In this episode, Preston and Stig review the top selling investing book on the market at the end of the first quarter 2017. The Book is titled, Unshakable, by Tony Robbins. Tony is a world-renown self-help expert that has written numerous #1 selling books and his personal net worth is $480 million. Like Tony’s book from 2014, he does a great job of explaining the hidden fees on Wall Street. His recommended approach is extremely simple: buy low-cost ETFs every month and don’t try to beat the market. Instead of most financial books trying to teach you how to beat the market, Robbins’ book is instead trying to teach people how to capture the market’s average without losing much to the Wall Street fees. Through education and statistics found in the book, Robbin’s educates the reader on how to stay the course and what the final outcome might look like.
In this episode, you’ll learn:
• What you can and can’t control in the financial markets
• The truth about diversification
• Why private equity funds are not worth their high fees
• Why you should write down your personal rules before you invest
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Books and Resources Mentioned in this Podcast
Toby Robbins’ book, Unshakable – Read reviews of this book
Preston and Stig’s podcast episode on Tony Robbins’ book “Money Master the Game”
Preston and Stig’s interview with Meb Faber about investing internationally
Our Summary of Unshakeable
If you would like to download the below summary of Unshakeable in .pdf format, follow the link.
Chapter 1: Unshakeable
The stock market has seen several ups and downs over the years, but after a disaster occurred in 2007, many people are scared to invest money even today. It’s understandable because we live in very confusing, uncertain times; however, there are many people who have learned the secret of making money in bad as well as good times. By focusing on things you can control and ignore factors you can’t control, you go one step closer to becoming unshakeable. Nobody can predict the future or the market, but you can sharpen your focus and concentrate on things you can change.
For example, if you are too confused about investments, don’t run off to your nearest advisor who might charge more fees than you actually make, but instead, go for index funds that don’t necessarily require active managers. Unless you’re an expert like Ray Dalio or Warren Buffett, you are better off with index funds that charge minuscule fees. Also, you have to learn to avoid sharks in the finance industry when they dispense advice that might be harmful to you. If one followed a specific plan and stuck only to funds with lesser fees and higher returns, all would be perfect with the world, but we aren’t living in a perfect world, and that’s where this book comes in. Not only will it teach you to draft a specific plan, but it will also guide you to understand the game of achieving financial freedom without too much stress.
Chapter 2: Winter is coming… but when?
Our older generations were quite vulnerable since they were powerless to go against nature. But, they survived because they noticed a pattern in different seasons and planted the right crops at the right time. Similarly, investors can utilize their skill of pattern recognition to identify the patterns emerging in the markets.
The first pattern that’s very evident is the power of compounding. Most people don’t realize that they won’t find riches suddenly, but instead, you need to work towards it. It’s right there in front of us yet many people struggle when it to comes to investing their money. Even rich celebrities end up bankrupt because they are clueless about investments. Therefore, if you haven’t begun investing already, jump in now because you’re going to learn way more by compounding your money than you ever imagined. In other words, you’re just building your own fund to achieve financial freedom.
Many people have no idea as to where to invest their money. Should the money go into mutual funds? Bonds? Stocks? You get the idea. There are so many ways to invest, yet the question hangs in the air. Of course, you could sit down with a financial advisor, but they charge so much for little information that it seems like you’re making nothing. Today, it definitely appears like the risks are more than the returns for our hard earned money. It’s scary, yes, but instead of panicking and selling everything, you need to just sit back and figure out a pattern in the market. Like other seasons, the financial winter will also arrive, and if you look closely, it’s apparent that it occurs almost every year! It might not be possible to beat the market, but if you want to understand this game and play it, it’s critically important that you get rid of all your inhibitions and fears to find the right time to invest.
Chapter 3: Hidden fees and half-truths
Many people consult brokers or financial advisors to achieve financial security, but what they don’t realize is that the very advisor who’s supposed to help them can be the biggest hindrance. At the end of the day, it’s his job to make money through you, so even if he doesn’t raise the capital and puts up a mediocre performance, you still have to pay him. If you can develop some confidence and take things under control, you’re already on your way to your freedom!
So, where do beginners start? Mutual funds seem to be lucrative and there are so many out there that it can get quite confusing. It’s also the route that seems the easiest and most obvious. After all, the brokers are all educated and you think they know what they are doing. However, think again. Just like you, he’s a human too and he isn’t any better than you at predicting anything. Also, never mind the fees but the taxations can burn such a deep hole in your pocket that it can be difficult to breathe! For instance, if you buy some stock today and your manager sells it the next day while it’s peaking, you’re still going to have to pay tax even though you didn’t profit from it! And, don’t forget that you have to pay commissions whenever the brokers trade your stock. Taxations, commissions, and fees can take away everything from your profit and the problem is that most people don’t even understand how it works.
Therefore, instead of trusting the wolves, stick to the antidote and try index funds because it not only eliminates trading activity but it also works almost on auto-pilot mode if you don’t have the time to actively pursue your investments. Basically, index funds are better because you’re already saving money by reducing the fees and other hidden costs.
Chapter 4: Rescuing our retirement plans
The 401(k) plans introduced in 1984 seemed like a great boon for Americans to live the elusive American dream. Almost 90 million people have invested their hard earned money hoping to have a comfortable retirement. However, as innovation increased, the greed of many financial firms also increased. In fact, companies providing 401(k) plans to their employees were not even required to disclose how much they were charging! It’s like buying something without a price tag, yet people trust their employers who in turn trust the broker who sold them the plan.
At the end of the day, most Americans don’t know how much they are paying, and even though this might seem absolutely unbelievable, it’s simply the truth. When Robert Hiltonsmith dug up the facts, he realized that people were paying about 17% as hidden fees and costs for their 401(k) plans! To add insult to injury, these fees are NOT included in the fees you’re already paying! Also, since most funds are on your 401(k) list because the company paid your provider, they are managed actively and very expensive. No, they don’t even perform well, but again, you’re the one taking the brunt of it all. Many small companies even force their employees to invest in funds with higher fees. Even if you open your own account, you will be charged nevertheless, and that’s how rotten the system is. Therefore, your best bet is to take a good look at the fees you’re paying and entrust your savings to someone who will disclose all details with you. Companies such as America’s best 401(k) are known to charge less, and if you do your homework, you’ll be able to save a lot of your money that’s otherwise wasted in fees and other costs.
Chapter 5: Who can you really trust?
Surveys show that almost everyone with money has a financial advisor, but surveys also show that most people don’t trust them! Why? Well, it becomes obvious at some point that the advisor doesn’t really care about his clients. Brokers are known by different titles such as wealth advisors, financial advisors, wealth managers and a lot more to increase their trust factor, but no matter what they are called, they all work to sell their products for a good fee.
They are people with a mission – maximizing their profits – and this doesn’t mean that all of them are dishonest, but they are just doing their job. Imagine a poker game where the house wins no matter what. Similarly, even if your broker is honest, he’s just doing his job because he’s been trained to do so. The main problem is that they aren’t legally required to give you more profits! The truth is that the industry is structured in such a way that brokers can be useless to you even if they want to help. Therefore, your best bet lies in finding an independent advisor who’s legally a fiduciary.
Chapter 6: The core four
There are many ways to make money and billionaires follow various different methods. After talking to fifty rich and successful people, Tony recommends four core principles that can be followed to gain maximum advantage.
- Do not lose – Instead of thinking about how to make money, focus on avoiding losses in the first place. Experienced millionaires do their best to prevent losses because they are aware that it’s almost impossible to start back from scratch if they lose money.
- Asymmetric risks and rewards – Most people assume that the more risks they take, the higher the rewards; however, this is just a myth. Big investors only look for something where the rewards outweigh all the risks by a huge margin.
- Tax efficiency – Don’t ignore the impact of taxes on your income as they can eat up all your profits. Pay close attention to your holding period and reap rewards by reducing taxes.
- Diversification – It’s extremely important to allocate your assets in a diversified manner rather than dumping all your eggs in one basket.
Chapter 7: Slay the bear
Today, many people are so scared of investing their money that they simply sit on their cash! Yes, it’s definitely an uncertain world, but how far will certainly help us? Warren Buffett once said that we pay a heavy price for anything certain and that’s absolutely true. Surveys suggest that a whopping 60 percent of Americans distrust the financial system, but remember that these people have no chance of achieving financial freedom. Sure, you’re worried about your stocks and assets and the uncertainties that plague the financial market, but what good will it do if you do not invest at all?
If you surrender and let fear take over, then you’ve simply lost the game even before it has begun! No, this doesn’t mean that you become reckless and take risks, but you can educate yourself and understand what you’re getting into. Don’t let your fear become the ultimate cause for your inaction! Yes, the market is likely to crash again in the near future, or maybe it won’t, but no matter what happens, remember that it’s possible to make money even in bear markets.
Chapter 8: Silencing the enemy within
In order to succeed, you need to make sure that you go through a checklist so that you don’t miss out on anything. Just like the airlines’ industry follows a certain procedure before every journey you need to treat your financial journey the same way. Avoid making mistakes such as:
- Seeking confirmation from others to ensure that you are right in what you’re doing. Investors usually get stuck to their beliefs once they make up their minds and don’t realize that it could be extremely dangerous for their wellbeing.
- Don’t form quick opinions based on recent events – also known as recency bias – where you convince yourself that the current trends will continue forever.
- Don’t be overconfident and overestimate your abilities since that’s the quickest way to lose your money.
Chapter 9: Real Wealth
Many people achieve a lot of things and make loads of money, but the irony is that they still end up being unsatisfied. The reality is that we aren’t chasing money but just the feeling of being finally free from the burden that surrounds our lives. Money can’t buy everything you want since you need to be emotionally wealthy to be truly happy. So, why wait to be happy?
Think about what makes you really happy. Most people gain happiness when they achieve something they never imagined in their wildest dreams. The path to accomplishment is not as treacherous as you think it is if you truly have the desire etched in your heart. Again, it comes with a checklist that involves three steps.
The first step is that you hone your focus. No matter what you do in life, it’s important that you’re focused because your energy flows along with it. Secondly, you need to stop procrastinating and start doing! All your focus and experience is a waste if you don’t take action. Finally, the third and final step is that you be grateful and appreciate everything you have. At one or the other point of time, we all accept that there are many factors beyond our control, and that’s where grace comes into play.