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Harry Browne’s Fail-Safe Investing Prescription

edited August 2011 in Fund Discussions
Hi Guys,

Given the current roiling market turmoil it seemed like a good time to revisit the calm and common sense of an old friend and a steady, savvy investment advisor. I am speaking of Harry Browne’s writings.

Harry Browne was a successful financial advisor for over three decades. I had the good fortune of meeting him several times at the Las Vegas MoneyShow in the 2000s. He surely did not fit the conventional profile of the prototypical speaker at that annual conference. Whereas the bulk of presenters had a large supporting staff and impressive presentation visual aids, Harry only came armed with his accumulated financial wisdom and a lonely, single 3 X 5 index card that was completely covered (both sides) with small handwritten notes.

Harry Browne was a rail-thin gangling man who spoke softly, with authority, and with considerable common sense; Harry was forever a no nonsense whatsoever type guy. You may remember him as the founding godfather behind what is now Michael Cuggino’s Permanent Portfolio family of mutual funds. Harry Browne became a trusted financial advisor with only a high school education; he bolted college after a few weeks never to return so, to a large extent, he was self-educated.

You might also recall that he was twice a presidential candidate (1996 and again in 2000) under the Libertarian Party banner. Harry Browne passed away in 2006. I miss his quieting confidence and soothing manner.

Harry published numerous economic and financial books. I own two of them: “Why the Best-Laid Investment Plans Usually Go Wrong” issued in 1986, and “Fail-Safe Investing” published in 1999. The Fail-Safe book is a distillation of his accrued investment learning and philosophy; it is especially succinct and delivers the goods on his subtitle of “Lifetime Financial Security in 30 Minutes”. During this stressful period, I felt compelled to reread his dazzling investment summary.

Fail-Safe Investing does not contain any deep market secrets nor does it delve into complex analysis methods. It surely might disarm a reader with its simplistic approach to investing. I believe that at root, we all realize the wisdom in the rule set that Harry Browne prescribes. I think it might be helpful to re-familiarize ourselves with his, and most likely many of our favorite investment axioms during this volatile market cycle.

Here is a listing of Harry Browne’s 17 investment rules. I have parenthetically added a single sentence comment or observation to each rule. I am positive that each of you could provide many others from your own market experiences and knowledge.

Rule 1: Build your wealth on your career. (Maximize your career longevity and income.)

Rule 2: Don’t assume you can replace your wealth. (Recovery is arduous and uncertain, impossible if you withdraw, so stay in the game.)

Rule 3: Recognize the difference between investing and speculating. (Asset allocate your resources with a portion committed to market reproducing Index holdings and a speculative element committed to Alpha seeking speculative holdings.)

Rule 4: Beware of Fortune-Tellers. (Charlatans are everywhere; no one can forecast the market because no one is in control.)

Rule 5: Don’t expect anyone to make you rich. (An advisor’s primary goal is to make himself rich, and if he succeeds it is mostly due to coincidence or luck.)

Rule 6: Don’t expect a trading system to make you rich. (If it existed, all uncertainty would be removed from investing; out-of-sample testing always defeat these systems.)

Rule 7: Invest only on a cash basis. (Although leverage is a force multiplier, excessive leverage kills.)

Rule 8: Make your own decisions. (You are the best champion for your investment survival.)

Rule 9: Do only what you understand. (Never outrun your core knowledge, skill sets, and competencies.)

Rule 10: Spread the risk. (Diversify, diversify, diversify with negatively correlated holdings.)

Rule 11: Build a bulletproof portfolio for protection. (Browne’s vision was the Permanent Portfolio, PRPFX)

Rule 12: Speculate only with money you can afford to lose. (Any strategy that attempts to outdistance market like returns is a form of speculation.)

Rule 13: Keep some assets outside your own country. (International exposure is mandatory, including some minor foreign exchange component.)

Rule 14: Take advantage of tax-reduction plans. (As Milton Friedman observed: “I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.”}

Rule 15: Ask the right questions. (The questions must be sufficiently detailed to drilldown to identify real risk; superficiality destroys wealth.)

Rule 16: Enjoy yourself with a budget for pleasure. ( Happiness is essential for balance, and Economic Happiness research is developing clues in this arena.)

Rule 17: Whenever you’re in doubt, err on the side of safety. (Always invest deploying Benjamin Graham’s margin of safety concept to modulate unrealistic enthusiasm.)

These are not only fundamental rules for investing, they are also meaningful rules to guide personal worldly ambitions and goals. I suspect, Browne designed them with that objective in mind.

The opening section of Browne’s book that outlines his 17 rules is only 70 pages long. It probably can be absorbed in about 30 minutes. His writing style is easy and very linear. The second part of his book expands on the 17 rules, and in many ways is both challenging and captivating.

I have purposefully limited my commentary to encourage your participation. I welcome your insights. Please contribute.

Don’t panic; stay strong. To help you keep the faith, you might consider securing a copy of Browne’s Fail Save book. As a minimum, it offers comfort in these demanding and stressful times.

Best Regards.


  • Hi MJG,

    I don't have any particular insights, but I thought that all your effort on this post warranted a response. I became aware of the writings of Harry Browne and PRPFX through the Fund Alarm forum. After suffering through the last 2 bear markets while "staying the course" with conventional mutual funds in my IRA, I thought, "There's got to be a better way." For me, it's technical analysis. So my present portfolio is what I think of as a barbell, in terms of risk. At one end is PRPFX, and at the other is either RYVYX and RYRSX, or RYVNX and RYIRX, or RYMXX.

    Best regards,
  • Dear MJG
    thank you again for pointing Harry Browne out for young investor like myself. I would definitely look into his book further...thanks mentioning this investor
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