Podcast Summary
Tony Robbins shares insights from successful investors on financial success: Debunk financial myths, avoid actively managing mutual funds, use index funds, maintain a balanced portfolio, and prioritize an emergency fund for financial success.
Tony Robbins, in his new book "Money, Master the Game," provides detailed insights from successful investors on how average individuals can set themselves up for financial success. Robbins was motivated to write this book due to his personal experiences with financial hardship and his observation of the widespread suffering caused by the 2008 financial crisis. He debunks common financial myths and mistakes, highlights the challenges baby boomers face in retirement, and advocates against actively managing mutual funds. Instead, he recommends using index funds, having a balanced portfolio, and maintaining an emergency fund. The book also emphasizes the importance of maintaining a healthy relationship with money to prevent it from becoming an obsession.
The shift from pensions to 401ks left many unprepared for retirement: One third of baby boomers have less than $1,000 saved for retirement, highlighting the need for financial education to help average investors succeed
The shift from traditional pensions to 401ks has left many individuals ill-prepared for retirement. The speaker, who was inspired by documentaries detailing the financial crisis, shares his frustration over the small number of people who destroyed entire economies and received bailouts, only to be told to manage the recovery and make more money. He was determined to find a solution and wrote a book, interviewing 50 of the world's most brilliant financial minds. He discovered that the change in society, replacing pensions with 401ks, left many people unprepared for retirement. One out of three baby boomers has less than $1,000 saved, which is a concerning statistic. The 401k, originally designed for the wealthy, was adopted by companies as a cost-saving measure. The speaker aims to level the playing field by simplifying complex financial concepts and teaching average investors how to win.
Many mutual funds underperform the market: Despite professional management, most mutual funds failed to beat the market (96% underperformed). Wealth is built through wise money management and compound interest, not through mutual funds alone.
Mutual funds, despite being managed by professionals, often fail to beat the market. In fact, statistics show that 96% of mutual funds underperformed the market in the past. This is due to the complexity of the financial world and the fear of volatility, causing many people to never enter the market at all. However, even those who do earn large sums of money, such as lottery winners, athletes, or celebrities, can still end up broke if they don't manage their money wisely. Instead, the key to building wealth is through compound interest, as demonstrated by individuals like Theodore Johnson, who started out earning only $14,000 a year but ended up worth $70 million in his senior years.
Starting small with automatic investments and compound interest: Automatically investing a percentage of income, even 5%, can grow over time with compound interest. Consider index funds for low-cost investment options that own a piece of the market's biggest companies.
Investing a percentage of your income automatically, no matter how small, is the first step towards financial wealth. This concept, known as compound interest, was emphasized by Theodore Johnson. He suggested starting with 20%, but even 5% can lead to sending 15% towards investments over time. Instead of investing in actively managed mutual funds, Johnson recommended owning the market itself through index funds. Index funds allow investors to own a piece of all the biggest companies in the market, and they typically have lower costs compared to mutual funds. The average investor may not be aware of the true costs of mutual funds, which can include more than just the expense ratio. By choosing index funds, investors can avoid the high costs associated with actively managed funds and get closer to their financial goals.
Fees can significantly impact total returns: 3% fees result in 60% loss of total returns, focus on index funds, and set aside money early and often to minimize fees.
The fees you pay for mutual funds can significantly impact your total returns over time. The tyranny of compounding fees means that even small percentage differences in fees can result in substantial losses. For instance, giving up 3% in fees translates to giving up 60% of your total returns. To illustrate, if you and your neighbor both invest $100,000 and earn the same return, but you pay 3% in fees while your neighbor pays only 0.17%, you would end up with $250,000 less than your neighbor despite having the same return. To protect yourself and maximize your returns, consider focusing on index funds and setting aside money early and often. Additionally, learning from industry experts like Ray Dalio can provide valuable insights into the investment world.
Ray Dalio's All-Season Investment Strategy: Ray Dalio's All-Season Strategy, based on his successful All-Weather Strategy, aims to make money consistently in any market condition, with an 85% success rate and an average loss of 1.6% over 75 years.
Ray Dalio, the founder of Bridgewater Associates, developed an investment strategy called the "All-Season Strategy" based on his successful "All-Weather Strategy." This strategy aims to make money consistently, regardless of market conditions. The strategy is simple enough for individuals to apply with minimal effort, and when back-tested over 75 years, it has been successful in making money 85% of the time with an average loss of only 1.6% and an average return just under 10%. This strategy offers a smoother investment experience compared to the market's historical volatility. Dalio is planning to share this strategy in his book and encourages individuals to apply it themselves or seek help from professionals.
Minimizing losses for maximum gains: Successful investors prioritize minimizing losses to put themselves in a position for significant returns. They understand the impact of losses and aim for 'asymmetrical risk reward' to minimize risk and maximize potential upside.
Successful investors prioritize minimizing losses over maximizing gains. This may seem counterinthetic, but by focusing on not losing money, these investors put themselves in a position to make significant returns. They understand that a loss of 50% requires a gain of 100% to break even, and that the time and energy required to recover from large losses can be substantial. Therefore, they aim for "asymmetrical risk reward," taking on the least amount of risk possible for the maximum potential upside. Examples of this strategy include Paul Tudor Jones, who risks $1 to make $5, and Kyle Bass, who never risked more than $0.6 to make a dollar. By focusing on not losing money and implementing a plan to protect themselves, these investors are able to maximize their returns over the long term.
Money as a tool for creation and positivity: Recognize money as a tool, approach it positively, and use it to make a positive impact on others.
Money is a tool that can be mastered or master over you. It's not an inherent changer of one's character, but rather a reflection of our own beliefs and emotions. To maintain a healthy relationship with money, it's essential to recognize this and approach it as a tool for creation and positivity, rather than a source of fear or judgment. Additionally, the author emphasizes the importance of giving back and using money to make a positive impact on others. Ultimately, the book encourages readers to focus on mastering their relationship with money, rather than letting it define or consume them.
Living Authentically and Embracing Criticism: Don't let fear of criticism stop you from living authentically and making a positive impact. Embrace criticism as a chance to learn and grow.
That it's impossible to please everyone and avoid criticism entirely. According to Tony Robbins, quoting Aristotle, the only way to do so is by doing nothing, saying nothing, and being nothing. However, Robbins emphasized that he, and we, should not choose that path. Instead, we should strive to live our lives authentically and make a positive impact. On a different note, during the podcast, Brett McKay mentioned some exciting resources for listeners. Tony Robbins' book "Money Master the Game" is available on Amazon.com and other booksellers, and the author's website, moneymasterthegame.com, offers free resources. Additionally, the Art of Manliness Podcast's online store has recently released a Benjamin Franklin-inspired journal. This journal is based on Franklin's personal diary and virtue charts, designed to help individuals live better lives. The journal makes an excellent gift and supports the show and website. So, in summary, don't be afraid of criticism, live your life authentically, and check out the new journal on the Art of Manliness store. Until next time, stay manly!
