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Unshakeable By Tony Robbins

Financial Freedom Playbook Summary

Here are my book notes from Unshakeable by Tony Robbins.

If you want to become a millionaire by investing in the stock market, consider this the blueprint.

1) When you’re truly unshakeable, you have unwavering confidence, even amidst the storm.  When others are afraid you have the presence of mind to capitalize on the chaos around you.

2) You know we’re living in strange times when even the greatest financial minds (like former Chairman of the Federal Reserve, Alan Greenspan) admit to being confused on the state of the economy and where it’s headed.

3) You don’t have to predict the future to win this game; you just have to focus on what you can control.

4) Most people you think are providing unbiased financial “advice” are actually brokers making big commissions off the stocks, bonds, mutual funds, retirement accounts, insurance policies, or whatever else they’re recommending to fund their next vacation.

5) Most mutual funds are actively managed.  Meaning, experts are moving in and out of positions frequently, trying to outdo the market.  Because of this human involvement, they charge more fees.  In the end, you overpay to underperform.

6) A hedge fund is private, available only to high net worth individuals, actively managed, and charges huge fees in hopes of higher returns.

7) A mutual fund is public, available to anyone, actively managed, charges fees, and rarely beats the market.

8) An index fund is public, available to anyone, but without active managers – meaning, very low fees.  Instead of moving in and out of stocks, bonds, and assets, when you buy an index fund, you own and hold all assets in that index (for example, all 500 stocks in the S&P 500 Index).

9) As you can see, these fees can really add up.  Paying an extra 1% per year can cost you 10 years’ worth of retirement income.  (Holy moly!)

10) Indexing, therefore, is the smartest strategy for everyone not named Warren Buffett.  Consider this: from 1985 to 2015 the S&P 500 averaged a 10.28% return per year.  If you invested $50,000 in 1985 in an index fund that tracked the S&P, it would’ve been worth just under $1,000,000 by 2015.  But the average investor during that same time averaged just 3.66%.  They would’ve only had around $150,000 by 2015.  Fees and fear can cost you a fortune if you’re not careful.

11) Buffett: “My wealth has come from a combination of living in America, some lucky genes, and compound interest.”

12) Stop trying to earn your way to financial freedom.  The real route to riches is to set aside a portion of your income, invest it, and let compounding go to work for you over many years.  That’s how you become wealthy while you sleep.

13) How big should your nest egg be?  Many so-called experts say 10 times your income.  Tony Robbins suggests doubling that to 20.

14) A correction is when any market falls at least 10% from its peak.

15) A bear market is when any market falls at least 20% from its peak.

16) Freedom Fact #1: on average, corrections occur about once every year and last less than two months.  (If you hold tight, the storm will pass.)

17) Freedom Fact #2: less than 20% of corrections turn into bear markets.  (If you panic and sell, you’ll probably regret it.)

18) Freedom Fact #3: nobody, not even the best of the best, can accurately predict the market on a consistent basis.  To think you and I can is ridiculous.

19) Freedom Fact #4: despite many short term setbacks, the stock market always trends upward over time.  (More people, better tech, more innovation, and more productivity means companies will continue to thrive.)

20) Freedom Fact #5: historically, bear markets happen about once every four years.  They last for a year on average.  And the S&P, for example, will dip about 33%.  (Winter never lasts forever.  Sooner or later Spring comes.  The top investors know this and see bear markets as a gift.  They take advantage and buy at bargain prices.  The best opportunities come at times of maximum pessimism.)

21) Freedom Fact #6: bear markets become bull markets and pessimism turns to optimism when that happens.  But average investors panic and make the wrong moves at the wrong time.  (Another Warren Buffett quote worth writing down: “The stock market is a device for transferring money from the impatient to the patient.”)

22) Freedom Fact #7: the greatest danger isn’t poor timing; it’s being out of the market.  Most of your returns come from the top trading days – the days with the greatest gains – which almost always occur within close proximity to the very worst days.  (Even if you buy in at the absolute worst times, you’ll still beat those who sit on the sidelines and therefore miss out on the big jumps plus compound interest.)

23) If you’re outside of a tax-deferred account, such as an IRA or 401(k), investing in actively traded funds becomes a double whammy: not only do you pay more in fees, but taxes as well.  Yes, even if you hold them for over a year.  Why?  Because the “professionals” trying to outpace the market are buying and selling short-term.  In total, this mistake can eat up nearly two thirds of your nest egg!

24) So what’s the answer?  Index funds.  Because they’re passive, there’s almost no overhead that you have to help cover.  This can easily save you 2-3% per year.  Not only that, since you’re “buying and holding,” you remove the human error element.  (Now you’re not missing out on the top trading days.)  Still not convinced?  Warren Buffett wants his wife’s trust invested in low cost index funds when he dies.  (How ’bout dat?)

25) Nearly 90% of the 310,000 financial advisors in America are just brokers peddling products for a commission.  They’re not required by law to act in your best interest.  If you’re going to use one, get a Registered Investment Advisor not affiliated with a broker… and who won’t try to talk you into high-fee funds or “proprietary” plays (which usually mean kickback).  Also, if they start telling you how they can beat the market, that’s a red flag.

26) Core Four Principle #1: don’t lose.  Protect your downside.  You want an asset allocation where you’ll “still be okay” even when sh*t hits the fan.

27) Core Four Principle #2: aim for an asymmetric risk/reward.  Little downside, big upside.  But how?  By buying undervalued assets when the market is getting pummeled and pessimism is high.  Never forget, corrections and bear markets are blessings.

28) Core Four Principle #3: tax efficiency.  It’s not what you earn, but what you keep that matters.  Avoid actively managed funds and short term trading or else taxes will nickel and dime you to death.

29) Core Four Principle #4: diversification.  Diversify across classes (don’t only hold stocks, for example); within classes (don’t just buy Apple because you love your iPhone); across markets, countries, and currencies; and across time (dollar cost average, dawg).

30) “Cowards die many times before their death; the valiant never taste of death but once.” – Julius Caesar

31) Bear markets are the single greatest opportunity to build lasting wealth in your lifetime.  Everything’s on sale.

32) Surviving a bear market is 90% preparation (expecting it to come, being diversified, having enough money set aside so you don’t have to sell and realize losses to survive)… and 10% not getting emotional and doing dumb things.

33) Bad news is an investor’s best friend.  It lets you buy a slice of America’s future at marked-down prices.

34) Good alternatives to stocks and bonds include: real estate investment trusts, private equity funds, master limited partnerships.

35) Stay away from gold and hedge funds.

36) Key investing guidelines: (a) have the right balance of stocks, bonds, and alternatives for your situation; (b) index funds should be the core of your portfolio (variety: domestic, international, large-cap, mid-cap, small-cap, micro-cap); (c) have liquid assets like bonds that you can sell to free up cash to take full advantage of “discounted stocks” during bear markets; (d) keep some money to “explore” with; (e) rebalance once a year so you can profit handsomely during market rebounds.

37) The greatest threat to your financial well-being is your own brain.  Eighty percent of success is psychology; whereas 20% is mechanics.

38) Common investment mistakes: (a) seeking confirmation of your beliefs, even if they’re wrong; (b) thinking recent events (a terrorist attack, for example) will become ongoing trends; (c) overconfidence; (d) greed, gambling, and pursuit of home runs; (e) going overboard where you’re most comfortable (buying too much company stock, for example); (f) negativity and loss aversion (remembering bear markets more than bull markets, and acting irrationally to “cut losses” when you shouldn’t).

39) Chill.  It’s a marathon.  Stop over-checking your portfolio.  Even once a year is fine!  And don’t watch TV.  Pundits get paid to shock and scare you into watching their shows.  Also, beware of anything Wall Street puts out: remember, they don’t make money unless you’re active.  Of course they’re going to tell you to tinker with stuff – so they can collect more fees.

40) In general: buy and hold, trade less, think long-term, cut down on fees and taxes, seek opposing views from qualified people, diversify globally, and control fear.  (Also known as the exact opposite of what Timothy Sykes teaches.)

41) The secret to living an extraordinary life is to take control of the mind and choose to live in a “beautiful” state and not a state of “suffering.”

42) The IRS allows you to give away up to $5.45 million dollars throughout your life or upon death without incurring any taxes.  If you’re married, double it – $10.9 million.  Anything beyond that gets hit with a whopping 40% estate tax.  (Ouch!)

43) But wait: you can also give away up to $14,000 per person per year without it counting towards the lifetime exemption amount I just listed above.  Again, if you’re married, that jumps to $28,000.  No gift tax, no estate tax, plus you get to enjoy the impact you’re having while you’re still alive.  Pretty cool.

44) Other ways to distribute wealth without paying taxes: you could obviously donate to charity; pay for someone’s medical expenses; contribute to kids’ or grandkids’ college tuition; put money, assets, and/or life insurance policies into an irrevocable trust that also protects you from lawsuits and such.

That’s all I got.

So now that you know how to be a millionaire using stocks, why not explode your income so you’ve got more firepower at your disposal?  These articles will help.

Cory Johnson: likes curvy women, comedy, music, ‘n’ money. His net worth is $11 million. Here’s how he did it.