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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)

#191

Post by kqr »

nly wrote: post #163
tornato7 wrote: post #102

Earlier quoted context omitted.

This is interesting. The antithesis is probably the book Lifecycle Investing [0] which essentially concludes that you should be 2X leveraged stocks in your youth and slowly reduce leverage over time. 0. https://www.lifecycleinvesting.net/

So a 50% market drop wipes you out completely? Hrrm, nah

Reminder: it takes as long to get from 100 to 1,000 as it takes from 10 to 100 -- it is really important to avoid big drawdowns, which 2× leverage is almost sure to produce.

If anything, optimal growth requires fractional leverage, i.e. keeping wealth out of the markets.

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

#193

Post by colonwqbang »

gnfargbl wrote: post #131

Rule 7 (don't use leverage) really needs some additional clarification. If you're borrowing money using a mortgage in order to invest in stocks, that's probably not particularly smart. If you're taking on debt financing to grow an already-profitable business into an even more profitable business, that might be a different kettle of fish.

Why would an investment into your own business be less risky than a diverse investment in the general market? It doesn't make sense.

Anyone who has both loans and stocks is "borrowing to invest in stocks". Because they are investing money that could be used towards paying off their loans. As long as the risk is carefully considered (not too high % loans etc) why not do it?

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

#194

Post by sacado2 »

prepend wrote: post #187
sacado2 wrote: post #175

Earlier quoted context omitted.

6% or so per year, in fact. Not so bad.

Worse than a more typical 80% stock/15% bonds/5% cash. Having half your assets in cash and gold is very not smart.

I myself tend to lean toward stock-heavy allocations, but this is not something I'd recommend to everyone. I don't know if you remember the 2008-2009 period, or if you even were an investor back then, but those were... interesting times, to say the least. Almost-retired and newly retired didn't sleep well back then.

Your portfolio lost 26% of its value that year, and losing 1/4 of your life's saving isn't something most people are ready to stomach, especially when they need it the most (year just before or just after retirement, typically).

At the same time, Browne's allocation lost less than 1%. Since 2007 it had just one really bad year (2022, -13%, and even then it wasn't as bad as the above allocation), other than that, it was always positive or close to zero.

A simple portfolio that almost never loses money and still has a decent, yet significantly smaller than its competitors, CAGR. That's a pretty good option for very conservative investors, IMO.

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

#195

Post by [deleted] »

sgerenser wrote: post #124
ghaff wrote: post #41

Earlier quoted context omitted.

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 ther…

People with “a guy” always think he’s doing something super clever. In reality, the best ones are just investing your money in index funds. The best they can do is help to save you from yourself, like avoiding selling stocks and moving to cash in 2008 or 2020.

[deleted]

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

#196

Post by dang »

Related:

Golden Rules of Financial Safety (1999) - https://news.ycombinator.com/item?id=15586230 - Oct 2017 (110 comments)

The 16 Golden Rules of Financial Safety - https://news.ycombinator.com/item?id=10842766 - Jan 2016 (1 comment)

I've nicked 1999 from that other title. If it's wrong, hopefully someone can figure out the right year (https://meta.wikimedia.org/wiki/Cunningham%27s_Law).

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

#197

Post by OJFord »

gnfargbl wrote: post #131

Rule 7 (don't use leverage) really needs some additional clarification. If you're borrowing money using a mortgage in order to invest in stocks, that's probably not particularly smart. If you're taking on debt financing to grow an already-profitable business into an even more profitable business, that might be a different kettle of fish.

I might not re-mortgage in order to raise capital to invest, but if the interest rate is low (i.e. not right now) why would you put up more of a deposit than you have to? It's a cheap loan for however many years, and if it rises you can just put up more then, having benefited in the meantime.

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

#198

Post by TacticalCoder »

hammock wrote: post #158
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…

Why get hung up on the percentages? Isn’t that bike shedding? The principle is what matters. Take the wealth you can’t afford to lose, and put it in a balanced portfolio that seeks to match the performance of the market so that you don’t fall behind your peers. So look at your peers (your socioeconomic class) and match the average portfolio. For a tech wagie, a 60/40 for the older folks or 80/20 for the younger folks…

> So look at your peers (your socioeconomic class) and match the average portfolio.

> The point is simply to keep up with your peers’ returns on their wealth that they also can’t afford to lose

Wait... Why the heck would I give care about what my "peers" (whatever that is) are making as returns? I don't care about keeping up with the Jones.

Does copying my peer's average portfolio somehow protect mine? As in: is that some game theory thing where because they all do that, what they own keeps some value and hence I should copy that?

I'm genuinely asking.

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