best permanent portfolio book

[l82start]

what is the best permanent portfolio book?  

[pplooker]

That's an easy one.

http://www.amazon.com/Fail-Safe-Investi ... 031226321X

As far as I know, it's the only definitive PP book available.  Really though, the Crawling Road Blog pretty much tells you everything.  Still, I found this book an interesting read.

[craigr]

As pplooker stated, Fail-Safe investing is the most concise and easy book on the subject. The e-Book version is slightly more up to date than the printed version (mainly just states to use an Index fund for the stocks vs. older actively managed funds). Here it is:

http://www.trendsaction.com/books/Harry ... 1245243723

I also liked his 1987 book "Why the Best Laid Investment Plans Usually Go Wrong." This book spends about 1/3rd of its time debunking many common investment ideas (market timing, chart reading, technical analysis, etc.). Then it spends the rest of the time discussing the ideas behind the Permanent Portfolio. The asset classes are still stocks, bonds, cash and gold, but back in 1987 index funds were not widely available so alternatives were used. The good part though is he spends time on each core asset class describing the benefits and drawbacks of each and why they are in the portfolio. The book is long, but well worth the read. You can find copies used on Amazon for a few bucks here:

Why the Best-Laid Investment Plans Usually Go Wrong & How You Can Find Safety & Profit in an Uncertain World

[l82start]

thanks for the suggestions...
i am listening to the  raidio shows from the blog right now, and have ordered the Fail-Safe-Investing-Lifelong-Financial-Security book from amazon to add to my reading list,
between a successful fall ass-backward into it gold investment and the discovery of bogle's indexing (the bogle head guide) i have - by dumb luck, ended up with a small beginners port folio that is a few % worth of re-balancing away from being a PP, i am looking forward to learning more about it...

[craigr]

I think between Browne's advice and the Boglehead's guide you're setting yourself up to be a successful investor.

Browne and the Bogleheads differ in a number of areas:

1) Bogleheads like TIPS for inflation protection. Browne likes gold.
2) Bogleheads usually advise a total bond market fund for fixed income. Browne likes Treasuries only.
3) Bogleheads usually like to keep the fixed income maturity on the short-side (1-5 years). Browne likes to split it 50/50 between very short and long term Treasuries.
4) Bogleheads try to match your stocks and bonds to your age. Browne keeps a fixed allocation to all assets regardless of age.

Overall though, both strategies are passive and discourage market timing and trying to beat the market. I think Browne's approach is more strongly diversified personally with better protection from market extremes. But if you are a long term investor the Boglehead's approach is also OK if you can tolerate some more volatility from time to time.

Personally, I think all portfolios should hold an allocation to gold of some sort. I think there is ample historic evidence to support its inclusion to protect against some severe economic conditions. If you adopt a purely Boglehead approach I'd still strongly encourage you to consider an allocation to gold along with your stocks and bonds. A 10% allocation would not be unreasonable and could offer significant benefits if we had very high inflation in the US vs. owning none at all.

[l82start]

i don't know if its better to start a new topic or discus it here, but i am curious to know more about #2 and 3 on your list
-the pros and cons of total bond vs treasuries
-and the pros and cons of 50/50 short/long vs short term

i have had good results with gold and tend to lean toward keeping some..

[craigr]

i don't know if its better to start a new topic or discus it here, but i am curious to know more about #2 and 3 on your list
-the pros and cons of total bond vs treasuries
-and the pros and cons of 50/50 short/long vs short term

Start a new topic in the bond section. This is a common question and I think I can make a good case for why US investors should only own US treasuries for their bond allocation (assuming 2008 didn't teach them this lesson already!).

[Quasimodo]

Harry wrote "How You Can Profit from the Coming Devaluation" in 1970, and after reading it I followed his advice which as I recall pretty much featured what the PRPFX fund invests in. I had swiss francs purchased from the bank's international department which I kept in a safe deposit box; a bag of junk silver coins and some krugerrands in our basement, and some shares of Blyvooritzicht, a South African gold mine. I don't remember the book advocating long term treasury bonds, but it's been forty years since I read it, so there you go.

It felt pretty subversive at the time, but the investments held up well during the '70s and the precious metals really took off in 79. I'm not claiming it was his best book, but it resonates for me.

John

[craigr]

It felt pretty subversive at the time, but the investments held up well during the '70s and the precious metals really took off in 79. I'm not claiming it was his best book, but it resonates for me.

The first part of that book has a great explanation of what money is. I'm sure he wasn't recommending LT bonds in it! It was probably the first book on Austrian Economics to become a NYT best seller. That part of the book is still very relevant even today.

[pplooker]

I seem to remember that Browne would later recant his own book however and admit that he just got lucky in his predictions.

[craigr]

I seem to remember that Browne would later recant his own book however and admit that he just got lucky in his predictions.

Yes he said as much about his guess about the dollar and gold - A rarity in the investing world. Ego is a big player in the field and I actually appreciate it more when someone can look back at what they've said in the past and just admit their call was luck even if it may damage the magical aura they had for stating their original position.

But the book actually has some good economic analysis that was dead on. So he does admit it was luck, but the reasons why he reached the conclusion were sound and still apply today.

[l82start]

"Fail-Safe investing"  just showed up in the mail today i am looking forward to reading it,
i want to finish the book "why smart people make big money mistakes " first, i am half way through it now i would definitely recommend it based on what i have read so far..

[craigr]

"Fail-Safe investing"  just showed up in the mail today i am looking forward to reading it,
i want to finish the book "why smart people make big money mistakes " first, i am half way through it now i would definitely recommend it based on what i have read so far..

Harry Browne's books and books on behavioral finance (like the one you mention above) are excellent combinations to read and understand. Behavioral finance is important to understand if for no other reason to put your own emotions in check before making any investment decision. Understanding how your mind can work against you is really important when the markets aren't going your way (or even if they are and you start to get overconfident).