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Harry Browne’s Rules of Financial Safety (1999)

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Re: Harry Browne’s Rules of Financial Safety (1999)

#11

Post by thenerdhead »

soared wrote: post #4

Like 15 of these can be replaced by having a financial advisor that you fully trust. Finding one is obviously a huge challenge, but makes almost of all this knowledge you can offload onto an expert. IMO fidelity is probably the closest you’ll get, they’re call centers/etc are all fully certified us-based people who aren’t on commission/etc.

Rule #1 literally talks about why you don't.

> Can you make big profits by relying on an expert who does have the proper qualifications? How do you find a true expert? That task is no easier than picking the right investments. If you don’t understand investing as well as the pros, you won’t know how to check those who seek to advise you. And you can’t rely on an advisor’s track record, even when it’s presented honestly. Track records tell you only how advisors did in the past – not how they will do next year.

Re: Harry Browne’s Rules of Financial Safety (1999)

#12

Post by NhanH »

iambateman wrote: post #3

> “Rule 9: Don’t ever do anything you don’t understand.” In 2021 I bought $500 of stock in a VR software company who was crowdfunding. Price per share was $4 on a valuation of $60M. Fast forward two years and they raise again…this time at a valuation of $170M. Naturally, I assumed my $500 was worth close to $1500 on paper. Wrong. By some magic, the common stock share price went from $4 to only $4.75 even as the compa…

Practically speaking, when getting stocks/ stock options in startup, you have to trust the integrity of the founders to the point not only for them to do the right things, but to fight for it. Preferred stocks (which VC gets) + dilution means there are a lot of ways to screw over common stocks, and at time when liquidation (that isn’t IPO) happens, a lot of lawyers will have the jobs of minimizing your stake.

Which is to say that crowdfunding stock is a baaaaaaaaad idea. You are faceless to the founders, hard to see a scenario when things can go right.

Re: Harry Browne’s Rules of Financial Safety (1999)

#14

Post by roenxi »

Rule 11 deserves a rethink. There is an official policy that cash will lose some % of its value each year! Holding 25% of your wealth in cash is planning to throwing away years of life.

For this sort of dead-basic investment advice, there is no point being ready for situations where a cash position is advantageous. People are much more likely to panic, do something stupid or get ground down by inflation.

It is better to hold enough cash for an emergency fund then a mix of productive and hard assets. Gold is good as a hard asset, but anything that is durable would be ok. The advantages of cash are small compared to the risks and locked-in losses.

EDIT

Although thanks to other commentators I see that the fine print says that cash isn't literal cash and is actually "short-term U.S. Treasury securities"; making the whole complaint a bit moot. Once the money is in bonds it becomes a matter of strategic thinking rather than a simple "don't do that". I wouldn't do that right now, but given the level the article is pitched at I think it is fair advice as long as people read that cash doesn't mean cash cash.

Re: Harry Browne’s Rules of Financial Safety (1999)

#15

Post by [deleted] »

soared wrote: post #4

Like 15 of these can be replaced by having a financial advisor that you fully trust. Finding one is obviously a huge challenge, but makes almost of all this knowledge you can offload onto an expert. IMO fidelity is probably the closest you’ll get, they’re call centers/etc are all fully certified us-based people who aren’t on commission/etc.

[deleted]

Re: Harry Browne’s Rules of Financial Safety (1999)

#16

Post by oezi »

iambateman wrote: post #3

> “Rule 9: Don’t ever do anything you don’t understand.” In 2021 I bought $500 of stock in a VR software company who was crowdfunding. Price per share was $4 on a valuation of $60M. Fast forward two years and they raise again…this time at a valuation of $170M. Naturally, I assumed my $500 was worth close to $1500 on paper. Wrong. By some magic, the common stock share price went from $4 to only $4.75 even as the compa…

Investing in any VC investment as a crowd investor at a valuation of more than 5m-10m is a near certain recipe for disaster.

Re: Harry Browne’s Rules of Financial Safety (1999)

#17

Post by 303uru »

iambateman wrote: post #3

> “Rule 9: Don’t ever do anything you don’t understand.” In 2021 I bought $500 of stock in a VR software company who was crowdfunding. Price per share was $4 on a valuation of $60M. Fast forward two years and they raise again…this time at a valuation of $170M. Naturally, I assumed my $500 was worth close to $1500 on paper. Wrong. By some magic, the common stock share price went from $4 to only $4.75 even as the compa…

Preferred stock. IE the rich get to dilute their risk by passing it on to you!

Re: Harry Browne’s Rules of Financial Safety (1999)

#19

Post by 303uru »

soared wrote: post #4

Like 15 of these can be replaced by having a financial advisor that you fully trust. Finding one is obviously a huge challenge, but makes almost of all this knowledge you can offload onto an expert. IMO fidelity is probably the closest you’ll get, they’re call centers/etc are all fully certified us-based people who aren’t on commission/etc.

Fidelity is maybe ok. You really need to spend some time educating yourself and if you want help, need to get a fiduciary.
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