HEDERA THOUGHTS
To the reader:
"""
Rule #1: Never lose Money. Rule #2: Never forget rule #1.
--- Warren Buffett
"""
Before diving into the lessons and reflections from the past year, I'd like to
start by sharing the performance of my portfolio in 2024 and 2025.
Year Pre-tax[1] SPY QQQ
2018 (25.64%) (8.07%) (10.73%)
2019 7.28% 28.65% 37.27%
2020 21.54% 15.09% 45.14%
2021 58.53% 28.79% 28.63%
2022 (14.87%) (20.28%) (34.16%)
2023 30.63% 24.11% 52.22%
2024 23.91% 24.00% 26.99%
2025 0.48%[2] 4.92% 7.21%
Total 213% 226% 312%
Anual 11.39% 12.33% 17.66%
[1] All returns are pre-tax and exclude dividends.
[2] The actual 2025 return might be slightly negative (-0.52%) after accounting
for current tax liability.
[3] All new capital is assumed to have been added at the beginning of each
year, so the actual return may be slightly higher than reported.
Since the beginning of 2025, my portfolio has significantly underperformed the
benchmarks - especially considering the level of risk I took on. Without
question, this has been the most difficult half-year I've experienced so far.
* Top correct decision: Selling Adobe in Sep, 2024, right before the market got
disappointed by its AI monetization potential.
* Top incorrect decision: Letting fear take over on "Liberation Day", right
before the biggest bounce since 2020.
As of now, my only position is a 10% allocation in KWEB. The rest is in cash.
Don't be sheep.
On April 4, I received the first margin call of my life. I had no choice but to
deposit more funds into my brokerage account.
During those days, the market was overwhelmed by fear and uncertainty. Headlines
were dominated by Trump's tariff threats, and discussions of a looming global
crisis were everywhere - terms like "Mar-a-Lago Accord," "Dollar Devaluation,"
and "U.S.-China Decoupling" were constantly in the news. I was bombarded with
information from all directions, and eventually, I lost emotional control. I
simply couldn't predict how it would all end.
"""
I think tomorrow would be worst day for both SPY and QQQ in the last past 50
years. We may experience another black Monday since 1987.
--- My twitter on April 6 11:33PM
"""
On the morning of April 7, I began to deleverage. I sold half of my TSM holdings
and bought QQQ put options as a hedge. About 15 minutes later, Trump posted on
his social media platform, announcing a "temporary" suspension of the tariffs
he had just introduced a few days earlier.
The market immediately bounced back-over 7%-but my portfolio lagged
significantly behind. I was devastated. It was the darkest day of my investment
journey. Over the next three weeks, I made around 10 trades-every single one
resulted in a loss.
If you look at the performance history at the beginning of this post, you'll
notice I went through another sharp drawdown in 2018. Ironically, that one was
also triggered by a trade war initiated by Trump. It took the market about a
quarter to recover to its previous high.
Back then, I told myself I would never make the same mistake again-panicking and
following the crowd. But clearly, it's easier said than done, especially when
you have more "expertise" in the domain and are managing larger positions.
1000 -> 900 vs. 100 -> 90 vs. 1 -> 0.9
No Leverage
One of my brokerage accounts dropped dramatically-from a peak of $480K
(right before the so-called "deep-seek day") to just $20K in a matter of weeks.
That was the moment I truly understood how hard it is to recover from a 90%
loss. If your portfolio drops 90%, you need to gain 900% just to break even.
The main reason for this collapse was leverage and derivatives. In my note last
year, I mentioned that I had bought about 30% of my TSM position using margin,
with an interest rate of 6%. That margin didn't seem significant when TSM's
stock price stayed comfortably above my average purchase price of $144. But
once the stock dipped below a certain point, that margin became the primary
source of volatility. A 2% move in the stock price could lead to a 10% or
greater swing in my total portfolio. Eventually, I collapsed-right before the
market rebounded.
Leverage can be either an angel or a devil. When you're making money, it
amplifies your gains, even if all it's doing is boosting your beta. But when
you start losing, it rips off its mask and shows its ugliest side.
It's not just that leverage increases your nominal or unrealized losses. The
real damage happens when you're close to a margin call-you can no longer think
clearly. If you're forced to liquidate-either by yourself or the brokerage-it
doesn't matter what happens in the market afterward. It's game over for you. If
you're only partially liquidated, you feel immense pressure to "win it back,"
and that mindset pushes you to break every rule you've ever set for yourself.
All you can think about is betting on short-term moves.
Worst of all, you might be forced to sell shares of companies you still believe
in-companies you consider the best in the world. And those sales are
irreversible. Once you're liquidated, you won't be able to get that same margin
capacity again.
After more than 10 consecutive losing trades in April, I decided to stop and
take a break before making any further moves. Fortunately, in June, I managed
to execute a few profitable trades. So far, at least, I'm no longer in the red
for the year.
I still vividly remember sitting in my chair, staring at the market screen, and
feeling utterly hopeless. I started to question myself, my investment
philosophy, and even whether everything I had learned in the past was
meaningless.
But after a period of deep reflection, I pulled myself together. I realized the
problem wasn't with the philosophy-it was with my own greed and wishful
thinking.
For example, when I held a leveraged position in TSM, I told myself I would
deleverage as soon as I hit the one-year mark and qualified for long-term
capital gains. But that's just self-deception. If something is fundamentally
wrong, it doesn't matter whether you try to fix it after one year, one month,
or one day-it's still wrong.
And most importantly, it's entirely possible to achieve strong returns without
taking on that much leverage or risk. Just look at how the benchmarks have
performed over the past seven years.
Paradigm Shift
There has been a lot of discussion about whether we are experiencing a paradigm
shift-one that may have started with the current U.S. administration, or even
as far back as 2016. Some argue this shift could mark the end of the 30-year
bull market in U.S. equities.
But this shift isn't just about finance, such as concerns over unsustainable
government spending or the potential for a "pivot" event similar to the
collapse of the gold standard. It's also about politics, globalization, and the
deepening left-versus-right divide within the U.S.
At the time, I shared these concerns. I became especially anxious after some of
my relatives sent me articles and comments echoing similar views. But after
some reflection, I now believe that the U.S. remains the best place for
long-term investment.
Yes, global power dynamics may shift over the next decade. But large-scale
paradigm shifts-like the decline of the British Empire-take time. For instance,
the British pound lost its status as the world's reserve currency after the
Bretton Woods Agreement in 1944, but the U.K. wasn't considered to have
officially lost its global leadership until the Suez Crisis in 1956. Even that
process involved multiple turning points and took years to play out. So far, we
haven't seen any equivalent events for the U.S.
More importantly, I believe only a tiny fraction of investors are capable of
correctly predicting such macro-level shifts-and doing so at the right time. I
don't believe I'm one of them, and frankly, trying to be one offers very poor
returns on effort.
Instead, I'd rather focus on a simpler and more actionable problem: buying good
companies when they're available at a bargain.
Doing the Right Thing at the Right Time
I resigned from my job at the end of June and decided to take some time off
before figuring out my next move. At first, I was uncertain whether it was the
right choice-especially since it happened during the same period when my portfolio
suffered a major drawdown.
But something my mentor once told me helped me see things more clearly: When
you're faced with two options, and one of them is clearly worse, then you
should take the better one without hesitance. However, when the two choices are
equally uncertain, you should think more carefully. That simple idea has since
become one of my core guiding principles in life.
It's likely that my next stop will be a startup-style company. If that turns out
to be a fruitless decision four or five years down the road, I can always
return to a large tech company and work on side projects. Over the past year,
I've spent a lot of time reflecting and have come to better understand myself:
I always feel anxious when I'm not growing. I need to feel that I'm progressing
in life. I'd rather fight and fail than accept a life that feels predetermined
and meaningless.
That said, I won't stop learning about investing and finance-regardless of the
fact that I've underperformed the benchmark for seven years now. I still enjoy
it. I've felt despair, greed, regret, achievement and even like I was just
another sheep following the herd. But through all of it, investing has helped
me understand myself better. It's made me a stronger, more self-aware person.
Miscellaneous
Last but not least, I'd like to share the books I've read-or am currently
reading-in 2024. I didn't read anything in the first half of 2025, as it was a
chaotic and emotionally draining period. But I plan to get back to reading, no
matter how busy things get after joining the new company.
1. How the mighty fall
2. Losing the signal
3. Morris Chang Autobiograph #1
4. A Monetary and Fiscal History of the United States, 1961 - 2021
5. Hillbilly Elegy
6. Principle for Debt Crisis
7. The Petersburg Paradox and the Growth Stock Fallacy
8. Zero To One
9. Secrets of Sand Hill Road
10. Psychlogy of Money
Hedera Jun 29, 2025
* Thanks to ChatGPT for polishing the whole letter.