What if you could build an indescribable portfolio? One which makes money in any economic environment, including recessions. Fail-Safe Investing, by Harry Browne, shows you exactly how to do this.

Today’s article explains how this system works, and provides a full review of Browne’s classic investment guide.

Here we go.

Understand The Four Economic Conditions

The world economy cycles through four different situations. And each of these affects your assets in its own unique way. Fail-Safe Investing describes each as follows:

Prosperity is the first environment.

This is where interest rates fall, causing stocks and long-term bonds to rise in value.

Inflation is the second situation. When this happens, the US dollar weakens. Investors begin dumping their cash holdings, putting their money into gold instead.

Gold prices surge as inflation grows.

Deflation is the third economic environment. The US dollar gains value and interest rates fall. When this happens, long-term bond values rise dramatically.

Tight money is the final scenario. In this event interest rates rise, something which hurts most traditional investments. However, cash holdings often offset these losses, or provide an opportunity to buy depressed assets at a wonderful price.

Since you’ll never know exactly which situation will happen next, Fail-Safe Investing recommends building a fund which covers each of these situations. Doing so not only protects your money, but also gives you a chance to grow your wealth no matter the current economic environment.

Create A Permanent Portfolio

The Permanent Portfolio is a simple yet effective system for protecting (and growing) your money.

Here’s how it works:

• Invest 25% of your money in a broad market stock fund.
• Put 25% of your money into long-term bonds.
• Use 25% of your money to buy gold.
• Keep 25% of your money in cash or cash-like assets.

By doing this you’re protected against any economic environment. Likewise, one quarter of your portfolio will always prosper, no matter what.

This system is incredibly simple, but it works.

By dividing your money up equally across the four asset classes, you’re well diversified and ready to capitalize off any market condition.

It’s the perfect strategy for defensive investors concerned with protecting their hard earned wealth.

A Few Modern Tweaks

While Fail-Safe Investing is a great book, it was written almost 30 years ago. As such, some of the stock suggestions have advanced since then. Mainly, how you buy total market funds.

While Harry Browne suggests buying a total market mutual fund, an asset like the Vanguard S&P 500 (VOO) is a much better modern-day choice.

Additionally, I’d suggest opening a CIT high-yield savings account instead of opening a money market fund. CIT Bank has higher interest rates, giving you a better return on investment.

Beyond these small changes, Fail-Safe Investing is still a terrific book and it’s advice remains relevant.

Final Thoughts

Fail-Safe Investing is a terrific read and I highly recommend it to anyone who’s serious about building wealth.

The book is written in a plain, straightforward style, something which makes it incredibly easy to understand. Additionally, Harry Browne does a wonderful job breaking down the various economic conditions and explaining which assets thrive during them.

Read this book if you’re looking for a quick read packed with actionable advice.

Click Here To Order Fail-Safe Investing

P.S. This book is 150+ pages. As such, I suggest reading it in full to get a complete understanding of the Permanent Portfolio and how it works.