Customer Reviews

Fail-Safe Investing: Lifelong Financial Security in 30 Minutes

5 star:		(11)
4 star:		(4)
3 star:		(3)
2 star:		(0)
1 star:		(0)

 

 

I rate this book five stars, less for the contents of this book on its own, but rather for the series of books that Mr. Brown put out in the '80's, _Why the best laid investment plans go wrong_ in particular. This book contains the heart of those earlier books without all of the explanation, which may be why the point of it missed the earlier reviewer. Browne suggests dividing ones portfolio into two sections -- a "variable portfolio" that you can speculate with and a "permanent portfolio" which should be set up to survive *any* possible financial disaster, war, revolution, natural disaster, or whatever. He achieves this by diversifying in several different classes of investment, at least one of which should be helped by whatever happens. So if it's hyperinflation that arrives, and stocks and bonds are tanking, the gold part of your portfolio will go through the roof -- if the great depression comes back, the bond part of your portfolio will skyrocket. Whatever happens, the overall value of your portfolio should move gradually upward. I know now that some people are laughing, what gold? Nobody invests in gold any more. You need to understand that Browne is advacating an investment strategy for the ages. So what if gold is in the dumps for a decade or two? When that disaster we can't even conceive of wrecks the world economy in 2020, won't you be glad you've got that gold bullion in an offshore account to help you rebuild your life. The "permanent portfolio" is not about getting rich quick, it's about avoiding becoming poor quick. The "variable portfolio" is about getting rich quick, if you can. I first read Browne's advice a couple of decades ago when I was living overseas and had just had the fun of going through a coup against the government that involved three days of firefights between govt troops and rebels *inside* the bank where every dime I owned was kept. Mr. Browne is right. Nobody knows what will happen next. If you have money you can't afford to lose, you have to be ready for anything, and Harry Browne gives you the tools to do so.

Honestly, while it takes longer than the thirty minutes advertised on the jacket and first few pages of the book to read through all seventeen rules, the extra time spent is well worth it. Mr. Browne offers the reader simple rules to learn and help one preserve and grow money wisely. As such, it tells you the easiest ways to lose money, and how to avoid them. Although I do not agree with his recommended approach to investing, I do agree entirely with the essence of his seventeen rules which superbly present common finance and investment misconceptions and skillfully refute them.

Speaking of his seventeen rules, the first five can be condensed into one simple rule: Forecasting = Fortune Telling. From Browne, we learn that no one can predict the future, yet many of us entrust our hard-earned money without any hesitation to modern day Gypsies- financial planners, �emoney�f (mutual fund) managers and stockbrokers, who constantly tell us that they can predict the future using sophisticated �eeconometric�f forecasting tools. Browne reminds us that our wealth begins with what we earn, not with what we invest, and before we can invest, we have to earn. Although we can always borrow our way to bankruptcy with ease, we can borrow our way to prosperity only in our dreams. In the end, basing our earnings won through blood and sweat on the elaborate crystal-ball gazing of financial witch-doctors is the surest path to losses and total ruin.

Browne also delivers plain talk on risk, investment and speculation, and tells the reader that no one can ever hope to eliminate risk entirely. The best anyone can do is to develop realistic strategies for dealing with risk. As such, it becomes painfully clear that there is no such thing as a risk-free investment. This even includes for example so-called �erisk-free�f US Government Securities backed merely by the full faith and credit of the United States Government (I personally won�ft think any less of the reader who laughs at that last sentence). Who knows what the future holds, and just because the worst-case scenario- a default or bankruptcy, has never happened does not necessarily mean that it can not happen tomorrow. In keeping with this, his thirteenth rule exhorts us to keep some assets outside of our native country, and is a brilliant touch. I had to laugh when I read the various calamities- natural and unnatural, which could befall our investments in our native country. However, one should keep in mind that such calamities can occur in ANY country. Also, holding some assets outside the US may not provide the secrecy or safety Browne says it will impart, simply because of the inter-connectedness of the global economy and the incredibly long reach of the US government.

At no point does the book let the reader off of the hook. We ultimately bear the responsibility for our investment decisions, and Mr. Browne is absolutely right when he says to never assume that what you have earned today can be easily earned tomorrow. Throughout the book, Mr. Browne wants to remind the reader of three things. First, it is hard to earn a dollar, yet even in the face of this generally accepted truism, there are those who want you to believe that you can get rich quick simply by making bets based on their uninformed, though highly elaborate, predictions about unpredictable events. Second, you know more than the so-called �eexperts�f want you to think you know. The experts want you to disregard your common sense and put your trust in their opinion. Third, in the world of investing, what goes up eventually comes down, and even more important, what goes down does not necessarily have to go back up. As Browne pointedly remarks over and over again, in the world of investing, nothing is supposed to happen, and anything can happen. As such, the last five of his seventeen rules can be summarized as: Sophisticated = Stupid and Simple = Smart.

Finally, for those of us, including myself, who feel as if they have missed out on the Greatest Bull Market of All Time, fear not, for there will be other opportunities. After all, the last Greatest Bull Market of All Time occurred just before the Great Crash of 1929. As Browne tells the reader at the end of the book, you are not a failure if you missed the boat. To this I must add: You are not a failure if you missed the boat- especially if the boat was the Titanic! I think there are a lot of bruised and broken investors from the New Era Internet Boom (and subsequent Bust) that will wholeheartedly agree with me, as the last six years have been their figurative Titanic. These individuals especially need to read, and re-read this book as they invest going forward.

Bringing Las Vegas to a living room near you!

...according to Harry Browne, is the fact that "almost nothing turns out as expected." And yet, unlike in most other areas of their lives, in which they rightly view soothsayers as entertainers devoid of an inside track to the future justifying any go-for-broke departure from the straight and narrow of prudential common sense, somehow in the sphere of investing, perhaps driven by the fear of being "left behind" by the latest opportunities for speculative windfalls (and, need we add, spectacular losses?), millions of otherwise practical people are enchanted by one siren song or another: the claims of self-anointed "insiders" with "perfect" track records (i.e., a few lucky haphazard predictions from yesteryear masking the several dozen by the same advisor which turned sour), or the "scientific" systems of various gurus which start to fail the minute your money is on the line. By contrast, the desires of the great majority of us for the protection and enhancement of that part of our savings we cannot afford to lose as we prepare for retirement and beyond, can be best served by an investment strategy which emphasizes safety and simplicity - and which is diversified across four major investment media - stocks, bonds, gold and cash - so that, no matter what the uncertain future brings to the economy, our portfolios contain investments geared to respond well to each major trend - prosperity, inflation, tight money, or deflation. And with this strategy in place for those assets readers are counting on for their long-term survival, they still may, if they wish, speculate with that portion of their fortunes they know they can afford to lose. Ultimately, Browne's investment advice is a sound application of what, in that intoxicating book of personal philosophy which has helped so many in their quest for freedom and self-understanding, HOW I FOUND FREEDOM IN AN UNFREE WORLD (1973), he calls "The Uncertainty Trap: the urge to act as if your information were totally certain." And in their herd-based quest to sound "professional" and ahead of the competition, too many investment pundits and "experts" present themselves as "in the know" about not just why the market rose or fell today (I'm sure I'm not the only one who enjoys a great horselaugh whenever he hears broadcast reports to the effect that "the market rose today on rumors [or fears, or puffs of smoke] that..."), but what it will do tomorrow - and next year (as the always good-humored Browne points out, anyone with an authentic gift for financial prophecy wouldn't be wasting his time hawking newsletters and trading systems, or playing the talking-heads game on cable - he'd be helping the likes of George Soros and Rupert Murdoch invest a few spare billion, en route to owning his own country). Everything Browne writes merits the closest attention, and in this, his self-proclaimed last book on investing, he here presents a sort of summa of the common-sense wisdom he has garnered from thirty years of watching the rise and fall of markets - and he does so with his customary directness, clarity, and humility. He remains in a class by himself, and many of us will always be in his debt for the uncommon ideas he has expressed so ably. And above all for his own example - for the standard he has set.

I'm not your average reviewer. I think it's largely a waste of time so I just pass on it.

But this time it's different. Before I met Harry Browne (through his books and radio shows), I was addicted to all sorts of financial pornography. Experts, books, forums, investing clubs, technical analysis, fundamental analysis, trendlines, P/E, book value, blah, blah, etc.

Always tweaking, never happy. I was always up at night wondering how I was going to make a mistake that would wipe me out. Then I met Harry and his wisdom.

He makes the case that no one knows what's going to happen. No one. Even the cockiest hot-shot fund managers suck over the long run. Turns out, he's right (with the notable exceptions of guys like Buffet and Templeton--but are you as good as they are?)

So I asked myself: what am I doing trying to beat the market? Over the long run, I just can't. So you should probably come to that realization too. You can't beat the market. Just let it go........

So if you can't beat the market, how do you get solid returns year after year with very little volatility? The Permanent Portfolio(PP).

Inflation, deflation, prosperity, recession. Dollar up, dollar down. No matter what's brewing, you're covered. Let everyone else debate (because they don't know anyway).

Harry's PP has returned an average of 9.9% (roughly 5-6% over inflation) with extraordinarily low volatility for nearly the last 40 years. It will do equally well in all investing climates--which puts your mind at ease.

I'll let novice investors chase the "hot" funds while I sit back and relax knowing that I'm always covered no matter what happens. That level of "peace of mind" has no value--it's priceless. Thanks Harry--you've changed my life--may you rest in peace.

If you follow his advice, you won't get rich. However, you will protect the purchasing power of your savings, no matter what happens to the markets. This book is for the person who wants to invest his/her money in such a way that you can simply leave it in those investments - with occasional adjustments when one part or another becomes too large a part of your portfolio - and then turn your energies to more interesting or useful pursuits. You essentially become independent of all the investment hullabaloo and can put all your concentration on your collection of cigar rings, or whatever suits your fancy. I agree with H L Mencken who said that the value of money is greatly overrated (with my addendum - as long as you don't have to worry about it).

Every book written by Harry Browne is worthwhile, and this is no exception.

'Fail-Safe Investing: Lifelong Financial Security in 30 Minutes' should be required reading for anyone considering investing their funds with 'hot' fund managers, 'winning' advisory services or 'can't miss' trading systems. It also lays out a solid, common sense foundation for lifelong fiscal responsibility and profitability, and should be required reading for all high school students.
Harry passed away last year at the age of 73, and he will be dearly missed by those of us who treasure his legacy of liberty, independent thinking and personal responsibility. His life was a one of a kind gift that God blessed our world with.

This book is almost impossible for me to rate.

If the book had stopped with raising the question about how to invest so that you had financial security, and exposed all the risks as it does, it would have been a five-star book.

If the book had only looked at the importance of assuming that the future is unpredictable, and discussed alternatives about how to reduce the risk of that unpredictability, it would have been a five-star book.

Where the book gets into trouble, is that it offers unqualified recommendations that will get you into financial trouble. I graded the book down two stars for this problem.

The book argues that you focus on your day job (your career) as task one. Very few people will ever get to the point where investments replace earned or operating business income. Most financial books skip over this very important point.

Further, the book makes the important distinction between money that you should not take risks with and money that you can afford to lose. And it reiterates that distinction often and effectively. The money you plan to retire on is money with which you should not take much risk, and the money you have saved above that you can try other things with.

I particularly admired the many ways Mr. Browne documents the likelihood that any way you learn about to "beat the market" will soon do very poorly. Although this will not be enough to discourage the inexperienced from avoiding "taking a flyer," certain lessons can only be learned the hard way by most people.

So what's the real problem with investing? Prices fluctuate . . . a lot. These fluctuations cause investors to do the wrong things. They buy high and sell low. Ouch!

Mr. Browne's solution is to put together a portfolio that will protect you against the downside circumstances of high inflation, deflation, prosperity, and deflation. Although he doesn't say it, he wants your investments to be steadier in value so you won't be tempted to buy high and sell low.

Here is where the thinking gets a little dicey. How much downside risk you need to protect against depends solely on two things: the likelihood that you will sell at the wrong time and how long you will hold the asset. So the solution will tend to differ for each person. And I'm not quite sure how anyone assesses anyone's emotional tendency to buy and sell at the wrong time.

So let's shift focus. How can you avoid taking a ride downward? In nominal terms, that's not too hard. Stay in cash. You will always get some return, and if you are holding government short-term securities (like Treasury bills) or are in a government-insured savings account, there is little risk of losing your principal. For example, in tax deferred accounts, the returns on cash now are well above inflation. So in some environments, you won't even lose buying power.

So if you are close to retirement (or needing the money), it makes sense to be almost totally or totally in cash.

If you are 20 years old, the question turns around. Over a period of 40-50 years, cash will probably earn you a lower return than any other investment you can make. But can you handle the volatility? You should probably assume that you cannot handle the volatility. So you should have a fair amount of cash too in your "investment" rather than your "speculative" funds.

But you can handle that risk, too, in another way. You can save more money than you need to retire on (or for your children's education or whatever). Then the volatility will only take you down towards the minimum sums you need to have, not take you below your targets. If this approach feels comfortable to you, it is a better solution. You will earn more money and have less lifetime risk.

There are quite a few areas where I have problems with his advice. They are too numerous to outline here, but I will mention a few:

He ideally wants you to own 25 percent of your portfolio in gold in Austria or Switzerland. First, if you are over 60, I think that's very risky. If the value of that gold goes down, you've just lost. You won't probably hold it long enough to make the loss back. Second, you will increase the chances of being audited by the IRS if you honestly declare that you have a foreign bank account. Third, you will have violated the law if you do not. Fourth, what if you and your spouse die in a car accident? Are your heirs going to find that gold? Do you really need these problems?

He also encourages you to have your money in stock mutual funds and to select three for diversification. But he doesn't give you the information you need to do that well. See John Bogle's Common Sense on Mutual Funds for help with that issue.

Finally, he recommends people you can implement that strategy with. Be skeptical of any author who presents "trustworthy" people for you to work with. There are many, many ways this advice can represent conflicts of interest, overt or sub rosa.

If a salesman told you you could have "fail-safe" results and only need to spend 30 minutes a year to do so, would you believe her or him? Where else should you be skeptical about the specifics of advice you receive.

Think through how to "emotion-reduce" and "risk-reduce" your investing!

I learned some good, basic investing advice. I will be a lot more skeptical about supposed new ways to make money in the market. The plan is conservative but rightfully so considering the U.S. banking system and the U.S. dollar are based on fraud. The book gives explicit advice on how to execute the proposed plan.

Here's a most unusual creature: an investment advisor who does not try to forecast the future nor sell you advice based on his prognostications. Instead, he advises you to invest on the assumption that no one can reliably predict where markets will go. The amazing but sad truth is that most investment gurus and market forecasters are only throwing out guesses and do no better than dart throwers or chimpanzees when put to the test.

This book is elegant in its simplicity, but the specific investment advice is alas a bit too simplistic. It can still work for anyone, but more optimal permanent portfolios can be designed to cover more types of assets. In a perpetually sideways stock market (i.e., 2004-2005), a covered call mutual fund (such as the Gateway Fund) can keep you above water. Commodities funds, foreign bonds, foreign stock funds, high yield funds, etc. can give you additional ways to make money in different market conditions. Long-term investors surely don't need more than 10% in "cash" (Browne advises a whopping 25%). There are no exact right or wrong allocation percentages, of course, so I won't try to offer an alternative permanent portfolio allocation. But there are possibly better ways of setting one up than Browne's way. I do endorse the basic concept.

One rarely reads any investment advice or book this honest and straightforward, yet easy to understand and effective. I wish all regular folks, particularly those with 401k or IRA, read this book and take charge of their own financial and retirement future. The financial and investment advisory service industry is just full of sharks, crooks, and liars, sadly the public is only too trusting and constantly feeds those sharks with hard-earned money.

This is a must-read for majority of honest, hard-working folks. The advices in the book are common sense but timeless.