Why the Best-laid Investment Plans Usually Go Wrong
Harry Browne’s new book seems well timed to appeal to the large group of investors who are licking their wounds after being mauled in the recent bear market. He explains in detail how impressive performances by mutual-fund managers, technical experts, newsletter writers, and sundry advisers are largely based on luck. “The best-laid investment plans usually go wrong because they’re based on an empty hope,” he says, “the hope that some system, advisor, technique, indicator, or mysterious art will take the uncertainty out of investing. By and large, the investors and speculators who make money consistently are those who have ignored the fantasies and accepted the world as it is.”
This part of the book is quite interesting and full of wisdom which many rueful investors will wish they had heard a little sooner. The second half of the book, however, seems anticlimactic for two reasons: first, because Browne, having warned against relying on expert advice, proceeds to offer his own; second, because the book appears to have been padded out with the kind of information that is generally found in primers for the unshorn novice. He explains the mechanics of buying stocks, warrants, options, corporate and Treasury bonds, precious metals, commodities, real estate, and so on. He gives specific instructions for opening a Swiss bank account and deals with some tax considerations. He gives names and addresses of all sorts of investment counselors and purveyors of information. On one page he even lists the addresses and telephone numbers of such firms as E.F. Hutton and Company and Merrill Lynch, Pierce, Fenner, and Smith.
Browne became famous with his book YOU CAN PROFIT FROM THE COMING DEVALUATION, which was published in 1970 and accurately predicted the devaluation of the United States dollar and its impact on the price of gold. (He confesses his timing was lucky.) He also hit the best-seller lists in 1973 with an excellent self-help book, reminiscent of Ayn Rand, titled HOW I FOUND FREEDOM IN AN UNFREE WORLD. The investment advice in his new book is familiar and conventional. He recommends keeping two portfolios, one for conservative, long-term investments and another, smaller one for speculative purchases protected by stop-loss orders. Browne seems to have mellowed with years of good living; he sounds less like a prophet these days and more like a conservative banker.