"Fail Safe Investing" by Harry Browne

[rjohnla]

Hi, hope this goes better than last Post. It's always been in the back of mind since I read it and just curious what you all think. I guess most of you know who Harry Browne was, now deceased, an investment consultant, wrote 8 investment books and was the Libertarian candidate for president in 1996. Book subtitle: "Lifelong Financial Security in 30 Minutes". Basically, invest 25% in S&P index, 25% in LT treasury Bond Fund, 25% in Gold and 25% in cash / cd's. Rebalance every year. The return for the time-frame calculated was 11.2%. Pretty easy, my only concern would be the time frame that was used.

 

[ziggy29]

This is what is often called the "Permanent Portfolio," and while on some level it makes me nervous, it's hard to argue with its track record.

There's also a mutual fund called the Permanent Portfolio Fund (PRPFX), and while it adds a little stuff and tweaks the percentages, it mostly follows the same approach. I do have a position in this fund but despite its track record I have a hard time treating it as more than a small "play money" holding.

 

[omni550]

You may find this blog post of interest (written by John Greaney, who early-retired at age 38 in 1994) wherein he compares returns of various investment strategies including Harry Browne's http://www.retireearlyhomepage.com/reallife13.html

 

[rjohnla]

Hi Ziggy29, Thanks for the information. Yes, made me nervous as well and that's one sign it might not be for us, don't want investments to keep you up at night, if they do, have to re-assess. I'll look into the fund. All the Best

 

[Onward]

Harry Browne's How to Be Free in an Unfree World had a huge influence on me when I read it in my 20s, and it's probably one of the reasons I ended up on this board.

I have a soft spot for his Permanent Portfolio, too.

Here is William Bernstein's take:

Wild About Harry

 

[captain3d]

I like it and am a follower. I do not rebalance every year. I have been rebalancing with new money, but even in retirement it would not be an every year rebalance. The recommendation is to rebalance when something hits either 15% or 35% (from 25%) which typically only happens every three years.

The book does make a lot of sense to me and so far I have been happy with the 'steadiness' of it al for the last five years.

phil

 

[rjohnla]

Hi Onward, yes, it's a really great read and I like to go back to it from time-to-time. Last time, ironically, was last week - I read about work and freedom & believe that's a primary reason I'm hear now. Want to make that big jump to ER, but conservative in that I have ensure I can take care of myself by myself. With my new puppy, an 7-8 year old Lab mix I adopted about 2 weeks ago. Going to have to go back to that stable portfolio and take another look, I really like the simplicity as well as the logic behind it. We may not get super-wealthy, but for me anyhow, a return of 5-10% with lower risk is more than good enough. Thanks for your input. All the Best & Happy Returns.

 

[rjohnla]

Hi Phil, good point, looking at returns as a basis for balancing rather than a strict time-frame. Gives more flexibility. Thanks for the advice. John

 

[captain3d]

I think the 15% and 35% rebalance bands are part of the strategy. You can get much more into the PP discussion if interested over here...

Permanent Portfolio Discussion Forum - Index

 

[clifp]

You may find this blog post of interest (written by John Greaney, who early-retired at age 38 in 1994) wherein he compares returns of various investment strategies including Harry Browne's 2012 Update: Real-Life Retiree Investment Returns

Nice to see Greaney is still updating his site. Interesting about the difficult challenges of us 2000 retirees. I unfortunately didn't start doing a balance sheet until Dec 2001, so I have to estimate my 99, and 2000 net worth.
I am definitely doing better (in real dollars) than I was in 2001, probably 2000 and behind my 1999 peak.

But I think the key is less asset allocation than keeping a withdrawal rate of 3-3.5% roughly my dividend/interest income.

 

[urn2bfree]

I really like the analysis of the various portfolios on that Greaney website, BUT what about expenses? I am not clear how much expenses-and taxes-would alter performance of the various portfolios. We know tiny differences in expense ratios can multiply to large chunks of loss in returns. Add in taxes as well. For instance, if you are annually rebalancing your Gold position, that -until recently-meant selling gains in Gold. Any such gains in Gold must be reduced by 28%, which is the special tax rate for gains in gold.
I am going to write to Greaney and see how he accounted for taxes and expenses.