Low-Risk Plan: ‘Shot Through the Heart’

Those of you who have been following my opinions for a while know how much I favour a Browne Plan for those who don’t have the experience, skill or time to manage family wealth actively.

Invented by the American strategist Harry Browne, such a plan promises steady long-term capital growth with minimal downside risk, requires no management beyond a simple annual portfolio view, and frees you from having to make any decisions about what’s happening in the markets. The concept is simple – ignoring fixed assets such as your home, you allocate a fixed proportion of your capital to each of several very different asset classes, but rebalancing periodically, moving capital from those that have gained in value into those that have fallen. You sell some expensive assets to buy more of those that have become cheaper.

Browne recommended investing 25 per cent of your portfolio in each of just four assets -- shares, bonds, gold and cash.

Anyone who followed such a plan in the US since 1970 would have achieved an average return of 8.35 per cent a year. In only five of those 45 years did the portfolio lose money, and always bouncing back strongly in the following year.

The logic behind such a plan is… 

David Fuller's view

Harry Browne’s investment plan has appealed to an increasing number of professional investors in recent decades, whether they admit it or not.  There is a buy-low-sell-high logic behind Browne’s investment plan, although ‘the devil is often in the detail with any investment strategy. 

Martin Spring is a big fan, as you can read in this issue.  Tim Price who is quoted in the opening headline, is no longer a fan, having scrapped two of the four investment strategies.  You can see his latest assessment of Browne’s investment plan in detail, as his presentation from The Markets Now on Monday was posted in Comment of the Day yesterday.   

Here is Martin Spring’s On Target.