4/6/17
UnShakeable by Tony Robbins
- When I am unshakeable, I have an unwavering confidence even amidst the storm.
Ch. 2
- Start early
- get in, stay in
Compounding. earn money while I sleep. Hard to "earn" my way to financial freedom, must invest instead
- FF = freedom FactFF1: corrections happen once a year & only last 54 days on average. Hold tight, the storm will pass.
FF2: 80% of corrections don't turn into bear markets.
FF3: Nobody can consistently predict whether the market will rise or fall.
FF4: The stock market rises over time despite short term setbacks.
FF5: Bear markets happen every 3-5 yrs and they never last. spring always follows winter.
"The best opportunities come in times of maximum pessimism"
FF6: every bear market in U.S. history has been followed by a bull market
FF7: The greatest danger is being out of the market.
Ch. 3
index funds > actively managed funds
Ch. 4
beware of 401k plans! use America's best 401k
Ch. 5
- only 10% of financial advisers are registered investment advisors
Financial advisors are sketchy → see Ch. 5 to hire smart.
Ch. 6
Core four: key Principles
to guide every investment decision.
✓ 1. Don't Lose - best investors are obsessed w/ avoiding losses. The more money you lose, the harder it is to get back where you started.
✓ 2. Asymetric risk/reward - minimum risk w/ max profit. 3 to 1 or 5 to 1?
✓ 3. Tax efficiency - It's not about what you earn, it's about what you keep.
50% tax if hold < 1 year vs.
20% tax if hold > 1 year
- Mutual fund managers act as if taxes don't matter, but they do...
✓ 4. Diversification:
- A. Diversify across diff asset classes - avoid putting all $ into real estate, stocks, or bonds.
- B. Diversify within asset classes - Don't put all $ in a favorite, like apple.
- C. Diversify across markets, countries & currencies around world - We live in a global economy, don't invest solely in own country
- D. diversify across time - you'll never know best time to buy. add investments over time to reduce risk.
Ch. 7
- If you want to be certain you will never lose anything in the market, then stay on the sidelines & never achieve financial freedom.
"We pay a high price for certainty."
- Warren Buffet
- ★ If you live in fear, you've lost the game before it begins
- ★ Bear markets are the single greatest opportunity to build wealth in a lifetime.
Prepare for the bear
★ Be fearful when others are greedy, & be greedy when others are fearful
Stocks - market is down 1/4 years, up 3/4. over the long term, stock market news will be good.
Bonds - A bond is a loan. Legally required to pay back. 1.8% per year over 10 yrs. Little risk.
great to invest in bonds in anticipation of a bear market
Real estate investment trusts (REITs) - Hassle free, low cost way to diversify across different types of property
To review
- Asset allocation drives returns - diversify globally across multiple asset classes. Never bet your future on 1 country or asset class.
- use index fund as portfolio's core - use large cap, midcap, small-cap, microcap
- Always have a cushion - to avoid selling at worst time. use bonds, REITs, & dividend paying stocks
Psychology of wealth · 53Ch. 8
- Biggest threat to financial well-being is own brain.
- Knowing is not enough; investors need simple systems, rules, & procedure to protect us from ourselves
- 80% psychology, 20% mechanics
Common mistakes
- conf bias →seeking confirmation of your own beliefs - instead, seek opinions that contradict your own.
our brains are wired to seek proof of how smart we are, it's a trap!
→ solution: Ask better questions & find qualified people who disagree with you
- Mistaking recent events for ongoing trends.
Recency bias - recent events tend to carry most weight.
"Great things are not accomplished by those who yield to trends and fads and popular opinion." - Jack Kerouac
"The biggest mistake that the small investor makes is to buy when the →
Cont. →market is going up on the assumption that the market will go up further - and sell when the market is going down on the assumption that it's going to go down further." - Harry Markowitz
→ solution: Don't sell out, rebalance.
Decide how your going to diversify;
Allocate a certain percentage to stocks, bonds, & alternative investments. If you do 60% stocks + 40% bonds & the stock market soars one year and you are left w/ 70% stocks + 30% bonds, then & vice versa →sell stocks & buy bonds to rebalance to 60/40.
Share your plan w/ someone you trust so they can verify your not flying into side of mtn.
rebalancing forces you to buy low & sell high.
- overconfidence - overestimating our abilities & knowledge = disaster. humans have a perilous tendency to believe that they're smarter than they really are.
→ solution: Get real, get honest. unless you are Warren Buffet or Ray Dalio then you don't have an edge that will make you a market-beating investor. ★ just invest in index funds & hold through thick & thin
The paradox: by admitting you have no special advantage, you give yourself an enormous advantage.
- Greed & Quest for homeruns - it's tempting but victory goes to the steady survivors.
Achieve sustainable long-term results.
Financial media makes markets seem like a casino. "The stock market is a device for transferring money from the impatient to the patient"
→ solution: It's a marathon, not a sprint.
checking performance of your stocks daily is like feeding candy to your brain; you get an endorphin hit but you have to realize it's addictive behavior & just stop it.
Instead of checking & consuming financial media from experts, consume a more wholesome diet; study Warren Buffet & Jack Bogle.
- Staying home - Humans tend to stay in comfort zones. Most americans only invest in the U.S. Stock market. Example: Sweden accounts for 1% of global economy, but Swedish investors have an average of 48% of their $ in Swedish stocks, whereas a rational investor would only invest 1% in such stocks.
→ solution: Expand your Horizons - by diversifying internationally, you decrease risk & increase returns.
- Negativity & loss aversion - your brain wants you to be fearful in times of turmoil... don't listen! "Negativity bias"
Remember: on average, corrections have occurred about once/yr since 1900, & bear mkts every 3 to 5 yrs. The best investors relish these times. Don't act irrationally
→ solution → preparation is key. have the right asset allocation & focus on long term.
Master the mind
review
- invest for long-term
- trade less
- lower fees
- be open to opposing views
- diversify globally
- control fears.
Real wealthCh. 9
- Real wealth is emotional, psychological, & spiritual
- live a magnificent life on your own terms
→ path to achievement ↓
- Focus - When you can't stop thinking about it, this intense focus unleashes a burning desire →
to achieve it. Your reticular activating system in brain will draw your attention to anything that will help achieve it.
- Go beyond hunger, drive, & desire, and consistently take massive action. Find the most effective execution strategy & remaining flexible. Learn from & model successful people.
- Grace - The more you acknowledge grace, the more you seem to have. A deep sense of appreciation brings brings more grace into our lives.
To create an extraordinary life, master the art of fulfillment. Truly & sustainably happy.
Principle 1: keep growing. Everything in life either grows or dies. Progress is key
Principle 2: Give - "You make a living by what you get. You make a life by what you give."
- ★ Find joy in every moment.
If disempowering thoughts come, then step out & use 90 sec rule
