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Unshakeable: Your Financial Freedom Playbook (Tony Robbins Financial Freedom Series)

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Unshakeable: Your Financial Freedom Playbook (Tony Robbins Financial Freedom Series)

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Waste no more time arguing about what a good man should be. Be one. —MARCUS AURELIUS Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. —AYN RAND

So never forget about these two ferocious foes of stock market success: fear and fees.

The gross return of the market minus the cost of investing equals the net return to investors.

By buying low-cost, broad-market index funds (and holding them “forever”), you can guarantee that you will receive your fair share of whatever returns the financial markets provide over the long term.

When you’re truly unshakeable, you have unwavering confidence even amidst the storm.

When people are forced to make financial decisions, they often act out of fear—and any decision made in a state of fear is likely to be wrong.

One study showed that 96% of mutual funds failed to beat the market over a 15-year period.I The result? You overpay for underperformance.

“When a person with experience meets a person with money, the person with experience ends up with the money; and the person with money ends up with an experience.”

What I do know for sure is that compounding is a force that can catapult you to a life of total financial freedom.

But maybe it’s time to give yourself a raise: increase what you save from 10% of your income to 15%, or from 15% to 20%.

The single best place to compound money over many years is in the stock market.

When any market falls by at least 10% from its peak, it’s called a correction—a peculiarly bland and neutral term for an experience that most people relish about as much as dental surgery! When a market falls by at least 20% from its peak, it’s called a bear market.

the biggest danger isn’t a correction or a bear market, it’s being out of the market.

Freedom Fact 1: On Average, Corrections Have Occurred About Once a Year Since 1900

Historically, the average correction has lasted only 54 days—less than two months! In other words, most corrections are over almost before you know it.

Freedom Fact 2: Less Than 20% of All Corrections Turn Into a Bear Market

It turns out that fewer than one in five corrections escalate to the point where they become a bear market. To put it another way, 80% of corrections don’t turn into bear markets.

Freedom Fact 3: Nobody Can Predict Consistently Whether the Market Will Rise or Fall

physicist Niels Bohr: “Prediction is very difficult, especially about the future.”

Freedom Fact 4: The Stock Market Rises over Time Despite Many Short-Term Setbacks

The great thing is that you benefit from these upgrades in the quality of the companies in the index. How? Well, as a shareholder of an index fund, you own part of the future cash flows of the companies in that index.

Freedom Fact 5: Historically, Bear Markets Have Happened Every Three to Five Years

“The best opportunities come in times of maximum pessimism.”

Freedom Fact 6: Bear Markets Become Bull Markets, and Pessimism Becomes Optimism

Why? Because the stock market isn’t looking at today. The market always looks to tomorrow. What matters most isn’t where the economy is right now but where it’s headed. And when everything seems terrible, the pendulum eventually swings in the other direction. In fact, every single bear market in US history has been followed by a bull market, without exception.

The stock market is a device for transferring money from the impatient to the patient. —WARREN BUFFETT

Freedom Fact 7: The Greatest Danger Is Being out of the Market

You miss one hundred percent of the shots you don’t take. —HOCKEY HALL OF FAMER WAYNE GRETZKY

“Don’t do something—just stand there!”

Hell is truth seen too late. —THOMAS HOBBES, seventeenth-century British philosopher

The name of the game? Moving the money from the client’s pocket to your pocket. —MATTHEW MCCONAUGHEY TO LEONARDO DICAPRIO IN THE WOLF OF WALL STREET

If you’re looking to achieve financial security, the obvious route is to invest in mutual funds.

Mutual funds offer a simple and logical alternative. For a start, they provide you with the benefit of broad diversification, which helps to reduce your overall risk.

What service is it that funds are supposed to provide? Well, when you buy an actively managed fund, you’re essentially paying for the manager to generate market-beating returns. Otherwise wouldn’t you be better off just sticking your money in a low-cost index fund, which attempts to replicate the returns of the market?

Like poker, investing is a zero-sum game: there are only so many chips on the table. When two people trade a stock, one must win and one must lose. If the stock goes up after you buy it, you win. But you’ve got to win by a big enough margin to cover those transaction costs. Wait, it gets worse! If your stock goes up, you’ll also have to pay taxes on your profits when you sell the stock. For investors in an actively managed fund, this combination of hefty transaction costs and taxes is a silent killer, quietly eating away at the fund’s returns!

When you own an index fund, you’re also protected against all the downright dumb, mildly misguided, or merely unlucky decisions that active fund managers are liable to make.

What about index funds? Instead of sitting on cash, they remain almost fully invested at all times.

“When you look at the results on an after-fee, after-tax basis, over reasonably long periods of time, there’s almost no chance that you end up beating the index fund.”

You’ve got to look very carefully at the small print. I don’t like things that require small print, by the way. —JACK BOGLE

It is difficult to get a man to understand something when his salary depends on his not understanding it. —UPTON SINCLAIR

By contrast, RIAs don’t accept sales commissions. Instead, they typically charge a flat fee for financial advice, or a percentage of their clients’ assets under management. It’s a cleaner model that removes awkward conflicts of interest.

Competence is such a rare bird in these woods that I appreciate it whenever I see it. —FRANK UNDERWOOD, House of Cards

Let’s make it simple. Really simple. —STEVE JOBS, cofounder of Apple

What I’ve found over almost four decades of studying success is that the most successful people in any field aren’t just lucky. They have a different set of beliefs. They have a different strategy. They do things differently than everyone else.

The key is to recognize these consistently successful patterns and to model them, using them to guide the decisions you make in your own life. These patterns provide the playbook for your success.

But the best investors are obsessed with avoiding losses. Why? Because they understand a simple but profound fact: the more money you lose, the harder it is to get back to where you started.

“Rule number one: never lose money. Rule number two: never forget rule number one.”

“The most important thing for me is that defense is 10 times more important than offense… . You have to be very focused on protecting the downside at all times.”

That, my friend, is an insight that you and I should never forget: we have to design an asset allocation that ensures we’ll “still be okay,” even when we’re wrong. Asset allocation is simply a matter of establishing the right mix of different types of investments, diversifying among them in such a way that you reduce your risks and maximize your rewards.

It simply means that we should invest in ways that help to protect us from nasty surprises.

Instead, they hunt for investment opportunities that offer what they call asymmetric risk/reward: a fancy way of saying that the rewards should vastly outweigh the risks. In other words, these winning investors always seek to risk as little as possible to make as much as possible. That’s the investor’s equivalent of nirvana.

Yet all three share the same obsession: how to reduce risks while maximizing returns.

One way to achieve asymmetric risk/reward is to invest in undervalued assets during times of mass pessimism and gloom. As you’ll learn in the next chapter, corrections

One of the most serious problems in the mutual fund industry, which is full of serious problems, is that almost all mutual fund managers behave as if taxes don’t matter. But taxes matter. Taxes matter a lot.”

1. Diversify Across Different Asset Classes. Avoid putting all your money in real estate, stocks, bonds, or any single investment class. 2. Diversify Within Asset Classes. Don’t put all your money in a favorite stock such as Apple, or a single MLP, or one piece of waterfront real estate that could be washed away in a storm. 3. Diversify Across Markets, Countries, and Currencies Around the World. We live in a global economy, so don’t make the mistake of investing solely in your own country. 4. Diversify Across Time. You’re never going to know the right time to buy anything. But if you keep adding to your investments systematically over months and years (in other words, dollar-cost averaging), you’ll reduce your risk and increase your returns over time.

One reason why diversification is so critical is that it protects us from a natural human tendency to stick with whatever we feel we know. Once a person is comfortable with the idea that a particular approach works—or that he or she understands it well—it’s tempting to become a one-trick pony! As a result, many people end up investing too heavily in one specific area.

For example, David told me how individual investors can diversify by owning low-cost index funds that invest in six “really important” asset classes: US stocks, international stocks, emerging-market stocks, real estate investment trusts (REITs), long-term US Treasuries, and Treasury inflation-protected securities (TIPS). He even shared the precise percentages that he would recommend allocating to each.

Ray revealed one of the great secrets of his approach: “The holy grail of investing is to have 15 or more good—they don’t have to be great—uncorrelated bets.”

In other words, everything comes down to owning an array of attractive assets that don’t move in tandem. That’s how you ensure survival and success. In his case, this includes investments in stocks, bonds, gold, commodities, real estate, and other alternatives. Ray emphasized that, by owning 15 uncorrelated investments, you can reduce your overall risk “by about 80%,” and “you’ll increase the return-to-risk ratio by a factor of five. So, your return is five times greater by reducing that risk.”

I learned that courage was not the absence of fear, but the triumph over it. The brave man is not he who does not feel afraid, but he who conquers that fear. —NELSON MANDELA

Because it’s important to understand that there’s never absolute certainty in life. If you want to be certain that you’ll never lose money in the financial markets, you can keep your savings in cash—but then you’ll never stand a chance of achieving financial freedom. As Warren Buffett says, “We pay a high price for certainty.”

if you live in fear, you’ve lost the game before it even begins. How can you achieve anything if you’re too scared to take a risk? As Shakespeare wrote four centuries ago, “Cowards die many times before their deaths; the valiant never taste of death but once.”

You can never know what the stock market will do. But that uncertainty isn’t an excuse for inaction.

A simple rule dictates my buying: be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread. —WARREN BUFFETT IN OCTOBER 2008, explaining why he was buying stocks as the market crashed

I suggest you commit that line to memory: “Over the long term, the stock market news will be good.” If you truly understand this, it will help you to be patient, unshakeable, and ultimately rich.

The point is, you want an advisor with the skills to tailor your portfolio to suit your specific needs. A one-size-fits-all approach to asset allocation can be disastrous.

The moral: never bet your future on one country or one asset class.

The investor’s chief problem—and even his worst enemy—is likely to be himself. —BENJAMIN GRAHAM,

Neuroscientists have found that the parts of the brain that process financial losses are the same parts that respond to mortal threats.

Our beliefs are what deliver direct commands to our nervous system. Beliefs are nothing but feelings of absolute certainty governing our behavior. Handled effectively, beliefs can be the most powerful force for creating good, but our beliefs can also limit our choices and hamstring our actions severely.

“Is it a three-to-one? Is it a five-to-one? Can I get disproportionate rewards for the least amount of risk? What’s the potential upside and what’s the risk on the downside?”

“Where are the breaking points for other investors? When will the price get so low or high that they will get out?”

“Is this truly the hard trade? Does it really have asymmetric risk/reward? Is it a five-to-one or a three-to-one? What’s the entry point? Where are your stops?”

80% of success is psychology and 20% is mechanics.

As Ray Dalio told me, “If you know your limitations, you can adapt and succeed. If you don’t know them, you’re going to get hurt.”

Mistake 1: Seeking Confirmation of Your Beliefs Why the Best Investors Welcome Opinions That Contradict Their Own

The truth is, it’s never wise to fall in love with an investment. As the saying goes, love is blind! Don’t get swept off your financial feet.

The key is to actively seek out qualified opinions that differ from your own. Of course, you don’t want just anyone with a different opinion, but rather someone who has the skill, track record, and intelligence to give another educated perspective. All opinions are not created equal.

“It’s so difficult to be right in the markets,” he told me. “So what I’ve found very effective is to find people who disagree with me and then find out what their reasoning is… . The power of thoughtful disagreement is a great thing.” As Ray explains, the key question is: “What don’t I know?”

I explain what I believe, and then I ask: “Where could I be wrong? What am I not seeing? What’s the downside? What am I failing to anticipate? And who else should I speak with to deepen my knowledge?”

Great things are not accomplished by those who yield to trends and fads and popular opinion. —JACK KEROUAC

“The biggest mistake that the small investor makes is to buy when the market is going up on the assumption that the market will go up further—and sell when the market is going down on the assumption that it’s going to go down further.”

“Individuals tend to buy funds that have good performance. And they chase returns. And then, when funds perform poorly, they sell. And so they end up buying high and selling low. And that’s a bad way to make money.”

invest in a portfolio of low-cost index funds, and then hold them through thick and thin. This will give you the market’s return, without the triple burden that active investors must carry: exorbitant management fees, high transaction costs, and hefty tax bills.

The best way to win the game of investing is to achieve sustainable long-term returns. But it’s enormously tempting to swing for home runs, especially when you think other people are getting rich faster than you!

Remember, as Warren Buffett says, “The stock market is a device for transferring money from the impatient to the patient.”

mental phenomenon is “loss aversion.” The trouble is, losing money causes investors so much pain that they tend to act irrationally just to avoid this possibility! For example, when the market is plunging, many people sell their battered investments and go to cash at exactly the wrong moment—instead of snapping up bargains at once-in-a-lifetime prices.

By failing to prepare, you are preparing to fail. —BENJAMIN FRANKLIN

For example, these simple rules and procedures will make it easier for you to invest for the long term; to trade less; to lower your investment fees and transaction costs; to be more open to views that differ from your own; to reduce risk by diversifying globally; and to control the fears that could otherwise derail you during bear markets. Will you be perfect? No. But will you do better? You bet! And the difference this makes over a lifetime can amount to many millions of dollars!

Every day, think as you wake up, “Today I am fortunate to be alive, I have a precious human life, I am not going to waste it.” —THE DALAI LAMA

For example, if you harness the power of compounding, stay in the market for the long term, diversify intelligently, and keep your expenses and taxes as low as possible, your odds of attaining financial freedom are extremely high.

Because if you master the external world without mastering the internal world, how can you be truly and sustainably happy? That’s why my greatest obsession today is the art of fulfillment.

The First Principle: You Must Keep Growing. Everything in life either grows or dies. That goes for relationships, businesses, or anything else. If you don’t keep growing, you’ll become frustrated and miserable, no matter how many millions you have in the bank. In fact, I can tell you the secret to happiness in one word: progress.

The Second Principle: You Have to Give. If you don’t give, there’s only so much you can feel inside, and you’ll never feel fully alive. As Winston Churchill said, “You make a living by what you get. You make a life by what you give.”

We’re driven by our desire to contribute. If we stop feeling that deep sense of contribution, we can never feel truly fulfilled.

In fact, I truly believe that success without fulfillment is the ultimate failure.

A man is but the product of his thoughts. What he thinks, he becomes. —MAHATMA GANDHI

The trouble is, the human brain isn’t designed to make us happy and fulfilled. It’s designed to make us survive. This two-million-year-old organ is always looking for what’s wrong, for whatever can hurt us, so that we can either fight it or take flight from it. If you and I leave this ancient survival software to run the show, what chance do we have of enjoying life?

This was the path I chose. I decided that I would no longer live in a suffering state. I decided that I would do everything in my power to live in a beautiful state for the rest of my life and to become an example of what’s humanly possible!

A Beautiful State. When you feel love, joy, gratitude, awe, playfulness, ease, creativity, drive, caring, growth, curiosity, or appreciation, you’re in a beautiful state. In this state, you know exactly what to do, and you do the right thing. In this state, your spirit and your heart are alive, and the best of you comes out. Nothing feels like a problem, and everything flows. You feel no fear or frustration. You’re in harmony with your true essence.

A Suffering State. When you’re feeling stressed out, worried, frustrated, angry, depressed, irritable, overwhelmed, resentful, or fearful, you’re in a suffering state. We’ve all experienced these and countless other “negative” emotions, even if we’re not always keen to admit it! As I mentioned earlier, most achievers much prefer to think they’re stressed than fearful. But “stress” is just the achiever word for fear! If I follow the trail of your stress, it’ll take me to your deepest fear.

But in reality, the mental and emotional state in which you live is ultimately the result of where you choose to focus your thoughts.

Notice, too, that most, if not all, of our suffering is caused by focusing or obsessing about ourselves and what we might lose, have less of, or never have.

Either you master your mind or it masters you. The secret of living an extraordinary life is to take control of the mind, since this alone will determine whether you live in a suffering state or a beautiful state.

Our lives are shaped not by our conditions, but by our decisions.

So what’s the biggest decision you can make in your life right now?

What I’ve come to realize is that the single most important decision in life is this: Are you committed to being happy, no matter what happens to you?

To put this another way, will you commit to enjoying life not only when everything goes your way but also when everything goes against you, when injustice happens, when someone screws you over, when you lose something or someone you love, or when nobody seems to understand or appreciate you? Unless we make this definitive decision to stop suffering and live in a beautiful state, our survival minds will create suffering whenever our desires, expectations, or preferences are not met. What a waste of so much of our lives!

All you have to do to change your life forever is commit in your heart and soul to find something to appreciate in every moment. Then you will experience the real wealth of ongoing happiness!

“What’s wrong is always available … but so is what’s right!”

It doesn’t matter what you appreciate. What matters is that by shifting your focus to appreciation, you slow down your survival mechanism. Love, joy, and giving, will all trigger the same positive transformation. This shift in your focus creates space for your spirit to enter the game, so you don’t get stuck inside your head. If you keep doing this with real consistency, you actually rewire your nervous system, training your mind to find the good in every situation, so your experience of life is one of thankfulness and joy.

To overcome fear, the best thing is to be overwhelmingly grateful. —SIR JOHN TEMPLETON

Yesterday is but a dream, And tomorrow is only a vision. But today well lived makes every yesterday a dream of happiness, And every tomorrow a vision of hope. —KĀLIDĀSA, Sanskrit dramatist and poet, ca. fifth century CE

if you make the decision to master your own mind, you’ll be mentally equipped to handle whatever challenges come your way.

This is the ultimate game changer. Find something to serve, a cause you can be passionate about that’s greater than yourself, and this will make you wealthy. Nothing enriches us as much as helping others.

The fear of death follows from the fear of life. A man who lives fully is prepared to die at any time. —MARK TWAIN

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