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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)

#21

Post by iambateman »

NhanH wrote: post #12
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 i…

For sure. Meanwhile this latest round raised $12M from 5,600 investors in a couple days. So the management team is getting a massive signal that “this is good.”

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

#22

Post by kaycebasques »

Rule #1 (your career creates your wealth) is a gem.

Rule #8 (make your own decisions) lacks self-awareness, especially after you read Rule #11 (bulletproof portfolio). I have been on a quest for a truly bulletproof portfolio for years. It's not easy. TANSTAAFL. Rule #11 also contradicts Rules #6 (no trading system works forever) and #9 (only do things you understand).

That criticism aside, the author did a service to us all by writing this. If I had followed all these rules consistently throughout my life, I would probably be a wealthier man today.

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

#23

Post by blitzar »

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…

What was The Founders’s ownership share diluted down to?

It wasn’t.

What was Peter Thiel’s ownership share diluted down to?

It wasn’t.

What was your ownership share diluted down to?

Point-zero-three percent.

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

#25

Post by tqi »

> GOLD not only does well during times of intense inflation, it does very well. In the 1970s, gold rose twenty times over as the inflation rate soared to its peak of 15% in 1980

Is this still true? As a layperson looking at the chart, it seems like gold has moved up and down a lot, but is more or less in the same place as it was 2 years ago.

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

#26

Post by matsemann »

ajross wrote: post #10
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…

That kind of scam is exactly why securities trading is regulated. Before the IPO though, all bets are off and unless you're the VC writing the term sheet, you're the sucker.

It doesn't have to be a scam. The pie got bigger, but perhaps because other people added more stuffing (money) to it. So one's original piece remained mostly the same.

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

#27

Post by ghaff »

roenxi wrote: post #14

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…

>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.

That depends on lots of things including how old you are and the current economic situation.

For someone on the older side, getting a very low risk 5% on a chunk of their money doesn't seem like a half-bad strategy at the moment especially if they already own their home.

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

#28

Post by jsmith99 »

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…

Rule #0: before investing in a privately held company make sure you understand the capital structure and obligations and if there are classes of investor with guarantees or seniority.

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

#29

Post by blitzar »

quonn wrote: post #5
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…

Probably due to „dilution“ where the number of shares is expanded, leading to lower value per share. I was surprised by this, too. It‘s perhaps the most important thing to know when working for startups or investing in them.

Listed companies can and do this as well, typically not on a scale that is so noticeable.

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

#30

Post by foobiekr »

williamdclt wrote: post #8
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.

Does anyone has a UK advisor they're overwhelmingly happy with?

In the US I have friends who are deliriously happy with their absolutely incompetent financial advisors.

The problem is that it’s a sales role and the usual customer manipulation applies strongly.

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