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“When you give up the search for
certainty, an enormous burden is lifted from your shoulders.

“The less you know – and the more honestly you recognize the limits of your
knowledge – the more likely your investment programme will turn out okay.
Humility is accepting that you don't know everything, or even everything about
any particular topic, and it is an investor's most vital asset. Arrogance
eventually ruins any investor.”

 

      
From ‘Fail-Safe Investing’ by Harry Browne.




 

In his book ‘Fail-Safe
Investing’, the US investment analyst Harry Browne proposed what he called a
‘Permanent Portfolio’ which had the following characteristics:

  • Safety
  • Stability
  • Simplicity.

Each of these characteristics barely requires elaboration. Safety
implies that the portfolio can protect the investor against “every possible
economic future”. Stability implies that whatever market circumstances, the
portfolio’s value should hold its own, incurring only modest falls. Simplicity
implies that the portfolio largely looks after itself, requiring only the
minimum expenditure of time in its oversight and maintenance. In terms of
particular economic or market environments, Browne highlighted four:

  • Prosperity, in which interest rates are
    usually falling, along with unemployment;
  • Inflation, during which consumer prices
    are generally rising;
  • Tight money or recession, during which
    money supply growth slows;
  • Deflation, during which the purchasing
    power value of money rises.

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