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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)

#201

Post by osigurdson »

roenxi wrote: post #62
osigurdson wrote: post #53

Earlier quoted context omitted.

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.

I cheerfully point out that cash also doesn't resemble an inflation proof investment. The difference is gold's value ambles around a level, and cash trends down.

Fully agree that cash is not inflation proof (by design). However, when looking for something that is inflation proof it isn’t clear that gold is it.

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

#202

Post by darkclouds »

nemo wrote: post #188
alluro2 wrote: post #185

Earlier quoted context omitted.

If you're actually interested in having an informed opinion on the matter, it might be useful finding out more about history of NATO vs USSR, expansion of NATO and dynamic of relationship between NATO and Russia, and EU and Russia in the last ~20 years. Not defending anyone, nor do I have any horse in the game, but as usual, reality is not black and white, and there's a broader history of moves and counter-moves that…

In fact I'm actually very familiar with that history already. Russia has justified their military invasions and occupations of neighbors by claiming that their actions were a result of NATO's actions, but this is in my opinion after having considered the evidence to be a ridiculous pretext. At no point did NATO actually force Russia to roll their military forces across the borders of their neighbors despite Russia's…

I sometimes think the Bolshevik revolution, the death of Tsar Nicholas 2, related to the British Royal Family, Queen Victoria was first cousin to Tsar Nicholas 2, are not over.

Disputes run deep and span generations when at the top.

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

#203

Post by r3trohack3r »

prepend wrote: post #76

What’s the minimum wealth level where these are applicable? > Rule 13: Keep some assets outside the country in which you live. This is very impractical unless you have even money where 5% of your wealth international makes up for the cost to maintain. It could easily cost$5-10k in travel expenses to travel somewhere and establish accounts, plus the costs to account for and audit and maintain.

IMO it’s also ineffective.

You can use it to derisk those assets, but in the U.S. there have been cases of a court demanding people hand over non-domestic assets and holding them in contempt until they do.

If the U.S. government decides your assets are theirs, I don’t think the location of the account is sufficient protection. You better hope you aren’t on U.S. soil, or any soil that extradites, when they ask you for that account if you plan on telling them “no.”

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

#204

Post by anonporridge »

jandrewrogers wrote: post #153
brilee wrote: post #50

Earlier quoted context omitted.

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…

The issue with rebalancing is that it often has tax implications if you aren't careful. You have to weigh the benefits of rebalancing with the tax loss. It works in tax deferred accounts but, at least in the US, a significant percentage of people do not have material access to such accounts.

This is why the first order move when "rebalancing" is to just adjust your allocations of new investment money from your post tax income.

e.g. if your stocks and bonds are doing very well and have inflated beyond their allocation, stop buying them and divert all of your savings to cash and gold/bitcoin.

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

#205

Post by movedx »

angarg12 wrote: post #155
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…

Growing up poor-ish and coming to a high income later in life (nearing 40 now) I believe growing your income is almost a prerequisite to accumulate wealth. Sure, I wish I had known this advice earlier, but even if I did, now I would be only ever so slightly richer. When I spent the first half of my career in a low pay job living paycheck to paycheck, I simply didn't have the spare income to invest.

> Growing up poor-ish and coming to a high income later in life (nearing 40 now) I believe growing your income is almost a prerequisite to accumulate wealth.

Your income is your number one wealth building asset. Love him or hate him, but he has some solid advice at times: "Ramsey says that your income is your biggest wealth-building tool. I'd argue that it's actually the gap between what you earn and what you spend. That's the cash you can use to become more financially secure. If you're unsure of where to start, take a look at where your money goes each month." - https://www.fool.com/the-ascent/personal-finance/articles/da...

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

#206

Post by kurthr »

ww520 wrote: post #152
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…

"Cash is trash." That's a saying on Wall Street urging people to put cash in equities. When viewing cash in isolation, it's tempting to conclude that holding cash is bad due to inflation. However, cash needs to be seen in contrasting with other investment vehicles. It's true that cash is losing 7% annually due to inflation. But at a time when stocks are losing 50% and bonds are losing 20% due to raising rate, losing…

I'd also say that "cash" includes a lot of things like savings/sweep accounts, short term treasuries (5.3%), and even CDs. Those are usually losing (eg not the last 20 years!?!) only a couple of points to stocks much less inflation.

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

#207

Post by iambateman »

hn_throwaway_99 wrote: post #34
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…

There are other replies saying you were "scammed", but just examine your own statements to see how something had to give (in this case, the common stock valuation) for anything to make sense. That is, look at your statement (emphasis mine): > 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. If they raised again, it's comple…

For sure, I think I was a sucker, not that the company was acting outside of the law.

In this case, I’m learning that my perspective on dilution is different from the founding team, who evidently feel fine tripling the share pool - as they should! Their odds of a major exit go up with millions in the bank, and the market is willing to bear that dilution, so of course they dilute.

Meanwhile, I end up feeling like I would have been better off buying $450 worth of Dogecoin and a really big pack of oatmeal crème pies.

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

#208

Post by lumost »

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…

If you have enough assets not to simply invest in the general market. Then there is also an opportunity cost to not having the funds to buy into "unique" opportunities. Whether they be distressed assets, innovative ideas - or simply buying Nvidia when ChatGPT came out. While the optimal strategy for an uninformed investor is diversification and buying the market... There are different strategies for informed well to do investors.

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

#209

Post by iambateman »

jboy55 wrote: post #60
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.

Yea, I understand your point. Price is convenient shorthand for funny money.

You’re right that I probably lit my cash on fire.

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

#210

Post by Spooky23 »

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…

Cash can be appropriate too. Safety has a value.

In a scenario where liquidity is an issue, you may pay way more than inflation to close a position, even in a bond. During the 08 crash, my dad bought some quality US State GO bonds at a significant discount, for example.

Thinking about a permanent portfolio means you need to think about events that seem unlikely today. What happens if the US loses a major conflict… aircraft carrier gets sunk, etc. that’s gonna affect treasury debt.

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