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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)

#51

Post by djbusby »

xhkkffbf wrote: post #40
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…

One compromise is to hold the cash in US TIPs, i.e. inflation indexed bonds. There's a limit of how much you can buy each year and the interface is quite clunky, but these bonds should protect against inflation. (Note: inflation as measured by the US government. Many feel that the equations understate the real inflation.)

Limit is $10k/year per tax-ID, IIRC

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

#52

Post by Kirby64 »

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…

Bank accounts being frozen has absolutely nothing to do with holding cash. Also, anyone saying "holding cash" almost certainly does not mean in a safe/under your mattress. It means in a bank account somewhere. Hopefully a high yield savings account.

And, the strategy to dealing with bank accounts being frozen is multiple bank accounts at different, unrelated banks. Same with credit cards.

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

#53

Post by osigurdson »

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…

If you look at the chart for the GLD it doesn’t resemble and inflation proof investment imo. Maybe in the extremely long term it is but on a 1 decade time scale for example it certainly is not.

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

#54

Post by throwaway290 »

distances wrote: post #45
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…

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

That's kind of the opposite of cash...

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

#55

Post by StopTheWorld »

> Rule 7: Don’t use leverage.

> Using margin accounts or mortgages (for other than your home) puts you at risk to lose more than your original investment.

As this says, margin accounts used in a certain way can put you at risk to lose more than your original investment. However, they are sometimes necessary to make investments with little to no additional risk. For example I may own $50,000 worth of XYZ Corp. and want to sell it on a Monday so as to buy $50,000 worth of DEF Corp on that same Monday. I can't do that if I don't have a margin account - settlement is usually T+2 days.

You can incur additional risk with a margin account, but not as much if it's just to borrow money you are almost certain you will have in a few days.

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

#56

Post by thunky »

djbusby wrote: post #51
xhkkffbf wrote: post #40

Earlier quoted context omitted.

One compromise is to hold the cash in US TIPs, i.e. inflation indexed bonds. There's a limit of how much you can buy each year and the interface is quite clunky, but these bonds should protect against inflation. (Note: inflation as measured by the US government. Many feel that the equations understate the real inflation.)

Limit is $10k/year per tax-ID, IIRC

You're thinking of I bonds and so is the poster you replied to.

TIPS are different and there is no purchase limit. They are available as funds/ETFs.

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

#57

Post by roenxi »

brilee wrote: post #50
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 in…

Superficially that makes sense, but on reflection you may observe that logic will apply to any assets as the relative prices change. Rebalancing from any asset to shares when shares are cheap will net good results.

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

#58

Post by [deleted] »

ghaff wrote: post #27
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 espe…

[deleted]

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

#59

Post by jonhohle »

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.

Many people believe the price of gold is being artificially suppressed or is artificially lagging since it is not behaving the way it typically does. If it can no longer be kept low, it will probably move quickly to a true market price.

Is that true? JP Morgan and Deutche Bank have been caught manipulating the price, but it would probably need to be the Fed to keep it suppressed for as long as it has been. They certainly have the motive, but no one has proven that they are doing it.

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

#60

Post by jboy55 »

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…

To correct, the Fair Market Value of the common stock went from $4 to $4.75. Saying "Price" indicates you can sell at that value, you most likely can not sell your stock for any price right now. You should value those shares at 0 in your future financial planning.

tldr; You bought $500 in lottery tickets with an undetermined draw date in the future with a high chance that it won't happen.

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