Book Review: Fail-Safe Investing by Harry Browne
“Fail-Safe Investing” by Harry Brown is a quick read that exposes the fallacy of expert professionals in the economic realm. Browne wisely delineates 17 rules for investing and simply explains his analysis of why those principles will keep the average investor out of trouble. His thesis seems to be “Be wise about investing in four general areas for your permanent portfolio and don’t assume expert advice will capture your dreams.”
Your portfolio, which is a collection of investments you hold, should be governed by three principles of 1) safety – guarding against every possible economic future; 2) stability – regardless of the economic climate you’ll not have to change the portfolio; and 3) simplicity – that is a portfolio that is easy to maintain and requires very little time to manage.
His “17 Simple Rules of Financial Safety” are clear, simple and easy to understand. He debunks the expert myths by exposing some of their expertise. For example, when an expertise makes claims to his foretelling of future events, the original claim is often very unclear what he was actually predicting. Often in the days preceding and succeeding the supposed prediction, he was also making other statements that demonstrated the market could have gone in another direction. A second example is when the expert highlights the predicted trends over a period of years, like from 1980 to 1987, and he emphasizes the huge returns an investor would have enjoyed if he had followed the expert’s advice. Yet if an investor had chosen 1987 to begin following the expert, he would have lost significantly in the crash of October, 1987. Additionally certain years are chosen to maximize the profit achieved. A third example is when claims are based on past events. No expert has been successful predicting the future of the market, or that expert would have been a billionaire many times over and owned his own country. Browne’s considerate and non-inflammatory exposure provides a realistic way to look at investing.
While Browne does not highlight Scripture, he does address “get rich quick” approaches to investing and the foolishness of it. He exhorts in his first principle to “Build your wealth upon your career,” rather than trying to gain wealth by speculating. Speculating is okay as long as it doesn’t interfere with the four fold plan he outlines and it is money that can be lost. He wisely discourages borrowing for investment and taking from the “permanent portfolio” to support additional speculative investments.
I find many of his quips to be very humorous. For example, “The investment expert with the perfect record up to now will lose his touch as soon as you start acting on his advice,” and “The system that has worked perfectly up to now will go sour when you stake your money on it.” The humor is that I have seen those as true.
Harry Browne is a well known investment advisor for over forty years. He was a Libertarian candidate for president in 2000. This is an excellent read.