I am retired and take educated guesses on all things financial.

April 14, 2008

April 15, 2008: Financial Safety

As we navigate uncertain financial times for investors worldwide, I am reminded of a list created by the late Harry Browne. Browne was an intellectual, free thinker and dogmatic in his views - economic and political. Some may remember his run for the Presidency as head of the Libertarian Party a decade ago. Although never respected by mainstream Wall Street, I always admired Mr. Browne for being true to his beliefs and innovative with his candor about the subject of personal finance. I had an exchange of e-mails with him before his death and found him to be a gentleman in every respect, although we differed on many topics.

So here's to you, Harry Browne. We can still profit from some of your ideas.


1. Your career provides your wealth. Investments won't take you from rags to riches. They may take you from riches to rags.

2. Don't assume you can replace your wealth.

3. Recognize the difference between investing and speculating.

4. No one can predict the future.

5. No one can move you in and out of investments consistently with precise and profitable timing.

6. No trading system will work as well in the future as it did in the past.

7. Don't use leverage. When someone goes completely broke, it is almost always because they used borrowed money.

8. Don't let anyone make your decisions.

9. Don't ever do anything you don't understand.

10. Don't depend on any one investment, institution or person for your safety. Every investment has its time in the sun - and its moment of shame.

11. Create a bulletproof portfolio. Diversify holistically in a Permanent Portfolio.

12. Speculate only with money you can afford to lose. Use a Speculative Portfolio to bet on eclectic securities or other investments you think will do exceptionally well.

13. Keep some assets outside the country in which you live. Don't allow everything you own to be where your government can touch it - to tax or confiscate it.

14. Beware of tax avoidance schemes. Nothing is worse than the IRS suppressing tax cheats. It is not worth the chance to get caught in questionable tax schemes.

15. Enjoy yourself with a budget for pleasure. Your wealth is of no value if you can't enjoy it.

16. Whenever you are in doubt about a course of action, it is always better to err on the side of safety.

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