This was an unbelievable 500 page book on finance that only a master and genius such as Tony Robbins could have consolidated. I mean honestly how do you teach Financial Freedom in a single 500 page book? I’ve spend nearly 20 years in Finance trying to figure it out (and still have not even come close) and Tony manages to do it in a single book. Amazing read that I highly recommend. It did not do justice to attempt to paraphrase this masterpiece so I have merely cut and pasted the key bullet points here (sorry no pg. numbers).
Ralph Waldo Emerson’s essay on self-reliance, and the lines “There is a time in every man’s education when he arrives at the conviction that envy is ignorance; that imitation is suicide; that he must take himself for better, for worse, as his portion.”
James Allen, As a Man Thinketh, echoing the biblical proverb “As a man thinketh, so his heart will be.”
Information without execution is poverty. Remember: we’re drowning in information, but we’re starving for wisdom.
Remember Warren Buffett’s top two rules of investing? Rule 1: don’t lose money! Rule 2: see rule 1.
1. Law of Compounding Interest
2. That’s the power of learning to invest when everyone else is afraid.
3. 46% of financial planners have no retirement plan! That’s right. The cobbler’s kid has no shoes!
look for opportunities that provide asymmetric risk/reward. This is a fancy way of saying that the reward is drastically disproportionate to the risk. Risk a little, make a lot.
Market-linked CDs are similar to structured notes, but they include insurance from the
Federal Deposit Insurance Corporation (FDIC).
Fixed Indexed Annuities.
“Success leaves clues.”
Money is nothing more than a reflection of your creativity, your capacity to focus, and your
ability to add value and receive back. If you can find a way to create value—that is, add value for a massive number of people—you will have an opportunity to have a massive amount of economic abundance in your life.
But in a nutshell, you can immediately and radically change how you feel (and not just hope you feel good) by learning that by changing your body first, you can change your mind.
How much money do you think you need to be Financially Free? Come up with a number. 10mm? 50mm? 100mm? The truth is, you’ll never make it happen until it sinks deep into your subconscious—the part of your mind so powerful that it makes your heart beat 100,000 times a day without your ever having to think about it. “I’m going to be financially free by the time I’m forty!” But if you resolve within yourself the sense of absolute certainty that “I’m going to do this!” and then you start to build a plan—something extraordinary happens. You begin to develop the certainty you can actually achieve it. Why? Because psychologically they don’t have Certainty that they can do it. And Certainty is the first human need that influences our behavior or actions.
That’s the difference between a millionaire and a billionaire: 12 days or 32 years! Do you see what I mean by saying they live in “different universes”? You can never say “millionaires” and “billionaires” in the same breath and be talking about the same thing.
And always remember the ultimate truth: life is not about money, it’s about emotion. The real goal is to have the lifestyle you want, not the things.
Money itself is not the goal. Our worth is not measured by the weight of our bank accounts but, rather, by the weight of our souls.
The next time you write yourmonthly mortgage check, write a second check for the principal-only portion of next month’s payment.
“What’s the secret to economic success? The key,” he said, “is to understand how to become more valuable in the marketplace.
“How do you truly become more valuable? Learn to work harder on yourself than you do on your job. In the Bible, there is a simple tenet that says there’s nothing wrong with wanting to be great.9 If you wish to become great, learn to become the servant of many.
Anybody can become wealthy; asset allocation is how you stay wealthy.
1. Security selection—stock picking;
2. Market timing—short-term bets on the direction of the market; and
3. Asset allocation—your long-term strategy for diversified investing.
J.P. Morgan has a seven-year structured note with 100% downside protection, meaning you’ll never lose your original investment, plus it gives you 90% of the upside gain of the S&P 500.
“The best way to diversify is to own the index, because you don’t have to pay all these fees,”
David Swensen told me.
Sometimes after you’ve made a few successful investments, you start thinking, “Hey, I’m good at this; I can do anything!” It’s just human nature to think you can beat the system. It’s what psychologists call motivational bias.
What do you focus on most often? What’s your life’s obsession? Finding love? Making a difference? Learning? Earning? Pleasing everyone? Avoiding pain? Changing the world? Are you aware of what you focus on most; your primary question in life? Whatever it is, it will shape, mold, and direct your life.
If you couldn’t leave any of your financial wealth to your children but only a portfolio, a specific asset allocation with a list of principles to guide them, what would it be?”
Stocks are three times more risky (aka volatile) than bonds. “Tony, by having a fifty-fifty portfolio, you really have more like ninety-five percent of your risk in stocks!”
every investment has an ideal environment in which it flourishes. In other words, there’s a season for everything.
Bonds are a different animal. Take US Treasury bonds, for example. If we have a season of
deflation, which is accompanied by falling interest rates, bond prices will rise.
Ray then revealed the most simple and important distinction of all. There are only four things
that move the price of assets:
1. inflation,
2. deflation,
3. rising economic growth, and
4. declining economic growth.
In other words, the price of Apple’s stock today incorporates the expectations of investors who believe the company will continue to grow at a certain pace. This is why you may have heard that a stock will fall when a company says that its future growth (earnings) will be lower than it had initially expected.
This is why he calls this approach All Weather: because there are four possible seasons in the
financial world, and nobody really knows which season will come next.
First, he said, we need 30% in stocks (for instance, the S&P 500 or other indexes for further
diversification in this basket).
Fifteen percent in intermediate term [seven- to ten-year Treasuries] and forty percent in long-term bonds [20- to 25-year Treasuries].”
He rounded out the portfolio with 7.5% in gold and 7.5% in commodities.
The year 2008 was a time when there were lots of people with assets (real estate, in particular) that were plummeting in price, and they couldn’t sell. They were asset “rich” and cash “poor.” This equation often leads to bankruptcy. Always remember that income is the outcome.
1. Fixed annuity: This is where you get a fixed, guaranteed rate of return every year independent of any stock market ups or downs), very much like you would receive with a CD or bond, but the rates are different.
2. Indexed annuity: This is where your rate of return is tied to how the stock market does, but you get a percentage of the upside of the market (not all) with no downside and no possibility of loss.
3 . Hybrid “indexed” annuity: This is where you get the benefits of an indexed annuity with the
addition of a “lifetime income” rider. This lifetime income feature gives you the ability to turn
on a paycheck for life! (Note: technically speaking, there isn’t a product called a “hybrid.”
However, it has become a common name among professionals to describe the category, which
includes the lifetime income feature.)
The reason for that is, nearly every expert I interviewed for this book agreed that
variable annuities should be avoided. They are extremely expensive, and the underlying deposits are invested in mutual funds (also known as sub accounts).
Fixed indexed annuity (FIA).
• In a fixed indexed annuity, your deposits remain entirely in your control. You are not giving up
access to your cash.
• It offers the potential for significantly higher annual returns than other safe-money solutions
such as CDs or bonds.
• It provides a 100% guarantee20 of your principal—you can’t lose money.
• The growth is tax-deferred, providing maximum compounded growth for the expansion of your
Freedom Fund.
• It provides income insurance, or a guaranteed income for life, when you select an optional
income rider.
“How in the world can insurance companies give you the upside with no downside?” The insurance company parks the bulk of your money safely in its cash reserves, never actually
investing it in the stock market. This is how it guarantees your principal. The remainder is used to buy “options” on the stock market index and to cover expenses. So if the market is up, you receive your portion of that gain. If it goes down, the options “expire,” but you don’t lose—and neither does the insurance company. Win, win. I came to find out that the insurance companies offer this product only if you are in your mid-50s or older. They can’t offer 7% forever, so they give a maximum of 20 years. If you are younger, the insurance company obviously can’t afford to give you a 7% return in your income account forever. Also, this annuity requires a sizeable lump-sum deposit up front.
But what about for younger people?? www.lifetimeincome.com.
These new FIAs provide benefits such as:
• Guarantee of your principal: whatever money you’ve invested, you’ll never lose.
• The upside without the downside: you participate in 100% of the stock market index growth.
That’s right: 100% of the upside with no downside, no chance of loss, and no cap on your
winnings. The insurance company simply shares in your profits by taking a small “spread” (ranging
between 1.25% to 1.75%). If the market is up 10%, and it keeps 1.5%, you get 8.5% credited to
your account value. Conversely, if the market is down in a given year, the insurance company
does not keep anything, and you don’t lose a dime or pay any fees! You pay the spread only if
you make money.
RICH MAN’S ROTH: private placement life insurance (PPLI).
• unlimited deposit amounts (with no income limitations)
• no tax on the growth of your investments
• no tax when accessed (if structured correctly) and
• any money left over for your heirs cannot be taxed.
“Tony, this is not your typical retail life insurance. You can’t buy this off the shelf from a salesman with well-coiffed hair and a gold Rolex. This is an institutionally priced policy with no commissions, no surrender charges, or other nonsense you encounter from retail agents. Think of it as an ‘insurance wrapper’ you are buying to place around your investments. And because of the specific tax code, which has been around for many decades, all of your deposits will
be legally sheltered from tax in this insurance wrapper. They can be invested in a variety of different funds, and you will not pay tax on the growth or when you access your cash if we do it right.”
you will need to visit its website (www.tiaa-cref.org/public) and acquire it on your own or ask a fiduciary advisor to help guide you in setting up a policy.As a fiduciary, your representative cannot take commissions. If she
One of the simplest things you can do to protect your family is to establish a living revocable trust. But unlike a will, a living trust can also protect you and your family
while you are alive. http://getyourshittogether.org, http://www.legalzoom.com/personal/estate-planning/living-trust-overview.html
Four Obsessions of Money Masters:
1. Don’t Lose
2. Risk a little, Make a Lot (asymmetrical bets)
3. Anticipate and Diversify
4. You are Never Done. Never done earning, learning, growing, giving.
His Yale model, also known as the endowment model, was developed with his colleague and former student Dean Takahashi, and is an application of modern portfolio theory. The idea is to divide a portfolio into five or six roughly equal parts and invest each in a different asset class. The Yale model is a long-term strategy that favors broad diversification and a bias toward equities, with less emphasis on lower-return asset classes such as bonds or commodities. Swensen’s position on liquidity has also been called revolutionary—he avoids rather than chases liquidity, arguing that it leads to lower returns on assets that could otherwise be invested more efficiently.
There are only three tools, or levers, that investors have to [increase] returns. The first is asset
allocation: What assets are you going to hold in your portfolio? And in which proportions are
you going to hold them? The second is market timing. Are you going to try to bet on whether one asset class is going to perform better in the short run relative to the other asset classes you hold? And the third tool is security selection. How are you going to structure your bond portfolio or stock portfolio? And that’s it. Those are the only three tools we have. The overwhelmingly most important [as you figured out] is asset allocation.
But from an asset-allocation perspective, when we talk about diversification, we’re talking about investing in multiple asset classes. There are six that I think are really important and they are US stocks, US Treasury bonds, US Treasury inflation-protected securities [TIPS], foreign developed equities, foreign emerging-market equities, and real estate investment trusts [REITs].
Warren Buffet:
“But now that you’ve announced you’re leaving almost all of your wealth to charity, what kind of portfolio would you recommend for your family to protect and grow their own investments?” He smiled again and grabbed my arm. “It so simple,” he said. Indexing is the way to go. Invest in great American businesses without paying all the fees of a mutual fund manager and hang on to those companies, and you will win over the long term!” Wow! The most famous stock picker in the world has embraced index funds as the best and most cost-effective investment vehicles.
Paul Tudor Jones:
So I’ve created a process over time whereby risk control is the number one single most
important focus that I have, every day walking in. Here’s a story I’ll never forget. It was 1976, I’d been working for six months, and I went to my boss, cotton trader Eli Tullis, and said, “I’ve got to trade, I’ve got to trade.” And he said, “Son, you’re not going to trade right now. Maybe in another six months I’ll let you.” I said, “No, no, no—I’ve got to trade right now.” He goes, “Now, listen, the markets are going to be here in thirty years. The question is, are you?”
You don’t need to go to business school; you’ve only got to remember two things. The first is, you always want to be with whatever the predominant trend is. You don’t ever want to be a contrarian investor. The two wealthiest guys in the United States—Warren Buffett and Bill Gates—how did they get their money? Bill Gates got his money because he owned a stock, Microsoft, and it went up eight hundred times, and he stayed with the trend. And Warren Buffett, he said, ‘Okay. I’m going to buy great companies. I’m going to hold these companies, and I’m not going to sell them because— correctly and astutely—compound interest or the law of compounding works in my favor if I don’t sell.’ ”My metric for everything I look at is the 200-day moving average of closing prices.
What’s the second thought for students? Five to one. Five to one means I’m risking one dollar to make five. What five to one does is allow you to have a hit rate of 20%. I can actually be a complete imbecile. I can be wrong 80% of the time, and I’m still not going to lose—assuming my risk control is good.
Sir John Templeton:
“Bear markets start on the time of pessimism. They rise on the time of skepticism. They mature on the time of optimism, and they end on the time of euphoria!”
“I know when to buy, but I don’t know when to sell.” But over these 54 years that I’ve been helping investors, I think I have the answer, and that is: you sell an asset only when you think you have found a different asset that’s a 50% better bargain. You search all the time for a bargain, and then you look at what you now own. If there’s something in your present list that is a 50% less good bargain than the one you found, you sell the old one and buy the new one. But even then, you’re not right all the time.
As Sir John Templeton said, “If you’ve got a billion dollars and you’re ungrateful, you’re a poor man. If you have very little but you’re grateful for what you have, you’re truly rich.”
CONCLUSION:
What are the three decisions that determine the quality of your life? That determine whether you feel rich or poor in any given moment? The first one is:
1. WHAT ARE YOU GOING TO FOCUS ON? We can be grateful for our health, our friends, our
opportunities, our minds, and the fact that we get to drive on roads that we didn’t have to build,
read books we didn’t have to take years to write, and tap into the internet that we didn’t have
to create. Do you tend to focus more on what you can control or what you can’t control?
2. WHAT DOES THIS EVENT/ACCIDENT/INCIDENT IN OUR LIFE MEAN? A change of focus and a change in meaning can literally change your biochemistry in a matter of minutes. Learning to master this becomes an emotional game changer.
3. WHAT AM I GOING TO DO? t turns out that what we focus on, what emotional states we tend to live in, and what we do can all be conditioned, or “primed,” into our lives with a simple routine.
10 Minute Meditation Ritual Every Morning:I begin every day with a minimum of ten minutes. I stop, close my eyes, and for approximately three minutes reflect on what I’m grateful for: the wind on my face, the love in my life, the opportunities and the blessings I experience. I don’t focus just on big things; I make a point not only to notice, but also to deeply feel an appreciation for the little things that make life rich. For the next three minutes, I ask for health and blessings for all those I love, know, and have the privilege to touch: my family, friends, clients, and the stranger I may meet today. Sending love, blessings, gratitude, and wishes for abundance to all people. As corny as it sounds, it’s the real circle of life. I spend the remaining time on what I call my “Three to Thrive”: three things that I want to accomplish. I envision them as if they were already achieved and feel a sense of celebration and gratitude for them.
My teacher Jim Rohn taught me a simple principle: every day, stand guard at the door of your mind, and you alone decide what thoughts and beliefs you let into your life. For they will shape whether you feel rich or poor, cursed or blessed.
“THE SECRET TO LIVING IS GIVING.”
The truth is: more recent studies have proven that money can make us happier.
1. Investing in experiences—such as travel, learning a new skill, or taking some courses, rather than
acquiring more possessions.
2. Buying time for yourself—“Whenever we can outsource our most dreaded tasks (from scrubbing
toilets to cleaning gutters), money can transform the way we spend our time, freeing us to pursue
our passions!” But can you guess the greatest thing you can do with your money that will bring you massively increased happiness?
3. Investing in others—That’s right. Giving our money away actually makes us really happy!
BEST QUOTES FROM THE BOOK
Live life fully while you’re here. Experience everything. Take care of yourself and your friends.
Have fun, be crazy, be weird. Go out and screw up! You’re going to anyway, so you might as
well enjoy the process. Take the opportunity to learn from your mistakes: find the cause of your
problem and eliminate it. Don’t try to be perfect; just be an excellent example of being human.
—TONY ROBBINS
An expert is an ordinary man away from home giving advice. —OSCAR WILDE
Money is a good servant but a bad master. —SIR FRANCIS BACON
The future has many names. For the weak, it’s unattainable. For the fearful, it’s unknown. For
the bold, it’s ideal. —VICTOR HUGO
The secret of getting ahead is getting started. —MARK TWAIN
There is no friend as loyal as a book. —ERNEST HEMINGWAY
I can’t afford to waste my time making money. —JEAN LOUIS AGASSIZ
No one would have remembered the Good Samaritan if he’d only had good intentions. He
had money as well. —MARGARET THATCHER
However beautiful the strategy, you should occasionally look at the results. —WINSTON CHURCHILL
All men dream, but not equally. —T. E. LAWRENCE
There is only one thing that makes a dream impossible to achieve: the fear of failure. —PAULO COELHO
The only person you should try to be better than is the person you were yesterday. —ANONYMOUS
Kites rise highest against the wind, not with it. —WINSTON CHURCHILL
He who gains time gains everything. —BENJAMIN DISRAELI
You can be rich by having more than you need, or by needing less than you have. —JIM MOTT
Happiness is not in the mere possession of money; it lies in the joy of achievement, in the
thrill of creative effort. —FRANKLIN D. ROOSEVELT
If you’re prepared, and you know what it takes, it’s not a risk. You just have to figure out
how to get there. There is always a way to get there. —MARK CUBAN
My favorite things in life don’t cost any money. It’s really clear that the most precious
resource we all have is time. —STEVE JOBS
Never test the depth of the river with both feet. —WARREN BUFFETT
In any moment of decision, the best thing you can do is the right thing, the next best thing is
the wrong thing, and the worst thing you can do is nothing.
—THEODORE ROOSEVELT
When you cease to dream, you cease to live. —MALCOLM FORBES
Far more money has been lost by investors preparing for corrections, or trying to anticipate
corrections, than has been lost in corrections themselves. —PETER LYNCH
Invincibility lies in the defense. ,—SUN TZU, The Art of War
I have enough money to retire comfortably for the rest of my life. Problem is, I have to die
next week. —ANONYMOUS
It is better to have a permanent income than to be fascinating. —OSCAR WILDE
Everyone can be great, because everyone can serve. —DR. MARTIN LUTHER KING JR.
We make a living by what we get. We make a life by what we give. —WINSTON CHURCHILL