The most financially beneficial step I have taken has been to talk to people, confront held beliefs, and adapt my own mindset when faced with objectively superior arguments. Over the years I have trawled many financial blogs and literature with the general goal of having the certitude that my mindset can withstand contrarian attacks.
Every idea is the best idea until someone puts it to the test.
This belief structure is pivotal to how I view the world and practically speaking I seek out people who have a contrarian position to my own whilst being able to defend it. This mindset is the reason for this blog’s existence.
As a quick and dirty example, Harry Browne, Libertarian scribble and bullish commentator is a competent individual, but I couldn’t disagree more on his investment strategy. The man knows what he is talking about and on the surface of it, his strategy makes sense, but the more I thought about it, the more I disagreed with his entire premise.
Harry’s “Permanent Portfolio”
Harry thinks that an optimal permanent portfolio should be split equally between 4 asset classes with no real reasoning beyond the perception of diversification through arbitrarily assigning 25% of your portfolio to an asset class like gold “just because.” His “Permanent Portfolio” consists of the following strategy:
- 25% in stocks,
- 25% in long-term treasury bonds,
- 25% in gold, &
- 25% in cash.
The argument for such a structure is that it renders you resilient to disaster and is an easy recipe to follow. The core issue from my perspective is that applying an arbitrary percentage to any given asset class is dumb as fuck.
25% in cash? Even if you have millions in actualized assets? Really?
How about 25% in gold? Will having a few kg’s of gold magically insulate you from a stock market meltdown? Did anyone actually liquidate precious metal holdings during 2008, or did they simply hold onto those slabs of precious metal and do very little else beyond scoffing at the financial market and how “it was bound to fail.”
Financially, I believe in achieving my goals. I don’t follow an arbitrary strategy, but rather adapt my approach in line with what I want to achieve and the current economic environment. I imagine that very few people will do things the way I do them, and I suspect that such a position is probably a good thing to be in.
It’s healthy to have a marketplace of ideas full of contrarians. The guiding purpose behind Questionable Margins is to have a free exchange of ideas, which will in turn help us collectively grow our wealth.