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Golden Rules of Financial Safety (1999)

harrybrowne.org

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Re: Golden Rules of Financial Safety (1999)

#101

Post by loeg »

wiredfool wrote: post #14
metalliqaz wrote: post #5

Advice: Just do dollar cost averaging in an index ETF. Question: Why? Answer: This article.

What advantages do index ETFs have over a comparable index mutual fund against the same benchmark? Or, to ask another way, is there any reason to prefer anything other than Vanguard's Index500 vs anything else attempting to replicate the SP 500? (I call out the Vanguard fund because the fees are very low, .14% iirc.)

ETFs trade mid-day instead of just end of day. You can only buy unit shares (but the unit price is typically far lower than mutual fund minimums). Those are really the only differences I know about.

Re: Golden Rules of Financial Safety (1999)

#102

Post by rb808 »

simplerufus wrote: post #9

#13 - Keep some money overseas How exactly is this possible? I am a german citizen and resident, and after hours of reaearch a few months ago i couldn’t find ONE bank in the world I could open a bank account with. I always have to be at least a resident. Did anybody figure this out? My partner is from Canada and I would love to park some money there, but I couldn’t figure out a way to do so.

You're right with modern money laundering rules and tax info sharing its rare to be able to open bank accounts for non-residents. If you want to hold CAD you're probably best to get an investment account that will let you hold CAD. I know Interactive Brokers will do this, but maybe some local brokerage will too. Probably Swiss Banks will have accounts with a variety of currencies for German residents if you look there.

Re: Golden Rules of Financial Safety (1999)

#103

Post by sova »

Eire_Banshee wrote: post #6
sova wrote: post #3

Manafort indicted for keeping money overseas that he did not report, among other reasons. Just a fact to bear in mind, as one of the points suggests keeping cash overseas

He never said try to hide it. Pay your taxes on it, do what you have to do so that it is legal. Just have it somewhere where "the man" cant seize it. He specifically went out of his way to say NOT to try elaborate overseas schemes to avoid paying taxes.

Foreign assets can't be seized?

Re: Golden Rules of Financial Safety (1999)

#104

Post by loeg »

mfoy_ wrote: post #85
PatientTrades wrote: post #50

Earlier quoted context omitted.

> And how, exactly, does one embark upon an endeavor By using the money earned from your career to fund ventures. A stable career should provide you with money to build wealth. However, simply working a 9-5 everyday will not provide wealth as the rules implies. It provides money, not wealth. There is a difference

It will take you decades of saving to have the kind of capital that can show a return that's even remotely comparable with your salary.

But you don't need to replace your salary, just cover your expenses :-).

For example, if you can save ~96% of your gross income and safely draw 4% from your investments, you can cover your expenses after only a single year. (Of course, you will never save 96% of your gross income, due to taxes.)

Re: Golden Rules of Financial Safety (1999)

#105

Post by loeg »

PatientTrades wrote: post #46
dsr_ wrote: post #29

Earlier quoted context omitted.

Where does the money for those things come from, if not your career?

> Where does the money for those things come from, if not your career? The money to fund wealth building ventures comes from having a stable career. However, the act of having a career does not build wealth as the rule implies.

The career is necessary (the point from the article) but not sufficient (your point, I guess).

Re: Golden Rules of Financial Safety (1999)

#106

Post by sova »

stuffedBelly wrote: post #58
kbutler wrote: post #8

He missed rule #0: Wealth is what you save, not what you earn or what you spend. There are many people with very high income but spending as high (or even higher!), so they have little or no wealth.

Actually from a financial perspective, wealth is assets you own (equivalent to equity + liability). People with high net income should be investing as much as possible to let the money flow in the market. If everyone saves with no intention to invest/spend, it would potentially result in a stagnant economy.

Investing != spending

Re: Golden Rules of Financial Safety (1999)

#107

Post by snikeris »

SilasX wrote: post #93
snikeris wrote: post #80

Earlier quoted context omitted.

The argument of the OP almost exactly fits this lead in to the article: > I hear some version of this argument all the time: The opportunity cost for holding cash is too high. It earns virtually nothing, and you’re guaranteed to lose money to inflation. Just get over your fear and buy stocks!

I get that the article promises to refute what the OP said, but if it really provided a relevant insight, you should be able to summarize the insight so as to contribute to the current discussion and let others know whether they've already heard the argument, or what crucial assumptions it makes, and whether the refutation really gets at the core point of the parent's objection (or is just nitpicking). And save the t…

I appreciate you schooling me on how to better contribute to the discussion. This was my attempt at what you're discussing (admittedly appended perhaps after your initial comment):

> Harry's 25% cash isn't dollar bills, it's treasury bills, which have held up to inflation.

OP seemed to be under the misconception that cash meant dollar bills under the mattress. The article addresses this in the section beginning "To explain, I think it helps to start with the definition of cash..."

OP seemed to be under the misconception that cash responds poorly to inflation, which the article also addresses.

Re: Golden Rules of Financial Safety (1999)

#109

Post by SilasX »

snikeris wrote: post #107
SilasX wrote: post #93

Earlier quoted context omitted.

I get that the article promises to refute what the OP said, but if it really provided a relevant insight, you should be able to summarize the insight so as to contribute to the current discussion and let others know whether they've already heard the argument, or what crucial assumptions it makes, and whether the refutation really gets at the core point of the parent's objection (or is just nitpicking). And save the t…

I appreciate you schooling me on how to better contribute to the discussion. This was my attempt at what you're discussing (admittedly appended perhaps after your initial comment): > Harry's 25% cash isn't dollar bills, it's treasury bills, which have held up to inflation. OP seemed to be under the misconception that cash meant dollar bills under the mattress. The article addresses this in the section beginning "To e…

If your only point is that "cash" includes short-term T-bills, then

1) What else is the article adding? The fact that it (historically) yields something above inflation was enough to refute the OP's implied claim about negative real returns.

2) That wouldn't address the OP's point that they still have a low RoR for a long-term portfolio.

3) As in my comment it wouldn't refute that T-bills haven't kept up with inflation recently.

If the article's point is about how balancing into/out of a stable investment can improve portfolio return, then that would warrant a summary in your comment.

Sorry if my comments come off as mean. I'm trying to convey why a giant article might not be helpful to resolving the disagreement.

Re: Golden Rules of Financial Safety (1999)

#110

Post by tanderson92 »

mfoy_ wrote: post #94
tanderson92 wrote: post #73

Earlier quoted context omitted.

Many people are downvoting you but you're right. Browne is implying that your investment returns will not outpace your career earnings. This may not be true at all, with compound interest over a lifetime.

For a contrived example, let's make the following assumptions: 1) There is no inflation. 2) Your capital investments always return 5%. 3) Your salary is $100,000 and does not change. 4) You are able to save 50% of your income and invest it. At year 0, you are worth the equivalent of $2,000,000 invested. It won't be until year 40 that your investments are returning the same amount as your starting salary. Presumably,…

This is incomplete as well as incorrect.

It is incomplete because: presumably you do not die immediately upon retirement. A 30 year retirement would see your investments compound for an additional 30 years after your career income stream ceases. This can dwarf the $2M total you save over a 40 year career at $50k/yr.

It is incorrect because even after the 40 years your net worth is $6.5M on gross lifetime earnings of $4M.

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