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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)

#41

Post by ghaff »

kaycebasques wrote: post #22

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…

Where I've ended up is keeping some money aside to scratch whatever (mostly pretty conservative) investing itch I have and leaving the rest to a financial advisor. He's done stuff for my family for years and my feeling is that especially if I'm not going to actively manage my full portfolio, I'm better off with someone else doing it than just throwing the money into some index funds and calling it a day. (Though there have certainly been periods where that's probably been the right strategy.)

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

#42

Post by varelse »

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…

[dead]

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

#43

Post by jtc331 »

tqi wrote: post #25

> 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.

It’s not true. And using the 70s as proof is either dishonest or lacking knowledge: gold rose in the 70s because an artificial pinning of its price was removed.

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

#44

Post by andsoitis »

darkclouds wrote: post #38
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…

You obviously havent had your bank account frozen for no reason. I have! Trying going without cash for 6 weeks, not knowing if transactions have gone through, direct debits have been paid etc etc. Going around in legal loopholes where the bank ombundsman wont talk to you until you have exhausted the banks complaints dept, but the banks complaints dept wont talk to you, so you get no where. Its fucking legal intimidat…

But a rule to hold 25% of your wealth in (physical) cash doesn’t seem well balanced. Imagine stashing $250,000 in notes somewhere. Do you put it in a safe in your house and hope your house doesn’t burn down or get burglarized? Or do you spread the cash across your multiple properties (that you don’t rent out)?

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

#45

Post by distances »

darkclouds wrote: post #38
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…

You obviously havent had your bank account frozen for no reason. I have! Trying going without cash for 6 weeks, not knowing if transactions have gone through, direct debits have been paid etc etc. Going around in legal loopholes where the bank ombundsman wont talk to you until you have exhausted the banks complaints dept, but the banks complaints dept wont talk to you, so you get no where. Its fucking legal intimidat…

The "cash" in the article does not mean physical cash. It means money in a bank account.

Edit: or more accurately,

> The cash portion should be kept in a money market fund investing only in short-term U.S. Treasury securities

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

#46

Post by distances »

andsoitis wrote: post #44
darkclouds wrote: post #38

Earlier quoted context omitted.

You obviously havent had your bank account frozen for no reason. I have! Trying going without cash for 6 weeks, not knowing if transactions have gone through, direct debits have been paid etc etc. Going around in legal loopholes where the bank ombundsman wont talk to you until you have exhausted the banks complaints dept, but the banks complaints dept wont talk to you, so you get no where. Its fucking legal intimidat…

But a rule to hold 25% of your wealth in (physical) cash doesn’t seem well balanced. Imagine stashing $250,000 in notes somewhere. Do you put it in a safe in your house and hope your house doesn’t burn down or get burglarized? Or do you spread the cash across your multiple properties (that you don’t rent out)?

I commented already for the parent, but the article most definitely does not mean physical cash. Nobody will advice you to hold physical cash.

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

#47

Post by ghaff »

soared wrote: post #33
thenerdhead wrote: post #11

Earlier quoted context omitted.

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 honest…

This is true historically where you needed to pick an individual advisor who managed your portfolio based on their experience/etc. That’s not really how the major companies like fidelity run it anymore - an advisor gets their certification and then fully plays by the playbook and isn’t allowed to even have their own track record. So you’re not getting some guys advise, you’re getting a company’s extremely researched…

I like my financial advisor and all that. And he'll take into account my plans and any specific preferences I have. But, at the end of the day, he's mostly taking the output of his company's computer programs.

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

#49

Post by [deleted] »

roenxi wrote: post #39
ghaff wrote: post #27

Earlier quoted context omitted.

>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 espe…

They could hold gold. Similar risk profile, much more likely to hold value long term and be better to hand on to the kids if there is some left over. I'm not saying cash is so terrible that a nervous, confused and delicate grandma can't just eat the losses for security. I mean, sure. If you think you're probably going to lose money anyway then 10%! But a 25% allocation by default is just giving money to wealthy men w…

[deleted]

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

#50

Post by brilee »

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…

The advice says keep 25%, but it also says to rebalance every year. In a year when stocks are down, cash becomes a larger fraction of your portfolio and you would use it to buy stocks precisely when they are at their lows! On the flip side, when stocks are great, then cash becomes a smaller part of the portfolio and rebalancing implies selling stock when it is high.

I do agree overall that these transitions happen infrequently enough that the opportunity cost of not being in the market is likely to outweigh the potential upside of being ready to buy at a dip

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