Breaking the Myth of Saving Money and Buying a House

Risk disclosure: The rent-versus-buy comparisons, the critique of high-dividend products, and the long-term ETF return projections described in this chapter are all organized from public historical data and offered as logical exploration. None of it constitutes individualized investment advice or real-estate decision advice. Past performance is no guarantee of future results.

In traditional social thinking, “saving money” and “buying a house” have been regarded as the one and only path to settling down and accumulating wealth. Yet under the financial logic of the great money-printing era, these once-golden rules have evolved into invisible killers of wealth. If you cannot break these deeply rooted myths of personal finance, you will discover that the harder you save and the heavier the mortgage you shoulder, the faster your real purchasing power shrinks. This chapter uncovers the underlying blind spots of cash, bonds, and real estate, and guides the reader toward the turntable that truly lets money work on its own.

The Inflation Blind Spot of Cash and Bonds

Most people carry a massive cognitive bias in their understanding of “risk.” People tend to believe that holding cash is the safest choice, because the number does not move; yet they overlook the “inflation air” that is exploiting their purchasing power at every moment. Under a fiat-currency system, governments everywhere, in order to stimulate the economy or deal with debt, inevitably keep expanding the money supply, causing the real value of cash to trend downward over the long run.

The poor, earning money with physical labor, receive nothing but garbage. Whether they stuff it under the bed or put it in the bank, it is the same — it is all garbage. And what is even more terrifying is that this garbage the poor earn gets cheated out of them by the financial industry to buy toxic assets, garbage that is not even worth its weight in garbage. (Video 00491)

Why invest only in the stock market? Look back at the real returns (already adjusted for inflation) of the major asset classes in the United States from 1802 to 2025. The historical data reveals a shocking gap: if you had put US$1 into stocks in 1802, more than two hundred years later (by 2025) it would have grown to about US$2.987 million; that same dollar put into long-term government bonds would have become only US$1,403. This final gap of more than 2,000 times perfectly captures the destiny embedded in asset selection. Stocks rank first, with a real growth rate of 6.9% a year, followed by long-term government bonds (3.3%), short-term Treasury bills (2.7%), and gold (0.7%). Worst of all is the purchasing power of the US dollar, whose real growth rate is a negative -1.4%. Which type of asset you choose determines which side of history you end up standing on.

▲ Figure 4-1 A comparison of the real cumulative returns of major US asset classes over the long run, where more than two centuries prove that choosing the right asset class decides your final fate

Source: Jeremy Siegel, "Stocks for the Long Run" (real total returns of five asset classes, 1802–2025)

When the final gap can reach hundreds of times, the quality of your allocation is worth caring about far more than short-term volatility.

The same blind spot also exists in bond investing. Many investment courses tout a “stock-bond balance,” believing that bonds provide steady interest. But a bond is, in essence, nothing more than an IOU; behind its meager interest, the investor bears the risk of a currency losing its purchasing power. When the inflation rate is higher than the bond’s yield, holding bonds is in effect shrinking the scale of your assets. In the torrent of capitalism, relying purely on saving money and interest is no different from frantically bailing water on a sinking ship; in the end, you can never keep up with the speed at which the ship goes down.

Viewed through a thirty-year lens, this erosion becomes even more intuitive: as long as inflation persists, purchasing power tends to fall noticeably after ten years, and stretched out to thirty years the loss becomes even more staggering. The nominal principal is still there, but the real purchasing power may long ago have been cut in half.

The history of the Nobel Foundation is the strongest living witness to the blind spot of cash and bonds. When the Nobel Foundation was established in 1901, its principal came to US$9.2 million, and its charter expressly stipulated that it could invest only in bank deposits and government bonds, and was strictly forbidden to touch stocks or real estate. Fifty years later, after the double erosion of inflation and the prize money paid out year after year, its assets had crashed to about US$3 million by 1953, on the verge of a bankruptcy crisis in which it could no longer keep paying out prizes. The foundation urgently amended its charter and pivoted toward stocks and real estate, which is what allowed its assets to grow rapidly and thrive to this day. The “safe” investment strategy is often precisely the most dangerous long-term plan. (Huang Pei-yuan, “The Bible of Personal Finance”)

The most terrifying trap in personal finance is choosing, out of fear, laziness, or herd instinct, those mediocre products that “everyone is buying” (such as endowment insurance, annuity insurance, or balanced funds). This choice appears safe, but in essence it is eating away, bite by bite, at your own future possibilities; it is a slow act of accompanying the financial industry’s sales figures into the grave, thoroughly wiping out any chance of flipping your class through assets.

Insurance companies are themselves masters at wielding compounding, while the policyholder is often the sacrificial victim in this game. Every unnecessary policy eats away at the cash flow that should have been rolling into assets. You think you are buying insurance, but in reality you are trading decades of future compounding for a placebo against an event with an extremely low probability of occurring. The true line of defense is the highly liquid, high-growth assets in your account.

Many retail investors, when dealing with mistaken assets, often fall into the “sunk cost” trap. For example, they ask, “I have only been paying into my endowment policy for two years, and the surrender penalty is very high right now — shouldn’t I just tough it out to the end of the six years?” Mathematically, this is seeking your own death. The projections prove it: force yourself to hold on and surrender in the sixth year, and your assets might amount to only NT$2.5 million; but if you swallow the pain and surrender now, redirecting the money into the QQQ system, your assets six years later would be far higher than NT$3 million. The numbers speak: as long as you “endure three years of pain,” you can turn your assets positive and get back onto the compounding express lane. Except for pure accident insurance and medical insurance, all savings-type policies are legally exploiting your purchasing power. Cutting your losses immediately is the first lesson of asset awakening.

Diversifying Risk Is a Cover for Mediocrity

The general public is often brainwashed by the dogma “don’t put all your eggs in one basket,” and then embraces whole-market indexes such as VTI or VWRA that cover thousands of holdings. This is using “diversification” to cover a fear of “mediocrity.” The truth of the capital market is “dominance by a few leaders” and “survival of the fittest.” When you expand your investment scope to 3,000 holdings, you do not lower systemic risk (because the top ten holdings almost entirely overlap); you merely actively stuff your portfolio full of mediocre companies that are in decline, or even close to bankruptcy.

Adding more holdings only dilutes the excess return you deserve. Quantitative research confirms that beyond 20 or so holdings, you can no longer further reduce non-systemic risk. Choosing a whole-market index is, in essence, actively reducing performance, not reducing risk. Holding tight to the NASDAQ-100 leaders, and letting the index’s own mechanism of weeding out the weak and keeping the strong keep running, is what “high-efficiency diversification” really is. What you want is to buy the winners, not to buy the entire arena packed with losers.

Short-Term Trading Is the Guillotine of Compounding

The most alluring thing about short-term trading is that it fools people into believing they are “actively controlling risk”; but its cruelest feature is that every entry and exit actively severs long-term compounding. You think you are locking in gains at the top, but in reality you are pulling up an asset tree by the roots before it has finished growing. Short-term market volatility will play out again and again, but over the long run what truly changes an asset’s fate is never catching a few highs and lows, but whether you stay in the market long enough to let the asset roll on by itself.

If you plan to sell at the top the moment you buy in, that is speculation, not investment.

Many investors say they want to invest for the long term, yet in actual practice they panic when prices fall and chase when prices rise, ending up in the textbook cycle of “selling low and chasing high.” This is not a technical problem but a cognitive one. True simplicity in the great way is not predicting tomorrow, but refusing to be driven by tomorrow’s noise. As long as the underlying asset has not gone bad, short-term bad news and turbulence are no reason to sell; frequent trading feels like control, but over the long run it usually buys only lower returns and higher emotional costs.

Long-term statistics also prove, over and over, that the cost of short-term market timing far exceeds intuition. According to J.P. Morgan data, over the 20 years from 2003 to 2022, holding the S&P 500 index the whole time delivered an annualized return of 9.8%; but simply outsmart yourself and miss the 10 best trading days of the market, and the annualized return plunges to 5.6%; miss 30 days and only 1.3% is left; miss up to 40 days and the annualized return even turns into a negative -0.4%, worse than a fixed deposit. Short-term traders think they are avoiding risk, but in reality they are committing suicide again and again on the runway of compounding.

▲ Figure 4-2 The cost of missing the market's best trading days, where stepping out for just a handful of days collapses the annualized return from positive into negative

Source: J.P. Morgan, "Guide to Retirement"

The debate of “lump-sum investing versus dollar-cost averaging” is, in essence, the same cognitive problem. Many beginners agonize over buying in tranches to avoid the top, but the capital market trends up over the long run, so buying in tranches is in essence continuously raising your average cost and wasting the most important thing of all, the compounding of time; setting your heart on waiting for a pullback before entering usually ends in regret after the market has risen again. Do not try to guess the bottom; when the signal comes, buy in a single lump sum, and time will help smooth out all the volatility.

Chasing High Dividends Is Chronic Impoverishment

The most addictive thing about high dividends is the sense of security that “money comes in every month”; but for young people, pursuing dividends too early often amounts to actively giving up the speed of asset growth. When the core goal is accumulating principal, low return is itself the greatest risk. Every dividend you receive, if what lies behind it is slower net-value growth, is in essence trading away the large compounding of the future for a small comfort in the present.

Young people should not touch high dividends. Low return is the greatest risk. (Video 00549)

Take the backtest comparison of 00662 since its establishment in 2016 (about 8 years): 00662’s total cumulative return reached as high as 322.4% (annualized 19.51%), while 0056 (Yuanta Taiwan Dividend Plus) delivered only 219.8% (annualized 15.47%). Even reinvesting every cent of the dividends, the high-dividend ETF still cannot even catch the taillights of the index fund. More fatal still is “tax exploitation”: collecting high dividends not only amounts to moving money from your left hand to your right, it also faces the double skinning of the second-generation National Health Insurance supplementary premium and the individual income tax.

Over the same period 0050 had a return of 180%, while 0056 was only 65%. Choosing between these two is very simple. When we invest, it is a matter of thirty, forty, fifty years — forever chasing the turtle and the terrapin gets you nowhere. (Video 00465)

Measured by “probability of loss,” the weakness of high dividends becomes even clearer: backtesting shows that investors who held 0050 (a Taiwan market-cap-weighted ETF) for a full three years had a historical loss probability of 0%, whereas those who held 0056 (a high-dividend ETF) for a full three years over the same period still had about a 3% chance of a loss — and this is under the total-return basis (dividends reinvested). High-dividend ETFs are also not “crash-proof”; in an extreme market crash their maximum cumulative drawdown can even hit the daily limit-down directly. Retail investors rejoice when they see a high-dividend product fill its dividend gap within 32 days, yet they fail to see clearly that filling the gap merely recovers the portion of net value deducted at the ex-dividend date, while hidden behind it lie two invisible losses at once: “tax skinning” (the dividend paid out is first eaten by the second-generation NHI supplementary premium and individual income tax) and “the compounding blackout” (that cash was not reinvested at the first moment, so it missed the market’s rise over the same period).

Pundits often proclaim that “dividends carry an 8.5% tax credit,” but this provision benefits only the extremely low-income earners who fall under the 5% tax bracket! For the awakening middle class who fall under the 20% or 30% tax bracket, collecting high dividends only makes the investor hand over the fruits of compounding to the national treasury with both hands, in the form of hefty taxes. This is legally inviting the government to draw the investor’s blood! Collecting dividends is “tenant-farmer thinking”; pursuing the compounding of net value is the true “landlord thinking.” The same myth also appears in “bonds are always a safe haven.” In the wrong interest-rate and inflation environment, long-term bonds can fall more savagely than stocks, even suffering a severe plunge of 40% to 50% or more.

By contrast, investing in overseas-income products such as 00662 can not only effectively avoid heavy domestic taxes, but also let compounding roll on without loss inside the net value. This is true capitalist tax thinking. If an asset allocation locks up large sums in low-return tools over the long run, the surface volatility does become smaller, but at its core it grinds the most crucial accumulation period of your life into a longer, more exhausting, later-arriving road to freedom.

You must see clearly, from the underlying corporate-finance level, that “high dividends” and “growth” are fundamentally mutually exclusive. The profit a company earns each year has only two paths: pay it out to shareholders (high dividends), or keep it in the company (invest in R&D, expand capacity, make acquisitions). When a company takes large sums to pay dividends, it is actively giving up investing in its future; for the tech industry, which is riding the AI wave and needs to burn enormous amounts of cash on R&D (research and development), the suppressing effect of high dividends on growth is especially fatal. ETFs on the market that flaunt the dual metrics of “tech + high dividend” look like the best of both worlds, but in essence they use their screening logic to actively exclude the true growth stocks that are expanding at high speed, temporarily paying no dividends, or not yet showing paper profits — barring the strongest tech giants of the future at the door, and leaving only a crowd of middle-aged and elderly companies “willing to return capital to shareholders and no longer wanting to invest in themselves.” This is precisely the structural reason why high-dividend tech ETFs look novel but are destined to underperform a pure growth index.

A deeper layer of exploitation is hidden in the accounting trick called the “income equalization reserve.” To serve the marketing slogan of a “stable dividend rate,” Taiwan’s high-dividend ETFs invented the equalization mechanism: when new subscriptions entering the fund dilute the original per-share dividend, the investment trust sets aside a portion of the new subscribers’ principal and pays it back out as a dividend to the original beneficiaries, thereby maintaining a pretty high headline yield figure. But once you take it apart, you find that the so-called “stable dividend” is merely repackaging new investors’ principal and paying it out as a dividend to old investors; the overall net value grows not at all, and the dividend is equivalent to the investment trust selling off a portion of the ETF on the investor’s behalf. If the original beneficiaries truly wanted more cash, they could achieve exactly the same effect by selling odd lots themselves, with no need for any equalization reserve at all; the new beneficiaries not only get no real income, they may even bear an increased tax burden because of the ambiguous accounting classification. Under the entire mechanism the only party that benefits is the investment trust itself — using the gimmick of a high yield to swell the fund’s size and earn more management fees.

Even the “high dividend-gap-filling rate” metric that the investment trusts use for promotion does not hold up mathematically. The common “gap-filling frequency ratio” merely computes the proportion of times over some number of past ex-dividend events that the share price returned to its pre-ex-dividend level, and how quickly — while completely ignoring the yield of each dividend, how many days it took to fill the gap, and whether the payout frequency is monthly or quarterly; even the historical length it draws on is truncated to within the most recent 15 or so events. Once you strip out all of these decisive parameters, the remaining “gap-filling frequency ratio” is merely a metric that is all form and no substance — unable to reflect real returns, unable to predict future performance, more a “sense of ceremony” figure shown to retail investors than a genuine basis for stock selection.

To thoroughly pop the illusion that “dividends make people richer,” the cleanest comparison comes from “0056” and the “0056 non-distributing feeder fund” — the latter’s investment contents are exactly 0056, the only difference being that it “pays no dividend and counts the dividend directly into net value.” Invest NT$1 million into each from 2019.06.10 to 2023.03.31, and what is the final market value? Both are NT$1.417 million, not a cent apart.

The only difference is in share count: the one collecting dividends used them to buy more, rolling up to 49,865 shares, while the non-distributing one stopped at 38,476 shares — fully 10,000-plus shares fewer, yet the total market value is exactly the same. This precisely proves that “collect a dollar of dividend and the share price drops by a dollar” — the dividend merely moves money that was already inside the net value from the left hand to the right hand, and the extra shares do not make anyone richer (just as swapping one NT$1,000 note for ten NT$100 notes does not make the amount any larger). (“A Casual Look at Insurance Concepts,” “Uncovering the 0056 Dividend Myth: Dividends Are Not the Whole of Investing”)

▲ Figure 4-3 Different share counts, identical market value, where paying or not paying a dividend is merely moving money from one hand to the other, with the total market value not a cent apart

Set the tax treatment of these two side by side and the gap becomes even clearer at a glance:

• 0056 additional tax burden: second-generation NHI supplementary premium of 2.11%, plus individual income tax (those in the 20%-30% bracket suffer the heaviest loss)
• 00662 non-distributing: income is folded into the fund’s net value, compounding rolls on without loss, and during the accumulation phase there is no friction from cash-dividend taxation or the second-generation NHI supplementary premium (overseas income and the Alternative Minimum Tax system are judged separately under Ministry of Finance rules)

The figure “A comparison of the total returns of 00662 and 0056 since inception” directly contrasts the two on total cumulative return and after-tax efficiency, making the gap between “the sense of security of high dividends” and “the efficiency of net-value growth” concretely visible.

▲ Figure 4-4 A comparison of the total cumulative returns of 00662 and 0056 since inception, where loss-free compounding leads high dividends by a wide margin

The point of “A comparison of the total returns of 00662 and 0056 since inception” is not to negate dividends, but to remind you that the accumulation phase should give priority to maximizing the final value, rather than to the illusion of cash flow.

The Price of Real Estate Losing Its Liquidity

Many mainstream views regard real estate as the best leverage tool for hedging inflation and forced saving. We must acknowledge objectively that for early-stage accumulators who have not yet built extreme investment discipline, a mortgage does indeed perform the function of “forced saving” and locking up funds. Yet once you enter the high-level game of capitalism, the limitations of real estate become a fatal wound. In the government’s eyes, real estate is a “tool for stabilizing assets,” and its liquidity is extremely low.

A house is a consumer good. Everyone, remember, a house is a consumer good, a money-eating asset. It is not an investment, and it is a very high-risk asset. Every year you have to pay a lot of taxes, and you have to pay insurance, and you have upkeep costs, always fixing this and repairing that. (Video 00498)

Taking the actual data of the Taiwan market, the rental return on residential property in the six special municipalities currently averages only between 1.1% and 2.1%. After deducting the roughly 2% annual mortgage-interest cost, the roughly 1.2% annual house tax (including land value tax), and further factoring in vacancy periods and the monthly amortization of repairs, the real net return on real estate is almost negative. This is precisely why real estate is “the price of losing liquidity” — when you urgently need a sum of cash to pay medical bills or to bridge a gap, you cannot pry a brick off the wall to pay with.

A deeper danger is that a drying-up of liquidity often arrives before the price collapse. When the market enters a tightening cycle, the central bank drains the money supply, and banks lower loan-to-value ratios, the trading that once looked lively will, at some inflection point, “freeze” in an instant. This is not panic selling, but a more hidden “clog in the funding pipe” — the owner’s house may still hold its paper value, but when it truly needs to be cashed out, they find there is no buyer on the market willing to take it over; the door to cashing out has been quietly locked. This is more terrifying than a plain fall in house prices: in the stock market, no matter how deep the drop, there is always a buyer to take the other side, just at an ugly price; but in the rigid phase of the housing market, even “not being able to sell at an ugly price” is the real situation. When you truly, urgently need this money to pay medical bills, taxes, or to top up a maintenance ratio, this door of liquidity may take several years to reopen.

This is no abstract warning. Consider the real case of a 49-year-old female tech-industry executive: on the surface her net worth was as high as NT$62 million, seemingly enough for a comfortable retirement; but a closer look at her asset structure showed that most of it was stuck in her own residence and real estate, and the “liquid assets” she could draw on at any time were only NT$23.5 million. Even estimated by the commonly used 4% withdrawal rule, her household would need at least NT$45 million in liquid assets to retire — a person with a net worth of NT$62 million still had a liquidity gap of nearly NT$22 million, and had to postpone retirement. Note: the 4% figure is merely the estimate of typical financial advisors; this book maintains that under the QQQ system the only safe withdrawal rate is 2%, which means the true gap is even more staggering than in this case. “Net worth” is paper wealth; “liquid assets” are true freedom. (Wealth Whispers)

In an extreme environment, real estate is not a safe harbor, but a pair of gilded handcuffs that binds your life.

Many people cling to the illusion of “waiting for the new Youth Housing Loan grace period to end in 2028, so that when the wave of forced-liquidation sell-offs comes, they can go scoop up cheap foreclosure properties.” This is entirely the leek-like thinking of someone who does not understand the “rigidity and sluggishness” of real estate. Taiwanese regard owning a house as a symbol of success, and even when they cannot make their mortgage payments they will first borrow from relatives and friends to hold on for dear life — which is why Taiwan’s mortgage default rate is a mere 0.08%, one-twentieth of America’s 1.67%. More importantly, nearly 25% to 30% of Taiwan’s capital flows within real estate, so once the housing market truly crashes, banks would face enormous bad debts triggering a financial tsunami, and the government would absolutely step in to prop up the market. When the stock market crashes, no one will catch the investor’s fall; but when the housing market crashes, the government is the one propping it up, because it cannot afford to let it move. Those waiting for a crash to pick up bargains will, with high probability, only miss out on several years of compounding growth while they stand watching, and in the end enter at a higher cost, full of regret.

When you shoulder a thirty-year mortgage whose principal and interest must be repaid with physical labor, you lose the opportunity cost of putting that enormous sum into a quality index yielding over 15% annualized (such as QQQ). Holding real estate not only faces very high holding costs (taxes, upkeep, interest), but while global technology and capital surge ahead at the high speed of compounding, the rate of appreciation of the vast majority of real estate, after deducting inflation, often does not even reach half of the broad-market index. More dangerous still, when funds are urgently needed, real estate cannot be cashed out within seconds the way stocks can, and this “absence of liquidity” can be fatal in an extreme market environment.

The true capitalist uses real estate in only two situations: one, owning a home to live in for peace of mind; two, in the retirement phase, using a “financial-type mortgage (interest-only, no principal repayment)” to revitalize a dead asset into an ATM that covers living expenses, while leaving the stock position untouched to keep appreciating.

If you use a financial-type mortgage, you might get some cash flow each month, enough for you to live on. So that ten million does not have to be touched; you do not have to spend that ten million, and it can keep appreciating. In effect you are living on borrowed money, and your assets can keep on appreciating. (Video 00525)

The Endgame Gap Between Renting to Invest and Buying a House

Numbers are more persuasive than any sermon. A precise thirty-year projection thoroughly ends the myth that “buying a house is the right choice.”

Assume a total house price of NT$20 million, a buyer’s down payment of NT$6 million, and a loan of NT$14 million (interest rate 2%), calculated with a relatively optimistic annual house-price growth rate of 5%. At the same time, set 00662’s annualized return at 12%, and monthly rent at NT$30,000, rising 2% each year with inflation.

The endgame thirty years later is revealed: choose to “buy the house,” and after deducting mortgage principal and interest, taxes, repairs, and all other costs, the final net worth is about NT$86.44 million, an annualized return of about 4.33%; choose to “rent, and put the entire down payment plus the difference saved each month into 00662,” and thirty years later the net worth can reach about NT$261.29 million. The endgame net-worth gap between the two is about NT$174.85 million — the rent-and-invest route is a full nearly 3 times that of buying.

▲ Figure 4-5 A comparison of the 30-year endgame net worth of renting-to-invest versus buying a house, where with the same sum of money the rent-and-invest final value far surpasses buying

Source: Chengfeng Linghang, "EP03-01, EP05-01 — The Great-Way-Is-Simple Investing Method"

This is not a bias manufactured by deliberately cherry-picking parameters, but an iron law of the compounding universe: a neutral return rate (12%) compounded for thirty years still has a final value that towers far above real estate with a low return rate (about 4%) plus capital concentration. Buying a house is buying an asset with extremely poor liquidity; renting lets capital, in a state of freedom, grow wild among the finest enterprises in the world.

Returning to that most common real-world question, “should a young person buy a house first, or rent first and invest?”, the core lies not in emotional preference, but in capital efficiency and life flexibility. From practical projections, if you are still in the early stage of asset accumulation, your career and place of residence may still change, and you have not yet built up an adequate emergency reserve, then renting first and putting your investable cash flow into high-growth assets usually stands a better chance of opening up a net-worth gap over the medium to long term.

The actionable decision principles are as follows:

• If “after buying a house” your monthly investable cash flow would drop sharply, and you would have to bear high leverage and low liquidity over the long term, give priority to renting and investing.
• If you already have a stable and predictable long-term need to settle in one place, and can hold a home you live in without sacrificing your core investment discipline, then buying a house can serve as a tool for life stability, not as your primary return tool.
• No matter which path you choose, you must first compare “the final net-worth value 30 years out” rather than looking only at the short-term monthly payment; any buying decision that ignores opportunity cost is, in essence, borrowing against future compounding.

The above buy-versus-rent endgame comparison is a conditional projection; the final figures will change when parameters are set differently, but the direction that “long-term compounding of highly liquid assets is usually significantly superior to a single highly leveraged property” stays consistent. (Chengfeng Linghang, “EP03-01, EP05-01 — The Great-Way-Is-Simple Investing Method”)

The Hidden Risk of Physical Destruction in Real Estate

Real estate’s disadvantage lies not only in its low return rate, but even more in its unique “un-diversifiable risk of physical destruction.” A stock portfolio can be spread across thousands of global enterprises, but a house is just one, sitting at some specific coordinate on the surface of the earth.

Chengfeng Linghang cited two real cases native to Taiwan: “the Sanchong foundation-excavation building-collapse incident (man-made disaster)” and “the Hualien 403 earthquake (natural disaster).” After a house is damaged or completely destroyed, the bank’s loan contract does not become void as a result; the owner not only loses the asset, but must continue to shoulder a ten-million-dollar mortgage, a lifetime of savings wiped out in an instant. This is a fatal blind spot that most ethnic Chinese, when deciding to buy a house, were never warned about by a real-estate agent or by their parents. (Chengfeng Linghang, “EP03-01 — The Great-Way-Is-Simple Investing Method”)

More hidden still is structural risk. Earthquakes are frequent in Taiwan, and within the same building, all it takes is a handful of residents opposing urban renewal for the entire old building to become impossible to ever rebuild, leaving the asset’s value stranded on paper. Holding real estate means betting the single largest fortune of your life on an immovable asset that cannot be insured, cannot be hedged, and cannot be exited quickly.

The Foundation of House Prices Is the Nearby Economic Activity

Real estate has yet another risk that is slower than physical destruction but even harder to reverse — the withering of economic activity at the location. Japan offers the clearest mirror: during the forty years of high-speed growth after the war, real estate was extraordinarily prosperous, banks competed to lend, and the urbanization rate broke past 70%; but after the bubble burst in the early 1990s it never recovered, and coupled with a declining birth rate concentrating population and economic activity into the big cities, houses in remote regions have now become “zero-yen houses” — given to you for free, and you still have to pay out of pocket for renovation and upkeep, because there is no longer enough economic activity there to hold up any value.

This exposes a truth that is often overlooked: the value of a house has never lain in that pile of bricks itself, but in its nearby economic activity. Economic vitality determines house prices, and in a location with no economic activity, house prices only fall in one direction.

Taiwan at this moment relies on semiconductors (such as TSMC and Nvidia) to hold up its prosperity, and its housing market is relatively stable, but the trend of a declining birth rate is likewise accumulating. In the future, economic activity may concentrate further into a few metropolitan areas, and it is hard to guarantee that remote regions will not follow in Japan’s footsteps. To bet the single largest fortune of your life on a property at a single coordinate is in fact to bet on that coordinate’s population and economic activity over the coming decades — a wager far harder to predict than “will house prices rise.” (Chenglap, “Social Observation #215 — The Value of a House Lies in Its Nearby Economic Activity”)

The Hidden Leverage in Buying a House Only Magnifies Failure

Many people regard buying a house as a “safe investment,” yet have never seriously calculated the leverage multiple behind it. Take the purchase of a NT$20 million house as an example: a down payment of NT$4 million (20%), a bank loan of NT$16 million (80%), and the precise leverage multiple is: NT$20 million / NT$4 million = 5 times. With only NT$4 million of principal, you control NT$20 million of assets. (Sergeant Major’s Lie-Flat Finance Notes, “A Steady Asset Allocation That Sleeps Soundly Through Bull and Bear”)

Five-times leverage certainly magnifies gains if it meets a rising market, but its magnifying effect in the direction of loss is equally cruel. If the house is damaged by natural or man-made disaster, the NT$4 million principal is wiped out in an instant, while the bank’s NT$16 million loan contract remains valid, and not a single installment can be missed. The more crucial difference is this: securities pledging has a maintenance-ratio mechanism that lets you actively monitor risk; but a mortgage has no stop-loss line — no matter how the market crashes, the obligation to amortize principal and interest does not pause for a single day. This “5-times leverage with no stop-loss” is the true nature of the risk that ordinary people actually bear in the housing market.

More cruel still, 5-times leverage on the wrong target cannot even win on return. Using the 20-year backtest from 2004 to 2024 in Taiwan as a benchmark, suppose Investor A puts NT$10 million into a Taiwan market-cap-weighted broad-market index on a total-return, compounding basis; Investor B puts NT$10 million into real estate and opens 5-times leverage. Twenty years later, the market-cap-index investor’s assets accumulate to about NT$65.48 million, an annualized return of about 9.98%; while the real-estate investor, even with 5-times leverage, ends up with assets of only between NT$34.97 million and NT$41.03 million, an annualized return of about 6.14% to 6.95%. After deducting house tax, land value tax, repair costs, vacancy periods, and interest costs, the annualized return improvement that 5-times leverage can bring to real estate is less than 1%.

What leverage magnifies is not real excess return, but maintenance costs and psychological risk. This is the on-the-ground, real-world evidence that “real estate is a consumer good, not an investment good” — 5-times leverage on the wrong target only magnifies failure.

The True Return of a Landlady Over Ten Years

A real case of a friend illustrates the problem even better. A landlady in Chiayi bought an entire floor of a downtown building for a total price of NT$14 million ten years ago, with a 20% down payment of NT$2.8 million and an 80% mortgage of NT$11.2 million (interest rate 2%, ten-year term). She put in the effort to partition it into dozens of studio units to rent out separately, walking exactly the path of landlady wealth that so many long for — “with leverage, with cash flow, and capturing appreciation too.” Ten years later she offloaded it at a house-price peak for NT$17 million — already the ceiling price for comparable local properties — and after deducting NT$510,000 in agent fees and taxes, she netted NT$16.49 million.

At first glance, back-calculated from the real cash flow, this investment’s annualized internal rate of return (IRR) reached as high as 17.7%, prettier than the stock market — but lay the accounts out flat and you see that this 17.7% is neither real nor reproducible, inflated by at least three layers of filters.

The first layer is the “leverage illusion”: this figure uses “the 20% down payment plus small monthly subsidies” as the input, and attributes the final, fully-repaid NT$16.49 million entirely to that bit of down payment at the start; in essence it is the mathematical magnification of early high leverage. Moreover, this leverage was not maintained throughout: as the mortgage amortized month by month, the 5-times leverage diluted all the way down to zero, and what held up the 17.7% was only that “early high-leverage” stretch, not the entire holding period.

The second layer is “the luck of selling at the very top”: the NT$17 million was the ceiling price for comparable local properties, landing right at the peak of the housing-market cycle, and the owner herself admitted that had she missed this window to offload it, her annualized return would have been even lower than 6.6% (the 6.6% here is on the “full-cash purchase” basis, not the same benchmark as the 17.7% high-leverage basis above).

The third layer is “the ignored costs”: over these ten years she had to subsidize about NT$7,078 out of pocket each month (the rent barely covered the mortgage), and also bear house tax and land value tax, studio repairs and furniture replacement, an average 90% occupancy rate (during vacancies the mortgage is still due), the NT$510,000 in agent fees and taxes when selling, plus the time cost of midnight leaks, tenants moving out, and neighbor disputes, which never make it onto the ledger.

Strip away the two filters of “early high leverage” and “selling at the very top,” and the remaining 6.6% is real estate’s true constitution — back-calculated from the angle of “buying the house with full cash,” the annualized return over these ten years is only about 6.6%, beating a fixed deposit yet falling far short of the long-term return of the Taiwan or US broad market. What is more, after the Financial Supervisory Commission cracked down on housing and tightened loan-to-value ratios, even this 17.7% propped up by high leverage and selling at the top has become hard to repeat. Real estate’s paper figures are the best at deceiving: capital gains do not equal total profit, breaking even on gross does not equal truly breaking even, and what leverage magnifies is more luck and risk than real excess return. The same sum of money put into an index tool need not watch a tenant’s face and need not gamble on a cyclical peak; it is usually more worry-free, and its return is higher too.

And the most fundamental layer of truth is this: from beginning to end, this landlady never truly crossed over to the capitalist’s side. Partitioning studios, recruiting tenants, fixing the plumbing and wiring, answering midnight calls about leaks, handling move-outs and neighbor disputes — these are all genuine, bona fide labor. She thought she was buying an “asset that generates money on its own,” but what she actually bought was a “job that requires showing up in person”: the income cuts off the moment she stops, and in essence it is still exchanging time and physical labor for money, merely dressed up in the outer garment of “landlord.” This is precisely the truth that “landlords are actually still laborers” — they mistake a labor-intensive job for passive asset income. The true capitalist is exactly the opposite: hand the money to the strongest enterprises in the world, let those enterprises’ elite employees work for you day and night, and spend less than thirty minutes a year on it yourself. The person holding QQQ or 00662 does not have to crawl out of bed at midnight to unclog a toilet — “you working for the asset” versus “the asset working for you” is the true watershed between laborer and capitalist.

A Retail Investor’s Bitter Tale of Personal-Finance Awakening

The most powerful corroboration of a truth is often someone who has personally walked the wrong roads. Sergeant Major Jeff is a retired sergeant major who served in the military-hospital system, and his investment journey is a microcosm of countless ordinary Taiwanese investors.

In 2012, Jeff bought his first apartment in Taichung; after selling it in 2015, he transformed into a studio-rental landlord. The traditional belief that “real estate is the most solid wealth” made him a firm believer, but reality was otherwise: the upkeep costs and vacancy periods of converting to studios made the actual return far below expectations, the trapped asset was hard to clear, and to this day it still sits listed for sale.

After hitting a wall with real estate, Jeff turned to high-dividend ETFs, believing the logic that “regular dividends are stable income,” holding 00878, 0056, and 00713, hoping to use a high yield to replace his salary. The awakening happened in April 2025, the day Trump launched an indiscriminate tariff war — all the high-dividend ETFs flaunting “high dividend, low volatility, crash resistance,” including 00713, went limit-down across the board. This deeply personal pain shattered the core myth that high dividends resist crashes, and from then on turned him decisively toward the CLEC system centered on index ETFs.

The low liquidity of real estate and the dividend illusion of high-dividend ETFs are precisely the two typical myths that lead ordinary people down the longest detour on the road to accumulating wealth. Awakening does not require genius; it only requires a fact painful enough.

This path of awakening is not an isolated case. Another veteran investor, after years of chasing high-yield products, summed up four fatal cognitive errors:

• Treating yield as return rate, which severely misleads expectations
• A false sense of security that makes one completely ignore the essence of investing
• Treating stock-market gains as rental income, a fundamental cognitive misalignment
• Thinking “as long as I don’t lose it’s fine,” without ever thinking through “when the market is at its worst, what kind of portfolio can get me through”

To chase the “peace of mind of cash flow” from monthly dividends, he tried everything from emerging-market local-currency products to all sorts of high-dividend funds, collecting yields ranging from 0.5% to 20%. The most painful comparison group was the period from 2015 to 2018: a certain 7%-yield fund delivered a total return of only 12% over 2.5 years, while over the same period the market-cap-weighted 00646 had an average annual return as high as 22%. The dividends that seemed to be pocketed steadily were in fact merely his total return cut into many pieces and handed back to himself, and in the process he missed out on true compounding growth.

Treating the stock market as a rental market is the most fatal cognitive misalignment of the high-dividend crowd — rental income is premised on “the asset not depreciating,” but the essence of the stock market is volatility. A fall is not what is frightening; not being able to come back after the fall is what is frightening. Downgrading the stock-selection standard from “total return” to “just don’t lose” amounts to actively locking yourself onto the slowest compounding curve.

The Dollar-Cost-Averaging Matrix of Years to a Hundred Million

Jeff’s bitter tale poses a clear question: “If I had started investing in QQQ earlier, how many years would it take to change my life?” The table below, pairing different monthly investment amounts with different annualized return rates, calculates the number of years required for “assets to break through NT$100 million for the first time” (projected on a beginning-of-month, effective-annualized basis). (Sergeant Major’s Lie-Flat Finance Notes, “New Recruits Take Note — Do Your Homework Before Entering the Market with the CLEC Index Investing Training Camp”)

The cruelest insight in this table hides in the horizontal comparison within a single row. With the same NT$20,000 invested each month, choosing QQQ (00662) at 12% annualized takes 34 years to break a hundred million; choosing VT at 8% annualized takes 46 years — 12 extra years of laboring life. Those 12 years are the prime middle years of a person’s life. The cost of choosing the wrong target is never a few percentage points lost on paper, but being bound to the labor market and suffering 12 more years of enslavement. This is not a gap in investment skill, but a slope of life determined by “the depth of one’s understanding of time and compounding.”

▲ Figure 4-6 The years required to break a hundred million with NT$20,000 invested monthly, where choosing the right core engine hits the target several years earlier

The Poor-Nation Thinking of Foreign-Exchange Reserves

This myth of personal finance exists not only in individuals but is even embodied in the enormous foreign-exchange-reserve policies of many nations. The workers of emerging nations toil at contract manufacturing to earn US dollars, and then the state turns around and takes those US dollars to buy low-return US Treasury bonds — this is the textbook “poor-nation thinking.” While these nations help support the returns on America’s national debt, they let their own national resources be harvested on the cheap.

Take my friends in Taiwan or my friends in China; both regions have such high foreign-exchange reserves. And the governments of these two regions will not spend money, just like poor people. They will not spend money, and they take the foreign-exchange reserves to buy bonds. We are the ones exchanging our foreign-exchange reserves into US dollars to invest on the government’s behalf. (Video 00495)

Locking up an entire nation’s labor fruits in low-return US debt, and an individual clinging to fixed deposits and endowment insurance, are in essence the same mistake at different scales — both use hard-earned purchasing power to subsidize those who know how to hold assets. The first step of awakening is to refuse this inertia of parking resources in low-efficiency tools.

The Path to Letting Money Work Automatically

True wealth is not about looking at the deposit figure in the bank, but at the “quality of the assets” you hold. The one and only path to crossing the class divide is to transform “money,” this tool, from a pure means of consumption into a machine that can “work automatically.” In the great money-printing era, the only defense is to hold the most productive capital, and to let the finest enterprises in the world (such as the NASDAQ-100 index) work for the investor day and night.

The general public is often infatuated with the term “passive income,” yet often mistakenly believes it equals “lying down and collecting a dividend every month.” In the CLEC system, true passive income comes not from dividends, but from the capital gains of long-term asset appreciation — when cash is needed, you then cash it out through pledging or borrowing (buy, borrow, die, meaning: never sell — borrow against assets, pass on at stepped-up basis), never selling stock and never collecting dividends throughout. More crucially, this return is by no means something for nothing; it is in essence a “deferred reward after extreme labor and self-discipline”: in the front stretch of compounding (the first 10 years), you must labor under high pressure like a madman, save to the extreme, and put every scrap of fuel into the capital engine. Without this stretch of high-pressure initial capital accumulation, so-called passive income is forever just a mirage. The present calm comes from an early, extremely cruel management of time and desire.

Under capitalism, the more you are in debt the richer you get, so do not listen to that terrifying talk out there. Capitalism would collapse without debt, so you must have debt, and having a lot of debt is nothing to worry about. (Video 00466)

The capitalist’s wealth code lies in no longer relying on physical labor as the means of accumulating wealth, but learning to “use money to make money.” When the slope of an asset’s automatic growth ignores your salary, you have truly bought back the driver’s seat of your own life.

In summary, breaking the myth of buying a house and saving money is not about asking people to stop saving entirely or to stop having a place to live, but about reordering the priorities of resource allocation. When you place your core assets in a quality index such as QQQ, you are no longer a victim invaded by inflation, but become a beneficiary sharing in the dividends of the progress of human civilization. Only by recognizing the limits of cash and real estate, objectively using real estate’s stage-specific advantages while avoiding its liquidity trap, and letting capital roll on automatically behind you through compounding, can you thoroughly decouple from poverty and win back the freedom and happiness that truly belong to a human being.