Once you start to understand debt, your asset allocation will change!
In the past, when I didn't quite understand what "asset allocation" meant, I often told the people around me that investing should involve a combination of stocks and bonds.
This is the most typical combination: stocks + US Treasury bonds.
The concept is simple: it's the old saying, "Don't put all your eggs in one basket."
Stocks are responsible for growth, bonds are responsible for stability.
Back then, I always believed that as long as I diversified my money, I could naturally achieve stability in the long run.
But after actively and continuously learning about taxation, asset allocation, and financial leverage over the past few years, I have a completely different understanding of the role of "debt".
I still talk about stock-bond allocation, but the "bond" is no longer just the US bonds lying in the account that don't move much.
Instead, it turned into "liability"!
Both involve debt allocation, but many people frown at the mere mention of debt. However, debt itself is neither good nor bad; the key lies in how you use it.
It's not about recklessly borrowing money for consumption, but about leveraging extremely low interest rates to amplify your asset allocation capabilities.
If you can invest borrowed funds in long-term, stable assets with a "yield" higher than the "interest on the debt," then debt can actually become a powerful tool, a means to accelerate the operation of assets.
Many people know the saying: "Money only becomes a lot of money when it begets more money."
The reason is simply that "quantitative change leads to qualitative change".
If you use 100,000 as principal to try and earn 100,000, it might take a long time for the market to rise and for your operations to be very precise.
But what if you need one million to generate one hundred thousand?
Just one limit-up day.
What if you need to generate 100,000 from 10 million?
Even the slightest market fluctuation has already exceeded the limit by too much.
This is not a difference in ability, but a difference in the amount of capital.
Of course, we are not suggesting that you use debt for high-risk speculation. A truly mature asset allocation approach is to treat "debt" as part of your asset allocation.
Use the lowest-risk funds to invest in a portfolio of assets with stable and sustainable output.
When the risk is kept within a reasonable range, this is actually a very healthy leverage ratio.
As your assets begin to grow, you'll find that many things start to change.
This is an asset allocation model where quantitative change leads to qualitative change!
In this era where the M-shaped society is widening, some people accelerate their progress by allocating assets appropriately, while others still rely solely on manual labor to slowly accumulate wealth.
If your mindset remains stuck in the past, even if you work hard to increase your income, you are likely to fall behind the times.
So the problem is never whether you're working hard enough!
It's not about whether your asset mindset has kept up with the times.
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