Unshakable: your financial freedom playbook \u2013 Tony Robbins<\/p>\n\n\n\n
In writing a short book that\u2019s quick and easy-to-read, I\u2019m looking to increase the likelihood that you\u2019ll not only master this material but also act on it. People love to say that knowledge is power. But the truth is that knowledge is only potential power. You and I both know that it\u2019s useless if you don\u2019t act on it. This book gives you a power packed action plans that you can put into effect immediately\u2013 because execution trumps knowledge everyday of the week.<\/p>\n\n\n\n
I\u2019m happy to tell you that his company will provide a review of your current situation and goals, at no cost, help you create a customized financial plan. You may decide that you prefer to handle your finances a loan. But if you ever decide that it might be helpful to get a second opinion from the top ranked firm in the country, you\u2019re welcome to reach out to creative planning, at getasecondopinion.com.<\/p>\n\n\n\n
Even worse, those fees add up massively overtime. If you overpay by 1% a year, it will cost you 10 years worth of retirement income.<\/p>\n\n\n\n
Along the way, we also learned a vitally important lesson: we\u2019re not rewarded when we do the right thing at the wrong time.<\/p>\n\n\n\n
Now let\u2019s imagine for a moment that Joe didn\u2019t stop investing at age 27. Instead, like Bob, he kept adding $300 a month until he was 65. The results: he ends up with the nest egg of $3,000,453. In other words he has $1.86 million because he started investing eight years earlier\u2026 but you know what\u2019s amazing? Most people never take full advantage of the secret that\u2019s signing full view, this wealth building miracle that sitting there right in front of their eyes. Instead, they continue to believe that they can earn their way to riches. It\u2019s a common misperception \u2013 this belief that, if you\u2019re earned income is big enough, you\u2019ll become financially free.<\/p>\n\n\n\n
The lesson? You\u2019re never going to earn your way to financial freedom. The real route to riches is to set aside a portion of your money and invested, so that it compounds over many years. That\u2019s how you become wealthy while you sleep. That\u2019s how you make money your slave instead of being a slave to money. That\u2019s how you achieve true financial freedom.<\/p>\n\n\n\n
In reality, the number you should really aim for is 20 times your income. So, if you currently earn $100,000, you\u2019ll need $2 million. It may sound like a lot, but remember that our friend Joe got there with them year $28,000dollars, and my bed is you have much more than this to invest over the coming years.<\/p>\n\n\n\n
How would you feel if you could cover the cost of your mortgage, food, utilities, transportation, insurance, all without ever working again? It\u2019s pretty great, right? The good news is, this number is usually 40% less an ultimate financial independence, where everything you need is paid for, and thus you can hit it quicker.<\/p>\n\n\n\n
But before we get started, let me quickly explain some investment jargon. When any market falls by at least 10% from its peak, it\u2019s called a correction\u2013 Particularly bland and neutral term for an experience that most people relish about as much as dental surgery. When the market falls by at least 20% from its peak, it\u2019s called a bear market\u2026<\/p>\n\n\n\n
Instead of getting distracted by all this noise, it helps to focus on a few key facts actually matter. For example, on average, there\u2019s been a market correction every year since 1900. When I first heard this, I was floored. Just think about it: if you\u2019re 50 years old today and have a life expectancy of 85, you can expect to live through another 35 corrections. To put it another way, you\u2019ll experience the same number of corrections as birthdays…<\/p>\n\n\n\n
And you know what else? Historically, the average correction has lasted only 54 days \u2013 less than two months\u2026<\/p>\n\n\n\n
It turns out that fewer than one and five corrections escalate to the point where they have become a bear market. To put it another way, 80% of corrections don\u2019t turn into bear markets<\/p>\n\n\n\n
And his 2015 annual report, warren buffet addressed this subject at length, explaining how population growth and extraordinary gains in productivity will create and enormous increase in wealth for the next generation of Americans. \u201dThis all-powerful trend is certain to continue: America\u2019s economic magic remains alive and well,\u201d he wrote. \u201cfor 240 years, it\u2019s been a terrible mistake to bet against America, and now is no time to start.\u201d<\/p>\n\n\n\n
The best opportunities come in times of maximum pessimism<\/p>\n\n\n\n
The trouble is, sitting on the sidelines even for short period of time maybe the costliest mistake of all.<\/p>\n\n\n\n
Meanwhile, a study by JP Morgan found the six of the 10 best days in the market of the last 20 years occurred within two weeks of the 10 worst days.<\/p>\n\n\n\n
What striking is that, even after this 20 year run of spectacularly bad luck, Mr. hapless still made a substantial profit. the lesson? If you stay in the market long enough, compounding works at Magic, and you end up with a healthy return \u2013even if your timing was hopelessly unlucky. And you know what? The worst performing investor wasn\u2019t me and lucky one, but the one who stayed on the bench, the one in cash: he ended up with only $51,291.<\/p>\n\n\n\n
Let\u2019s assume the stock market gives a 7% return over 50 years. At that rate, because of the power of compounding, \u201ceach dollar goes up to $30.\u201d But the average fund charges you about 2% per year in cost, which drops your average annual return to 5%. At that rate you get $10 dollars. So $10 versus $30. You put up 100% of the capital, you took 100% of the risk, and you got 33% of the return.<\/p>\n\n\n\n
Imagine for a moment that you stop buying actively managed funds that charge exorbitant fees. Instead, from now on, you invest only in low cost index funds. What\u2019s the result? At the very least, I would estimate that you can cut your fund expenses by 1% a year. But as you know, that\u2019s not the only benefit of switching to index funds. Hypothetically, let\u2019s imagine that your index funds outperform the actively manage funds by 1% annually. In total, you\u2019ve just added 2% a year to year returns. This alone can give you 20 years of extra retirement income. Now you see how much power you possess to take charge of your financial future? Take that power and use it to dramatically drive down your costs. This will help you immeasurably to become unshakable. Meanwhile, let\u2019s take a breath. Then let\u2019s step into another area where you can save your files of fortune: your 401(k).<\/p>\n\n\n\n
Remember, Sunday 1% of people enrolled in 401(k)s think there\u2019re no fees, 92% them at that they have no clue what they are. But the truth is, the vast majority of plans are characterized by huge broker commissions, expensive actively manage funds, and layer after layer of additional\u2013 and often hidden\u2013 charges.<\/p>\n\n\n\n
Whether you\u2019re a business owner or an employee, you can see how your company\u2019s 401(k) plan stacks up by using his free online Fee Check tool at showmethefees.com<\/p>\n\n\n\n
From 2010 to 2015, the percentage of the US population using financial advisors double.<\/p>\n\n\n\n
Registered financial advisors<\/p>\n\n\n\n
Why am I so adamant about this? Because it\u2019s not enough to say \u201cThese are useful insights; I\u2019ll try to keep them in mind.\u201d The best investors understand that these principles must be obsessions. They\u2019re so important that you need to internalize them, live by them, and make them the foundation of everything you do as an investor. In short, the Core Four should be at the very heart of your investment playbook.<\/p>\n\n\n\n
Core principle one: don\u2019t lose<\/p>\n\n\n\n
But the best investors are obsessed with avoiding losses. Why? Because they understand a simple but profound effect: the more money you lose, the harder it is to get back to where you started.<\/p>\n\n\n\n
The most important thing for me is that defense is 10 times more important than offense\u2026 you have to be very focused on protecting the down side at all times.<\/p>\n\n\n\n
Core principle two: asymmetric risk\/reward<\/p>\n\n\n\n
A cool conventional wisdom, you need to take a big risk to achieve big rewards. But the best investors don\u2019t fall for this high risk, high return myth. Instead, they hunt for investment opportunities that offer what they call asymmetric risk\/reward: a fancy way of saying that the reward 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\u2019s the investors equivalent of nirvana..<\/p>\n\n\n\n
Corrections and bear markets can be among the greatest financial gifts of your life.<\/p>\n\n\n\n
Core principles 4: diversification<\/p>\n\n\n\n
On average, the market is down about one every four years. You need to recognize this reality so you won\u2019t be shocked when stocks tumble\u2013 and so you\u2019ll avoid excessive risks. At the same time, it\u2019s useful to recognize that the market has made money three out of every four years.<\/p>\n\n\n\n
One common \u2013 but misguided\u2013 approach involves using a person\u2019s age to determine the percentage of bonds in his or her portfolio. For example, if you\u2019re 55, you have 55% of your assets allocated to bonds. To me, that\u2019s crazily simplistic. In reality, the type of assets you own should be matched to what you personally need to accomplish.<\/p>\n\n\n\n
Asset allocation drives returns. What\u2019s start with the fundamental understanding that your asset allocation will be the biggest factor in determining your investment returns. So, and deciding on the right balance of stocks, bonds, and alternatives is the most important investment decision you\u2019ll ever make. Whatever makes you choose, make sure you diversify globally across multiple asset classes.<\/p>\n\n\n\n
The rule of seven. Ideally, we like our clients to have seven years of income set aside an income producing investments such as Bonds and MLPs.<\/p>\n\n\n\n
Behavioral finance<\/p>\n\n\n\n
And fact, this is also an example of another emotional bios called \u201dEndowment affect,\u201d in which investors place greater value on something they already own, regardless of its objective value. This makes it much harder to part ways and buy something superior.<\/p>\n\n\n\n
Ironically, the next day, the markets snapped back in the opposite direction, with the Dow jumping 316 points as investors began to adjust to a of reality. We witness a Trump rally that continued for weeks. As I write this in December 2016, the S&P 500 just hit an all-time high for the third day in a row, the Dow Jones industrial average has scored its 11th<\/sup> all-time high in a month, in the market has surge six % in seven weeks since election.<\/p>\n\n\n\n How do you think investors feel right now? Pretty cheerful, that\u2019s how. When you read that the market is \u201croaring ahead,\u201d it\u2019s hard not to feel a little Rush of delight. Maybe you peek at your investment portfolio and notice that it\u2019s the highest it\u2019s ever been. Life is sweet<\/p>\n\n\n\n Granted, I have no idea where the market is headed from here, and as the greatest investors in the world will tell you, neither does anyone else. But I do know that people get carried away at times like this. And the stacking of emotions and believes they start convinced themselves that the good times will keep on rolling. Likewise, when the market is plunging, they start to believe that I will never recover. As Warren Buffett says: \u201cinvestors project out into the future what they have most recently been seeing. That is their unshakable habit.\u201d<\/p>\n\n\n\n What\u2019s the explanation for this? Is actually a technical term for the psychological habit. It\u2019s called \u201drecency bias.\u201d<\/p>\n\n\n\n Individuals tend to buy funds that have good performance. And they chase returns. And then, when funds perform poorly, they sell. They end up buying high and selling low. And that\u2019s a bad way to make money.<\/p>\n\n\n\n The best way to win the game and that of investing is to achieve sustainable long-term returns. But it\u2019s enormously tempting to swing for homeruns, especially when you think other people are getting rich faster than you.<\/p>\n\n\n\n The first thing to achieving anything you want is focus.<\/p>\n\n\n\n The second step is to go beyond hunger, drive, and desire, and to consistently take massive action.<\/p>\n\n\n\n The third step to achieving whatever we want is grace.<\/p>\n\n\n\n They assume that it\u2019s an inevitable part of life to get frustrated, stressed, sad, and angry\u2013 in other words, to live in the suffering state. But I\u2019m happy to tell you there\u2019s another pass: one that involves directing your thoughts so that your mind is your bidding, not the other way around. This was the path I chose. I decided that I would no longer lives in the state of suffering. 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 is humanly possible.<\/p>\n\n\n\n In reality, the mental and emotional state in which you live is alternately the result before you choose to focus your thoughts.<\/p>\n\n\n\n And all this suffering is really just a result of an undirected mind that\u2019s hellbent on looking for problems.<\/p>\n\n\n\n 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 would nobody seems to understand or appreciate you? Unless we make this definitive decision to stop stuff ring eleven a beautiful state, our survival minds create<\/p>\n\n\n\n Take all of your negative thoughts and all of your negative emotions, trade them for appreciation, and your whole life changes in an instant.<\/p>\n\n\n\n So what are you going to do? Are you going to join me in my quest to experience true and lasting wealth today by training your mind find joy in every moment? It\u2019s your choice whether to live in the suffering state or a beautiful state. You have the capability to become a master of enjoyment, to fill your mind with appreciation, to be happy no matter what. Best of all, the joy and you will affect everyone around you.<\/p>\n\n\n\nChapter 9: Real Wealth<\/h2>\n\n\n\n