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Fail-Safe Investing - Harry Browne

By Josh Kaufman

Warren Buffett famously has two rules of investing. Rule #1: Don’t Lose Money. Rule #2: Never Forget Rule #1. Fail-Safe Investing follows Buffett’s lead by teaching you how to protect your net worth against whatever the market throws your way without sacrificing your portfolio’s performance.

One of the central tenants of Fail-Safe Investing is that people have absolutely no reliable means of predicting the future. Since investment requires purchasing an asset whose price and/or value will appreciate over time, that limitation is a huge issue, making most market activity little more than speculation. Browne suggests structuring your financial portfolio in a way that will ensure it generates solid annual returns while maintaining value in even the most extreme and uncertain economic conditions – inflation, deflation, and recession. While the structure of this portfolio is deeply counterintuitive, this strategy has generated ~10% compound annual growth since the 1970s, with a maximum drop in the worth of the portfolio of 6% in any given year. That’s impressive.

While the investment strategy Fail-Safe Investing suggests appears to be extremely conservative (25% of the portfolio is in gold, with another 25% in cash equivalents), the advice in this book will help you generate solid annual returns without much effort, as well as weather almost any financial storm with your portfolio (and sense of financial security) intact. That type of knowledge is priceless.

(For a preview of the information contained in this book, check out Browne’s 16 Golden Rules of Investing.)

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