Harry Browne’s Rules of Financial Safety (1999) • Hacker News Board

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

#231

Post by sacado2 » Mon, Sep 04, 2023, 5:49 PM UTC

prepend wrote: post #217

sacado2 wrote: post #194

Earlier quoted context omitted.

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 m…

No one should have 25% in cash and 25% in gold. There’s different stock ratios for different situations. But half cash is bad advice. Even if you are 85, you might have lots of cash equivalents, but you wouldn’t have 25% gold. Picking a single year isn’t a productive example because the point of investment is to keep for multiple years. With a 10+ year horizon, you should definitely be willing to stomach a 25% drop o…

Average return is a metric, but it's not the only one. If you really want the biggest possible CAGR and don't care at all about volatility, you won't beat a 100% stocks allocation.

Browne allocation's Sharpe ratio (0.67) is better than yours' (0.60). They serve different purposes and cater to different investors.

I personally wouldn't use Browne's because I'm still young(ish) and have a very, very stable income and will get a pension from my government, so I can stomach the volatility and better take the best average return. But if I were a freelance of some sort in my late fifties or older, I'd get closer to Browne's allocation.

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

#232

Post by dang » Mon, Sep 04, 2023, 7:16 PM UTC

braislen wrote: post #139

ttul wrote: post #108

Earlier quoted context omitted.

To each their own, but I just dropped my daughter off at university, and nearly every kid is white. I felt it may be of some interest here on HN to let people know there is a step 0 that most humans will never be able to access. I don’t mean to imply that successful people didn’t work hard. I have worked hard. But had I grown up as some of my primary school colleagues did - on the literal wrong side of the tracks - I…

[flagged]

Please don't cross into personal attack, regardless of how wrong someone else is or you feel they are. It only makes everything worse.

https://news.ycombinator.com/newsguidelines.html

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

#233

Post by lottin » Mon, Sep 04, 2023, 8:08 PM UTC

OrvalWintermute wrote: post #228

lottin wrote: post #222

Earlier quoted context omitted.

A hedge is a financial instrument that is negatively correlated with an exposure. A hedge position is not supposed to have a positive return, it's supposed to offset another position, so that the combined return of both positions is zero, or close to zero. You're using financial jargon in an attempt to sound clever, but you only sound like somebody who doesn't know what they're talking about.

> You're using financial jargon in an attempt to sound clever, but you only sound like somebody who doesn't know what they're talking about. Stop with the snark, you're violating the rules. > Hedge defined "To hedge, in finance, is to take an offsetting position in an asset or investment that reduces the price risk of an existing position. A hedge is therefore a trade that is made with the purpose of reducing the ris…

> I have hedged my heavy US bond & US Treasury & US stock positions & US dollar positions with another asset class.

No, you just have a portfolio that consists of a bunch of random assets.

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

#234

Post by jdkee » Mon, Sep 04, 2023, 8:45 PM UTC

"Any attempt to be clever in assigning portions to the investments probably will do more harm than good. I prefer the simplicity of allocating 25% to each of the four investments."

Why would you assign 50% of your portfolio to non-productive assets?

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

#235

Post by OrvalWintermute » Mon, Sep 04, 2023, 9:22 PM UTC

lottin wrote: post #233

OrvalWintermute wrote: post #228

Earlier quoted context omitted.

> You're using financial jargon in an attempt to sound clever, but you only sound like somebody who doesn't know what they're talking about. Stop with the snark, you're violating the rules. > Hedge defined "To hedge, in finance, is to take an offsetting position in an asset or investment that reduces the price risk of an existing position. A hedge is therefore a trade that is made with the purpose of reducing the ris…

> I have hedged my heavy US bond & US Treasury & US stock positions & US dollar positions with another asset class. No, you just have a portfolio that consists of a bunch of random assets.

> No, you just have a portfolio that consists of a bunch of random assets.

No, I have a diversified portfolio that consists of 5 asset classes divided into percentages that match my risk appetite.

While I am regularly in derivatives too, currently I am not for some specific reasons.

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

#236

Post by jboy55 » Tue, Sep 05, 2023, 12:55 AM UTC

iambateman wrote: post #209

jboy55 wrote: post #60

Earlier quoted context omitted.

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.

Hey, I spent 6 years at a company collecting over 200k options, spending $2k exercising and having new money come in and try a 200:1 reverse split. Now, 15 years later, I'm a proud owner of common stock in a private company that is marginally profitable.

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

#237

Post by lottin » Tue, Sep 05, 2023, 5:18 AM UTC

OrvalWintermute wrote: post #235

lottin wrote: post #233

Earlier quoted context omitted.

> I have hedged my heavy US bond & US Treasury & US stock positions & US dollar positions with another asset class. No, you just have a portfolio that consists of a bunch of random assets.

> No, you just have a portfolio that consists of a bunch of random assets. No, I have a diversified portfolio that consists of 5 asset classes divided into percentages that match my risk appetite. While I am regularly in derivatives too, currently I am not for some specific reasons.

What is your risk appetite? How does gold affect the risk profile of your portfolio, specifically in terms of volatility and value-at-risk, and also more generally?

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

#238

Post by rocqua » Tue, Sep 05, 2023, 5:32 AM UTC

IAmGraydon wrote: post #154

Some of these are good, some are terrible. The rule about not using leverage is so bad that I can't take the rest of the article seriously. Anyone who really understands the purpose of debt and how to utilize it has to be laughing at this. The very best way to make money is with other people's money - this is a very basic tenet of wealth building. I challenge anyone to find an example of a business or wealth empire t…

You might have missed the point of the rules. They are not about FIRE, or maximizing gains. They are about risk minimized investing. Effectively 'how to beat keeping all your money in a bank account, whilst also having even less risk than a bank account'.

Debt is great for boosting returns, and the risk can be managed. But it remains risky. Certain strategies are less risky if you use debt. Those strategies have a risk that is astronomically above the risk tolerance these guidelines assume.

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

#239

Post by ww520 » Tue, Sep 05, 2023, 7:36 AM UTC

dave333 wrote: post #221

ww520 wrote: post #152

Earlier quoted context omitted.

"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…

Cash is convertible trash, except during deflation when it is King.

Doesn’t have to be in deflation. During asset deleveraging, cash is king, too.

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

#240

Post by Kirby64 » Tue, Sep 05, 2023, 6:53 PM UTC

darkclouds wrote: post #64

Kirby64 wrote: post #52

Earlier quoted context omitted.

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.

Well it does, because if you trust a bank to not freeze your accounts, then you dont need to hold so much cash. As to having multiple bank accounts, have you heard of data sharing? If you have multiple bank accounts in your name, across multiple banks, they can all be frozen, just look at how sanctions work of foreign entities. You obviously dont know how credit reference agencies work. So in the UK, the electoral re…

Again, cash in the context of the article has nothing to do with physical possession of money in a safe or something.

And, you seem to imply I don't have an understanding for how banking works. If one of your bank accounts gets yanked for fraud investigation, you shouldn't be getting all accounts frozen at all banks, outside of some government intervention involving freezing assets. If that's a situation you have to worry about, then sure maybe having physical cash matters. It doesn't for 99.999+% of people.

In the vast majority of cases, if you have an account frozen at one bank establishment, until they finish action... the rest of your money is fine at other banks. You should have plenty of time to go through the appeals process and whatnot.