Quite a lot of horse sense in this book! Suitable for beginner- to intermediate-level investors, particularly if you want to invest competently with a minimum of fuss, worry and fees.
There are two sections: Part I goes over the author's 17 Basic Rules, and Part II goes over each rule in more depth. The rules are useful and complete, and if you apply them, you'll have a robust investment plan. Let me specifically cite the author's Rule #11, which describes his extremely simple, low-fee "bulletproof" portfolio of 25% each in stocks, bonds, cash and gold, with basic annual rebalancing.
I'd also recommend pairing this book with two short and excellent books by William Bernstein: The Investor's Manifesto and The Four Pillars of Investing.
[A quick affiliate link to Amazon for those readers who would like to support my work here: if you purchase your Amazon products via any affiliate link from this site, or from my sister site Casual Kitchen, I will receive a small affiliate commission at no extra cost to you. Thank you!]
One final comment: advanced investors benefit from reading books like this too, for a couple of reasons. First, it's always a good practice to review basic concepts from time to time. But more importantly, doing so ensures there aren't any raging, gaping holes in your investing knowledge. The most dangerous thing to be is the kind of person who thinks he's an advanced investor when he isn't. Don't let this happen to you!
[Dear readers, the notes to this post aren't too long, so feel free to skim them. It should give you a good sense of what's in the book.]
Notes:
Prologue: Keep It Safe and Simple
2 On falling back on your common-sense understanding of how the world works in all domains, including investing, whereas "financial experts and advisors talk as though the investment world were somehow different from the rest of life."
3 On the author's 17 simple rules, some of which are obvious; "But the obvious is precisely what you must cling to--and it's what too many financial writers will try to separate you from. Danger lurks whenever you reach for exotic and complicated concepts--disregarding the plain truths that have brought you this far in life."
3-4 Part I of the book is the 17 rules; part II gives further explanation, additional background information and examples.
Part I: The 17 Simple Rules of Financial Safety
Rule #1: Build Your Wealth Upon Your Career
7ff On recognizing that you are more competitive in your field of work than you are against expert investors. On the fact that investing is the second part of the road, after you've learned to master working and saving; also a blurb here on how Social Security isn't going to be sustainable (note that this book was published 26 years ago, in 1999).
10 "Investing won't promote you from the middle class to the very rich. Most people who have hoped it would do so have wound up worse off." Instead keep it safe and simple and concentrate on what you do best, which is make money in your career.
Rule #2: Don't Assume You Can Replace Your Wealth
12ff "The world won't stand still for you or repeat itself when you need it to." [Good wisdom here, simply stated! You don't get mulligans very often, and usually you don't get them when you really need them.] Governments find ways to interfere in your business or your profession; new regulations or litigation makes certain businesses more vulnerable, technology changes can change demand for your products or your services; also whatever wealth you've accumulated is vulnerable to litigation, seizure, or just plain misjudgment; thus it's better to "assume that what you have now is irreplaceable, that you could never earn it again--even if you suspect you could." The author's point here is to treat your wealth with the utmost respect, and invest with preservation as the first priority.
Rule #3: Recognize the Difference Between Investing and Speculating
14ff On the risk of speculating when you think you're investing: doing things like engaging in market timing, choosing sectors you think will do better than the market, using tools like technical analysis to figure out when to buy and sell, also attempting to beat the market or beat others' returns. Both are "honorable endeavors" but only one is suitable for the funds you need to protect, you should only speculate with money you can afford to lose.
Rule #4: Beware of Fortune-Tellers
16ff Most people understand the true seers don't exist in the real world; on accepting uncertainty and dealing successfully with uncertainty, rather than finding a fortune teller with a "track record" who can predict stock prices or inflation.
18 "Anything can happen. Nothing has to happen."
18 On the notion that no one can eliminate uncertainty for you. [More helpful and understated wisdom that bears repeating.]
Rule #5: Don't Expect Anyone to Make You Rich
19ff On "helpers" versus "market beaters": helpers use their knowledge and experience to help you set up a portfolio, or help show you how to carry out your plans; market beaters recommend speculations, speculative opportunities, and ideally keep you humble by pointing to future events you haven't thought of.
21ff On coincidence and luck driving many investment records. Also on the idea that someone's good record will fall apart as soon as you start acting on his advice, his winning streak is what makes him known and celebrated, which means the streak of luck is probably run its course.
Rule #6: Don't Expect a Trading System to Make You Rich
24ff The real world doesn't provide systems that make it easy to beat the odds. "The system that has worked perfectly up to now will go sour when you stake your money on it." [Holy cow is this ever true.] On coincidence, good luck, selective construction of track records that makes "systems" appear better than they are; how no one hears about the systems that failed; also most systems arise from either common-sense observations about human behavior (using contrary opinion for example) or from data mining of spurious correlations in past market data; finally, any trading system brought to you will always have a fabulous record otherwise no one would tell you about it. [!!]
Rule #7: Invest Only on a Cash Basis
30ff This chapter counsels readers to never use leverage, never buy stocks on margin, never invest in anything using borrowed money. "Investing on a cash basis doesn't insure you against loss. But it effectively eliminates the risk of losing everything." [You have to say in the game, you want to avoid ruin at all costs.]
Rule #8: Make Your Own Decisions
33 "No advisor can be expected to treat your wealth with the same respect you give to it. You don't need a money manager. Investing is complicated and difficult only if you're trying to speculate and beat the market."
34 "You have no way of knowing what a money manager may be prompted to do someday by circumstances you know nothing about--his own financial problems, the pressure to keep his performance record competitive, or even problems that aren't related to his work but that impair his decision-making." [Great point here, it's a type of agency problem that will never be apparent to you, but it may rear its head at the worst time for you and your capital.]
Rule #9: Do Only What You Understand
35 When you invest in something you don't understand you're going to discover risks that you hadn't been aware of.
Rule #10: Spread The Risk
36ff Examples given here where precious metals did well in the 1970s when stocks and bonds did poorly, but then vice versa in the 1980s when the opposite ws true; or the example of real estate being a winner in the 70s but then lost prominence after tax rules changed in the 80s, etc. Further you can't rely on institutions to survive either, nor can you depend on an advisor; so the central idea here is diversification across investments and institutions.
Rule #11: Build a Bulletproof Portfolio for Protection
38ff Three requirements for a portfolio: safety, stability, simplicity.
39ff Rather than focusing on millions of specific possibilities, instead focus on four broad scenarios that your portfolio needs to respond to: 1) prosperity, 2) inflation, 3) tight money/recession and 4) deflation; "The four economic categories are all inclusive. At any time, one of them will predominate. So if you're protected in these four situations, your protected in all situations."
42ff On the four investments in the author's permanent portfolio that cover the four scenarios:
1) Stocks: take advantage of prosperity, but tend to do poorly during periods of inflation, deflation and tight money.
2) Bonds: do well during prosperity but also profit when interest rates collapse during a deflation. Do poorly during times of inflation or tight money.
3) Gold: does very well during inflation, but does poorly during times of prosperity, tight money and deflation.
4) Cash: does best during periods of tight money: the purchasing power of cash goes up when investments are declining in value and your interest rate goes up as well; likewise cash becomes more valuable during deflation as prices fall [people often miss this nuance: when stocks are crashing your cash balance becomes more and more valuable relatively speaking]; it's neutral during prosperity and costs you real purchasing power during inflation. The author suggests a permanent portfolio containing these four investments. [See below for the author's policy on rebalancing.]
45 On the composition of the portfolio, he keeps it unbelievably simple here: 25% stocks, 25% bonds, 25% gold, 25% cash; and then recommending a once a year rebalancing if any of the four investments has gone to less than 15% or more than 35% of the portfolio's overall value, [these are pretty large brackets. Very interesting!]
48 "A permanent portfolio should let you watch the evening news or read investment publications in total serenity."
Rule #12: Speculate Only with Money You Can Afford to Lose
50ff The author doesn't say you can't speculate, just only do it with money you can afford to lose; set aside a separate sum of money for speculation, he calls this a "variable portfolio" as opposed to the "permanent portfolio." Perhaps you might leave the variable portfolio totally in cash most of the time, but at certain times invest it all into stocks, or foreign currencies. or whatever. You can also turn this portfolio over to a money manager.
Rule #13: Keep Some Assets Outside Your Own Country
53ff [Shades of Perpetual Traveler and The Sovereign Individual here.] "For complete safety, don't allow everything wrong to be within the reach of your government. If you keep some assets in a different country, you'll be less vulnerable, and you'll feel less vulnerable. You won't have to worry so much about what your government might do next." The author comments here on seemingly remote possibilities, like a nation-state taking your property, a physical catastrophe which disrupts record-keeping in your country; this also protects you from litigation, reduces your vulnerability to a major economic setback in your own country, etc.
Rule #14: Take Advantage of Tax-Reduction Plans
56ff Standard discussion here of tax deferral using IRAs and 401K plans.
Rule #15: Ask the Right Questions
62ff The author first lists the wrong questions to ask here: Is there any risk? (Far better questions here would be "In what economic circumstances is this investments price likely to go down?" or "Are there other investments that could take up the slack in those same circumstances?") Another "wrong" question: "Is this investment safe?" (Instead, ask "Under what circumstances could I lose 20% or a substantial share of my investment?" and "Will I have residual liability?" [Yes, this can be a risk! See for example what happened to clients of the infamous James Cordier and his now defunct investment firm OptionSellers.com.]) Another: "What is the yield?" (Instead, ask "Under what circumstances would the investment appreciate or depreciate?" and then try to gauge the total return rather than just the dividend yield; also note the risks of yield chasing which blinds you to other factors.)
65ff Other examples of "wrong questions," like, "Does this company have a chance to be taken over? or "Does it have some other [fashionable] characteristic?" when you should instead be asking "Do I interpret widely known information differently from what most people believe?" Note that most information is already reflected in the stock price, so any implicit expectation of benefit from this fashionable characteristic or takeover potential means the stock will plummet if it doesn't happen; thus "you are risking a lot to gain a little."
65 "Large speculative profits are earned only by going against the crowd. The crowd isn't always wrong, but you can't make much betting with it--because you will buy at a price that's already high." [A couple of nuances here: he's correct, but also betting against the crowd implies knowing what the crowd thinks, there's a lot more to consider when thinking about your knowledge of what other people think.] "Unpopularity doesn't guarantee profits, but you'll never make a killing with a popular investment."
66 The author makes a snarky (albeit largely justified) remark about technical analysis, instead he suggests asking "Is there something on TV more interesting?"
Rule #16: Enjoy Yourself with a Budget for Pleasure
68 "Your wealth is of no value if you don't enjoy it." The author suggests making a specific budget that you can blow on whatever you want and making sure that amount is small enough that it won't impoverish your future under any circumstances.
Rule #17: Whenever You're in Doubt, Err on the Side of Safety
69 If you're in doubt or hesitating in any way, if you don't know enough about the investment or situation to make a confident decision, don't take a plunge until you know more. The author here tells readers that other opportunities will follow, even if you let this specific situation pass you by. [This is a tremendously useful thing to remember, you want to cultivate an abundance mindset: a belief that there will always be more opportunities as long as you stay ready and open. This also stops you from feeling like you have to take action on some speculation now because you know there will be others in your future.]
Part II: More About the Rules
Rule #1: More About Your Career and Your Wealth
74 Chart here showing the relationship between starting early, saving a lot, and what your retirement income will be as a percent of your job earnings; this is an oversimplified graph and it assumes linear returns (technically speaking, it ignores "sequence of returns risk" but it still illustrates the central point that starting early, saving a lot, and staying at it is basically the solution to retirement. Brief comments here on [vanilla] annuities; comments here that your post-work income won't need to be as high as your working income since your financial needs will be likely lower; you also will no longer need to divert any of your income towards savings and investing either.
Rule #2: More About Protecting Your Wealth
78 Comments here on "businessman and politician John Connolly" [no idea who this is even after a fairly extensive Google search], the Hunt Brothers and their silver speculations, Doris Day (whose husband squandered her money on bad investments); on how we will all make mistakes but the most important thing is to treat your wealth as precious and don't take chances with it. [Once again, you have to stay in the game!]
Rule #3: More About Investing and Speculating
80ff Elaborating on "only speculate with money you can afford to lose"; you are doing battle with professionals who have all kinds of resources--and yet still almost none of them outperform the market; this is the usual standard argument--and it is a compelling one--for just buying low-fee index funds.
Rule #4: More about Fortune-Tellers and Forecasts
82ff We think of fortune-tellers as entertainers usually, except with investing. On forecasts that get our attention, that seems mysterious or alarming, etc.; "The one thing you certainly can't forecast is the occasion when a forecasting method will fail." Forecasters "rarely advertise their failures" and even their scorecards claiming correct predictions in the past will leave out various contradictions or "on the one hand/on the other hand" language: "Years ago I began accumulating file cabinets full of investment newsletters. When some writer boasted about last year's right-on-the-money prediction, I'd dig out his original statement. Almost invariably, I found that the original prediction bore scant resemblance to the later self-congratulations. Sometimes the prediction was so hedged that almost any outcome would have made the forecaster a winner." Note also the forecasters should be "fabulously wealthy."
87 Finally, on using predictions to help you think through scenarios you haven't thought of, or call attention to a potential future that others are ignoring. [He's absolutely correct, this is a great point here. Likewise they can help you think through probabilities, see what the consensus already believes, etc.]
Rule #5: More about Relying on an Investment Expert
89 On the Hulbert Financial digest which tracks investment newsletters to rank the best results, the author notes that the leaders keep changing!
90 An important nuance here: you usually find someone after they put up some number of years of track record, right before they mean revert; the author gives one example of a newsletter that had a 7-year record of tremendous results but then lost more than half of the fund's capital at the end of that seventh year... but then citing that it still had a large gain for the full seven years. Of course the problem here is hardly anyone followed him until the very last year, so the investors had actual results far worse than the "track record." [Note that this exact catastrophe happened with Bill Miller, who had a record streak of beating the S&P500, but then blew up most of his investors because most of the capital piled into his fund right before the blowup.]
91 Another good nuance, where a newsletter investment newsletter performance marked from 10 years after October of 1987 was tremendously good, 27% per year, but measured from just two months earlier it was only a 12% gain (well less than the stock market) just because it included the October 1987 crash. The author quotes Mark Hulbert: "When you pick a newsletter on the basis of ten years that don't include a bear market, you're implicitly assuming that the next ten years won't include one either." [This helps unearth a series of good metaquestion: What assumptions am I making by trusting this performance record that I'm not thinking about or unaware of? What are the factors that help this guy do well that may not be factors going forward? What kind of market does this guy do well in? And so on. You can also use these metaquestions on stock market valuation measures too: see for example how the CAPE measure was horrendously skewed by the Great Financial Crisis which averaged in tremendously below-normalized earnings, and it thus made the stock market look way more overvalued than it actually was. Performance records and market valuation tools all need to be contextualized, which means you need to know your market history backwards and forwards.]
92 Finally comments here on winning streaks and good performance coming as much from luck as from talent; out of thousands of investment advisors, mutual funds or whatever, pure luck will dictate that a few will be significant outliers "and those are the ones you'll hear about."
Rule #6: More about Trading Systems
93ff Essentially the author talks about the recursive nature of investment markets (although he doesn't phrase it this way): economic indicators or any other factor that underlies a trading system eventually will be self-canceling, will get exploited away, or it will not act the same way consistently. And of course when you backtest the system it's over a fixed reality (the past data is fixed and static) and you can easily datamine factors and indicators that optimize that fixed reality of past data. "Systems and indicators assume an essentially static world."
Rule #7: More about Investing on a Cash Basis
98ff More comments here about how buying stocks on margin can wipe you out; don't take down a mortgage that has any recourse beyond the property itself, etc.
Rule #8: More about Making Your Own Decisions
100ff "...it's easier to decide how to invest prudently yourself than to decide to whom you could safely delegate decision-making authority." On how the standard guidelines for finding an advisor (get references, deal with a reputable firm, etc.) don't really work, "reputable" firms seem to go broke as often as any other companies; references only tell you that a few people have been satisfied with the advisor--and usually they're supplied by the person you're considering (it's much better to find an unhappy former customer). Also these "happy" clients may not know how to pick an advisor either! You're still relying on yourself.
101 Great point here about "fairy tales" on how money managers are allegedly professional, savvy, cool, logical; that they never panic like small investors, etc. [He's right! Professional investors panic as badly or worse than non-professionals--and if you think about why it makes total sense: their jobs and careers are on the line, they have to keep up with their peers or they get fired, professionals are at least if not more herd-like as the rest of us; see also the idea of how money managers generally must "fail or succeed conventionally" because there's asymmetric professional risk by whenever you do something unconventional. Individual investors do not have these types of forces acting on them at all.]
Rule #9: More about Understanding What You Do
104 On avoiding things that you don't understand; note that sometimes it's because of your lack of knowledge, but other times it's because the investment or the plan actually doesn't make sense; either way, "if you can't understand it don't do it."
Rule #10: More about Spreading the Risk
105ff Comments here about FDIC and the old FSLC [Federal Savings and Loan Insurance Corporation] which was cleaned out by the Savings and Loan scandal; on "Congress will never let the banks fail" as no more than a slogan, it is "no substitute for real security" as the author phrases it. Thus protect yourself by using more than one institution, diversifying across investment markets.
Rule #11: More about the Bulletproof Portfolio
107ff More details here on the author's permanent portfolio plan: the stocks portion should represent the broad market, he recommends splitting the 25% stock portion into three low-fee mutual funds [but today you can easily use a couple of broad index funds which will have de minimus fees]. The bond portion he recommends only buying US Treasuries [today, of course, you can buy your Treasury bonds direct via TreasuryDirect, or use an ultra-low fee government bond index fund at Vanguard]. The author argues to choose longer bonds which is interesting, and because it only plays a role as a diversifier--meaning when the rest of the investment world goes down longer bonds usually to go up, a lot--he's probably right to suggest this.
111ff On the gold portion of the portfolio [note that this book came out long long before Bitcoin, which solves most of the problems gold solves, only better]; he argues to hold gold itself not gold stocks, or collectors' coins; instead buy bullion coins which sell it a three to five percent premium because they don't require assaying; he argues you get the premium back when you sell the coin. The appendix has a list of national coin companies. I don't like this idea all that much honestly: you're likely to pay pretty big spread costs, and then there will be transport costs, storage costs, insurance costs, etc.
112 On the cash portion of the portfolio: everything should be in money market funds holding short term US Treasuries, so you don't have to worry about credit risk; he also suggests dividing between two or three funds for institutional protection.
114 On real estate: your home should not be thought of as an investment even if you can sell it at a profit; you'll still end up replacing it, likely with a home with similar or higher value; note also you can't "rebalance" a house in the same way you can a portfolio, it's neither fungible nor divisible; so you have to arrange the rest of your portfolio around it, in spite of it.
116 "If a permanent portfolio is too complicated for you, you definitely have no business risking your money on anything that requires more extensive knowledge about investing." [Heh, good rhetoric.]
118 "[The permanent portfolio] is a package of investments that provides the safety you need. Tear apart the package and you tear apart the safety." [This is a good point, a nuanced point. People want to find investments that just go up, but nothing just goes up; you also want ballast, you want things to cover black swan risks, you want the sort of "insurance" that gold--or better yet, Bitcoin--gives you in worst-case scenarios, etc.]
Rule #12: More about Speculating
119 An interesting visualization exercise here on deciding "how much speculative money you can't afford to lose" actually means. He says pick an initial figure that seems reasonable and then spend a few minutes imagining that you've lost it all. What would the loss do to your life? [It's also worth remembering that we're often very fallible when we imagine our future selves under duress, so imagine that whatever loss bugs you turns out to bug you a lot more than you think it would, and adjust accordingly.] Also on not touching the permanent portfolio: never use it as a source of funds for speculating, get your speculating money out of separate, incremental savings.
120ff Comments on speculative strategy: it's not about foreseeing the future, it's more like playing poker: you bet aggressively when you're in good circumstances but fold early when you have a bad hand. Also recognizing that good situations still may not play out. Further comments here on realizing it's unlikely you'll have any information that isn't available to everyone else--even if you have inside information it's probably already stale and known [yes, it almost always is]. On making sure that you speculate when your expectations differ considerably from the prevailing wisdom, but then also asking "Why do you think your expectations are smarter than those of others?" Finally, comments on how professionals who spend hours all day staring at screens and working on investing mostly don't outperform so it's likely "you probably can't."
Rule #13: More about Keeping Some Assets Overseas
125 [Interesting quote here, I wonder how true the last part is?] "If you're a world-class drug dealer or tied up in a billion-dollar controversy with your own government, a foreign bank might be brought under considerable pressure to reveal information about your account. But if you're a typical middle-class individual, your foreign holdings will be as anonymous as a fish in the Atlantic Ocean."
125ff The author is partial to Switzerland and Austria, on their banking privacy/secrecy policies [I think Switzerland has lost some of its reputation here by the way], their history of "fending off" government inquiries; comments here about equities held through a foreign bank will be anonymous and not traced to you because they'll be held in the name of the foreign broker with whom your foreign bank does business; likewise with gold, you'll want it stored at the bank itself, thus it will be completely outside the US financial system.
127 Secrecy best practices: open the account in person, don't use a check from your US bank to open it; don't have the bank send you correspondence in your home country, hold only things that produce no interest or dividends so that you don't earn income that gets reported to your home tax authorities.
128 Another interesting meta-idea here on the notion of "just making the decision to look for" privacy will open your mind to alternatives you hadn't noticed.
Rule #14: More about Tax-Reduction Plans
129ff On making sure your pension or retirement plans allows you to invest in things that are consistent with the permanent portfolio idea. Also on the important idea of not wasting the tax sheltering aspect of a retirement plan by putting something like gold into it which generates no income, and then holding all your income producing investments outside that plan. Better to do the opposite.
132 On avoiding any kind of complicated legal structures for tax shelters; on keeping with the rule if you don't understand it, don't do it. Also it's almost like the author is responding to Irwin Schiff here with his comments warning readers to never pay attention to any of the theories that people claim allow you to avoid paying taxes legally, like the 16th amendment or whatever, etc. And good on the author for saying it exactly the same way I said it in my review of Schiff's book: "...it doesn't matter whether you believe the income tax is 'legal.' Whether or not it is, many people who don't pay income tax are put in prison."
134 Also this author understands game theory as he writes about how the IRS may not send you notices; and if you avoid paying your taxes for a year or two, you may only get a notice asking whether you filed a return that they missed; but the fact that you don't hear from them repeatedly probably means they're giving you enough rope to hang yourself; they would rather have you go several years without paying tax so it's easy to prove it was a deliberate pattern of evasion and also allow the unpaid taxes penalties and interest accumulate to a point where it's very much worth prosecuting you. All very good points.
Rule #15: More about Asking the Right Questions
135ff This section reiterates and goes into a little bit more detail on the various meta-questions you want to ask instead of the "questions you shouldn't ask" when considering an investment. For example, instead of asking how well an investment performed in recent years, think about what kind of economic climate would cause this investment to do well, is that relevant to the other things you invest in, and did it actually prosper during the economic environment that it's supposed to, etc.
136 Instead of asking "How much should I invest?" instead ask "What provides proper balance against my other investments?" or "What what would make me too vulnerable?"
137 Instead of asking is the company or mutual fund socially responsible, do your socially responsive activity with the profits you make from investing and keep investing and social policies separate. [This is of course a belief-based or ideology-based issue and readers are free to disagree, but I think it's very important to keep in mind that the stock market constantly creates merchandise that appears to be socially responsible, and underperforms, and may not even be that socially responsible. Wall Street is very good at greenwashing, very good.]
138-9 Instead of asking whether an investment is going to rise or not, instead get into why your advisor is recommending it, do the arguments make sense, what predictions have to come into play, does the investment add your portfolio, etc.
Rule #16: More about the Pleasure Budget
140 Cute paragraph here about reaching a goal and being sure to relax and enjoy it; on not concentrating on other people's goals that they set for themselves, you only need to accumulate what you need to be secure, "you don't have to be the biggest winner in the investment markets."
Rule #17: More about Erring on the Side of Safety
141ff Interesting counterintuitive argument here disagreeing with the argument that "you can't afford to play it safe because economic conditions have made safe alternatives too risky." In the 1970s inflation averaged 7.4% per year and a risk-averse person with money in a bank savings account earned 4.8%--thus over the course of the decade, "the worst financial decade since the 1930s" he would have lost 2.6% of his purchasing power per year or 23% overall. The author admits that this guy survived at least, and didn't invest in things he didn't understand that could have separated him from his money. But then he argues, convincingly, that there are other riskless options: like holding Treasury Bills (which only would have lost 0.2% per year in purchasing power vs 2.6%) combined with just a tiny share in gold coins and you would have at the least maintained your purchasing power. So this excessive risk aversion can be easily fixed with a very small amount of extra risk. "I am saying that history provides no evidence that only the bold and adventurous survive financially."
Epilogue: Getting On with Your Life
144 "The rules are simply common sense. But most investors violate them frequently--even investors who are concerned primarily with safety." On the idea of chasing safety--or more accurately the illusion of safety--but in reality making yourself more vulnerable: say, by finding an allegedly "great" advisor or an allegedly can't-miss investment.
145ff Another great trusim: "almost nothing turns out as expected." This is a wonderful meta-statement because it gets you to size positions small, it gets you to stay humble, it gets you to stay flexible, it gets you to stay diversified, and it gets you to stay ready. The author calls this the best kept secret in the investment world. Ironically everyone in the financial media and all financial experts keep up a guise of acting like they anticipated everything! It's necessary kabuki, because to be an "expert" you have to look smart and unsurprised all the time. [It's hilarious how often media experts will say "this is unsurprising" or "I wasn't surprised by this" when something quite obviously surprising to everyone just happened.]
147ff On giving up a search for certainty: "And when you give up the search for certainty, an enormous burden is lifted from your shoulders. You can begin to invest realistically, and that's much easier than the search for certainty." On recognizing the limits of your knowledge, being humble about your knowledge and expertise. [Epistemic humility is a superpower: it is an investor's most vital asset.]
149 Reiterating once again rule #17: "When in doubt about an investment decision, it is always better to err on the side of safety."
Appendices
153ff "This is the book I've been leading up to for thirty years, and it probably will be my final investment book." [The best books are the ones that authors can only produce after a lifetime of experience, and then the book usually comes out of them effortlessly, and in a form that readers can ingest effortlessly.]
155ff The author shares resources here: a short list of mutual funds that meet his qualifications, some Treasury bill money market fund companies, a list of gold coin dealers and a list of possible foreign banks in Switzerland and Austria (Anglo-Irish Bank in Austria, and then in Switzerland: Anker Bank, Canadian Imperial Bank of Commerce, and UeberseeBank); as well as the contact information of his writing partner and investment helper, consultant Terry Coxon.
To Read:
Daniel J. Pilla: The Untax Promise
Terry Coxon: Keep What You Earn
Terry Coxon: Using Warrants
Harry Browne: How You Can Profit from the Coming Devaluation
Harry Browne: You Can Profit from a Monetary Crisis
Harry Browne: How I Found Freedom in an Unfree World