaudí remained unwaveringly dedicated to their paths, even in the face of death.
If you can't find such companies, then you're left with settling for the second-best options.
Personally, I don’t waste time on financial statements since they only reflect the past. I focus on envisioning the future. If you can't foresee a positive future for the companies you invest in, just get the fuck out.
You shouldn't need to code or use Excel for any of this. You should be able to perform necessary calculations in your head. If it’s too complex to do so, it’s probably unnecessarily complicated and irrelevant.
Always be creative when imagining the future. Predicting what’s to come is less about crunching numbers and more about creativity. Read novels, watch movies, and play games to broaden your perspective and inspire innovative thinking.
I can't stress enough that membership can change. When your investments reach significant landmarks, consider rebalancing. Remember, you should be able to do the math in your head.
Die Meaningfully
From the beginning, this has been part reward, part guideline for those I truly care about among the many who follow me on this path.
I've already tried to dissuade you from this perilous journey, but you'd likely continue regardless. And I know you probably wouldn't be able to leave it even if you tried, though I still recommend you do if possible.
My genuine hope is to prevent you from reaching a point where you feel compelled to quit after losing everything, leaving you no choice but to abandon the path. However, I'm not one to sugarcoat or tell half-truths, especially about serious matters. Understand this: you will face both mental and physical depletion. There’s no escaping that reality.
Your aim should be straightforward: learn something concrete with each step, no matter how small it may seem. That’s how you grow and improve. Don’t fixate on the inevitability of "deaths" along the way—they are a given. Pain, too, is unavoidable. Embrace the discomfort as a necessary component of learning. No pain, no insight. That's the rule.
That's why I recommend you play Soulsbourne games. They teach you how to die meaningfully. You die, you learn, you grow, you improve. That's the cycle. If you're truly qualified, you'll understand this from your own experiences.
I know there might be some confusion about distancing yourself from the market’s allure, leading you to believe it means managing minimal parts of your portfolio while heavily relying on a partner. That's not what I recommend. Without having a significant portion at stake, you won't experience the necessary pain to learn and improve. It's akin to cheating in a game—you won't learn anything that way.
Again, be prepared to die. Meaningfully.
Execution is the Key
Strategic planning is just the starting point. Without proper follow-through or continual refinement, it becomes meaningless. Execution is truly the key to success.
I pride myself primarily in this aspect. My focus isn’t on the gains or losses that result from executing a plan; rather, it's on how well the execution aligns with my strategy.
If I had the resources to develop my own trading system, I would eliminate the distracting colors and numbers typical of brokerage interfaces. My focus would be solely on the execution, not on cost basis, profit, or loss—those are only relevant when doing taxes.
Never let yourself be swayed by those red and blue figures or any numbers prefixed with minus or plus signs. That way lies doom.
Even if you believe you’re qualified, pause and reflect on why I stress the necessity to think and act with the utmost speed, akin to escaping Sophon's grasp in The Three Body Problem series.
Any moment of hesitation could be your undoing.
From another perspective, this means you must have absolute faith in yourself. You are your own savior. If you cannot trust yourself completely, you won't be able to execute decisions with the necessary swiftness.
When I mention 'think' in the context of speed, I'm not referring to a meaningless stream of consciousness. I'm talking about the ability to process information swiftly and make decisions based on that information. Mastery of Bayesian reasoning is essential. If you can't engage in this type of quick, informed decision-making, you're not ready for what this path demands.
Now you'd understand why I emphasize the need to be a coder. Being able to quickly process information and apply logical, structured thinking—skills honed through coding—is crucial in making informed decisions rapidly.
Moreover, lightning-fast execution is crucial to avoid being swayed by the market's whims or Sophon's deceptive grasp.
I constantly use pseudocode to think through problems in my head. I recommend you do the same.
How to Maintain Cash Balance
Let's debunk a common myth: the idea that you should always have a cash balance. This isn’t universally true—you can’t always keep cash on hand.
There will inevitably be times when you're fully invested. You might consider trying to maintain a cash reserve, but honestly, it’s not worth it. You’ll likely lose money experimenting with this. Instead, focus on cash equivalents.
That's right. Allocate a portion of your portfolio to low-beta stocks within the flag bearer group. These are your cash equivalents. They might not be actual cash, but they're the next best thing: easily liquidated and less volatile than other assets.
Your flag bearer candidates are your growth stocks and your main force. These are where your highest returns will come from. But it's crucial to understand that they are not cash equivalents. You hold these, you don’t trade them.
When an opportunity arises, you sell some of your cash equivalents to bolster your main force—your growth stocks. This is how you effectively manage your cash equivalents. Yes, there will be losses in this process, but that's the cost of pursuing growth.
Even experienced investors sometimes forget that investing incurs costs. These are unavoidable but manageable.
Statistically, cash equivalents typically offer reasonable returns with minimal risk, far surpassing pure cash over time.
Get accustomed to the costs and slippages in trading; they are integral to the game. Focus on the bigger picture and don't sweat the small stuff.
You know my stance on diversification: I don’t give a rat's ass when I’m confident in what I’m doing. If you're not confident in yourself, please, for your own good, get the fuck out.
Tax and Periodic Cashing
Paying taxes each year is essential for two reasons.
Firstly, paying tax indicates you've made a profit. Tax is a good sign. If you sell your shares and don't owe any tax, it typically means you've taken a loss, which is definitely not desirable.
Secondly, paying tax means you've cashed out some shares, implying you're enjoying the fruits of your investments. The ultimate aim of investing is to enhance your quality of life. Don't let the pursuit of wealth disrupt your daily happiness. If you can’t completely detach from the market, it should at least contribute positively to your life.
Make it a habit to periodically take profits. This practice will boost your confidence, especially during tough times that can weigh heavily on you mentally. Trust me on this.
At every significant financial milestone, do something meaningful for yourself and your loved ones. These actions serve as reinforcements, providing support when you most need it.
Log Everything
I cannot overemphasize the importance of logging everything. Every decision, every thought, every action—record it all.
However, this isn't about keeping traditional trading logs or diaries.
Instead, write essays like I do, and let your trusty GPT analyze them. Allow it to parse your thoughts and decisions, providing insights you might have overlooked. But never allow it to make decisions for you or blindly accept its conclusions. Always challenge it, question it, and if you can overcome its logic, you're navigating correctly.
Ultimately, you should be able to write an essay on any topic without relying on a single reference. If you've seen my verbal presentations on YouTube, you'll understand the level of expertise required. I can speak for hours on end without any prior preparation or using scripts, and you should aim to develop the ability to do the same. I might stop due to fatigue, not because I run out of content. Don’t rely on GPTs when writing initial drafts. Instead, use them during the refining process to enhance and polish your work.
To effectively interact with a GPT, you need to understand more than just its words. You must grasp the nuances in its responses, which demands a solid command of English, a deep knowledge of AI models, and their underlying mechanics. Essentially, you should understand AI to the extent that you could design and train your own models. Yes, that's the level of expertise I'm talking about.
Never underestimate the lengths to which people will go to achieve their goals. If you're not prepared to commit to that extent, you're not ready for this journey.
Finally, you must develop a robust strategy to manage the inherent grueling stress of this path. Engage in activities outside the market that bring joy to you and your loved ones.
This is crucial for maintaining your mental health and ensuring you can sustain your journey. If you find yourself unable to smile and laugh on an average day, it's a clear indicator that you're losing the battle, and potentially the war.
Remember the fundamental reason you embarked on this path: to enhance your quality of life. If you're not achieving this, something needs to change.
Me? Again, I don't lie. I'm not always happy, but on average, I am. I co-exist with Sophon, accepting that I can't escape her grasp entirely. However, I can distance myself from her for quite a while when I need to. That's the goal.
In essence, you're competing against me.
You must surpass me in every aspect to survive in this game. Consider me your tutorial boss, like Iudex Gundyr in "Dark Souls III". If you can't defeat me, you're not ready for the real challenges ahead.
If you're still determined to pursue this path, I wish you all the best. Believe me, you'll need it.