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Do you worry that you're not paying enough attention to your investments? Do you feel left out when you hear about the clever things other investors seem to be doing? Relax. You don't have to become an investment genius to protect your savings. Distilling the wisdom of his thirty years' experience into lessons that can be applied in thirty minutes, Harry Browne shows you what you need to know to make your savings and investments safe and profitable, no matter what the economy and the investment markets do. There ...
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Do you worry that you're not paying enough attention to your investments? Do you feel left out when you hear about the clever things other investors seem to be doing? Relax. You don't have to become an investment genius to protect your savings. Distilling the wisdom of his thirty years' experience into lessons that can be applied in thirty minutes, Harry Browne shows you what you need to know to make your savings and investments safe and profitable, no matter what the economy and the investment markets do. There are no secret trading systems here, no jargon to learn. Instead, Harry Browne teaches you in simple terms to, among other things:
-Build your wealth on your career
-Make your own decisions
-Build a bulletproof portfolio for protection
-Take advantage of tax-reduction plans
-Enjoy yourself with a budge for pleasure
Posted April 15, 2001
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 ove
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