Summary

Overall a good book that prepares you to save for retirement regardless of age. Would highly recommend picking it up if you aren’t sure what to to about saving for retirement gives good direction on what to pick and what to avoid or just to look for in general.

Notes

TLDR; The book the leads prepares you to save for your retirement regardless of age

This is an awesome book from Tony Robbins it starts with you asking yourself 5 questions:

  1. What do I really want?
  2. What is important about it?
  3. How will I get it?
  4. What is preventing me from having it?
  5. How will I know when I am successful?

You Will find you quality of life in the quality of your questions.

The best way to achieve what you want in your life is to find people who have already achieved what you want and then model their behavior.

Index Funds: A way for the investor to match, or mimic the markets, away anyone, even with a small amount of money can own a piece of the entire market. i.e a basket or list of stocks like the s&p 500. Vanguard funds

If you work for a living, you’re trading your time for money. Frankly, its just about the worst trade you can make you can always get more money, but you can’t get more time.

Money just magnifies who we are…

The Ultimate Goal => giving back

Goes Through the old system (Pension and 401k) vs. the new system (401k only).

Stock market has been the best financial long-term investment over the last 100 years.

Asymmetric risk important

Investment Products for Asset Allocation:

Broker vs. Fiduciary:

  • Broker: basically a salesperson just has to provide you with a product that is suitable it doesn’t matter who benefits more.
  • Fiduciary - Legally have to remove an potential conflicts of interest or at a minimum disclose them and put the clients need before their own.

Failure of Mutual Funds:

  1. 96% of actively managed mutual funds fail to beat the market over any sustainable amount of time.
    • Only place this doesn’t quite hold true is emerging markets.
  2. Four and five star funds of the 248 five-star rating only 4 kept that rating after 10yrs.
  3. High fee’s normally pay 3,000% more fee’s for inferior performance. Fee’s work the same way as compounding interest 1% vs. 3% can be about a factor of 2x for 100,000 with a growing rate of 7%.
  4. Breaks down each of the fee’s you can expect to see with mutual funds most of which they don’t have to disclose.
  5. Returns are time-weighted (from day 1) so doesn’t correctly report returns.

6 Human Needs:

  1. Certainty/Comfort:
    • Need to feel in control and to know whats coming next so we can feel secure.
    • The higher the need for certainty the less risk you’ll be willing to bear.
  2. Uncertainty/Variety:
    • Need change in your life its hard to grow if you have nothing to push back against.
  3. Significance:
    • Our need to feel special, unique, or needed.
    • Spending a lot of money can make you feel significant, and so can spending very little
  4. Love and Connection:
    • Love is the oxygen of life
    • The 1st 4 need are need of the personality
  5. Growth
    • Need to make you fill fulfilled.
    • Need something of value to give.
  6. Contribution
    • The secret to living is giving
    • The secret to wealth is gratitude

Compound interest Example:

2 people invest:

  1. 80,000 (4,000/yr. x 20yrs. @ 10%) started @ 20
  2. 100,000 (4,000/yr. x 25yrs. @ 10%) started @ 40

Person 1 would make 600% more than person 2

Cool Story:

  • When Ben Franklin died in 1790 he left $1,000 to Boston and Philadelphia. With strings attached specifically the money was to be invested and not touched for 100 yrs. At that point each city could withdraw up to 500,000 for designated public works projects any remaining money could not be touched for another 100 yrs. Finally 200 yrs. after Franklin’s death in 1990 amounted to approx. 6.5 million

Summary of Sections:

  • Section 1: Welcome to the JungleL the Journey begins with this step 1st step
    • All about compounding interest.
  • Section 2: Become the insider know the Rules before you get in the game
  • Section 3: What’s the Price of Your Dreams? Make the Game Winnable
  • Section 4: Make the most Important Investment Decision of you life
    • Where you put your money and in what preportion
    • All successful people say asset allocation
    • Dividing up what your investments into buckets that are secure and give you piece of mind versus buckets that are riskier.
  • Section 5: Upside without the Downside: Create a Lifetime Income Plan
    • Explore creative ways you can step or drastically limit losses and increase your gains.
  • Section 6: Invest like the .001% The Billionaire’s Playbook
  • Section 7: Just do it, Enjoy it, Share it

True Mastery Require 3 Levels:

  1. The first is cognitive understanding.
  2. Emotional Mastery
  3. Physical Mastery

3 Forces that can Achieve Greatest Returns:

  1. Asset Allocation
  2. Diversification
  3. Tax Efficiency

Try to only get Financial Vehicles with:

  1. 100% guarantee on deposits
    • Can’t lose money and you keep control
  2. Upside without the Downside
    • Your account value growth will be tied to the market
    • if it goes up you participate if down then lose nothing
  3. Tax Deferral on Growth
  4. A guaranteed lifetime income stream where you have control and decide when to turn it on
  5. Income payments tax free if structured correctly
  6. No management Fee;s

Asset allocation / Diversification:

Talks about diversifying into different buckets listed below:

  1. Peace of Mind Bucket - safe investment that you lock up and hide the key
    1. Cash/Cash Equivalents
      • Emergency fund
      • Normally this is the amount you keep in your bank account
      • Money Market Account used a lot for this bucket
      • virtually no return but also no really risk.
    2. Bonds
      • Fixed income investments because they are a promise to pay principle with agreed upon interest.
      • Bond increases in value when interest rates go down and decrease when they rise.
    3. CDs
      • Certificates of deposit basically loaning money to the bank
      • Taxes your cash for fixed rate of interest
      • Insured by FDIC
      • Can buy market linked CDs
    4. Your Home
      • Should not be thought of as an investment
      • When adjusting for inflation US housing prices have been flat for a century
      • The only time they have increased significantly is during a bubble
      • Can rent home and also get tax benefits
    5. Pension
      • If you have one keep in this bucket though these days they are rare.
    6. Annuities
      • If done right can give you guaranteed income for life
      • Like private pensions if done right
    7. Life Insurance Policy
      • Term life will suffice for most.
      • some life insurance policies can provide you with income for life while still alive
    8. Structured Notes
      • Engineered safety for investors
      • Not covered by FDIC
      • i.e currently JP Morgan has 7-year structured note with 100% downside protection (can’t lose initial investment) 90% of upside game of s&p 500
      • Sacrificies liquidity
    9. Treasury Bonds
      • Backed by full faith and credit of government
      • Types:
        1. T-Bills:
          • Government debt obligation coming due in less than 12 months
        2. T-Notes
          • Mature in 1-10 yrs fixed interest rate you get interest rate payment every 6 months
        3. T-Bonds
          • Mature in 10-30 years.
        4. TIPS:
          • Before opposite of most… will rise in inflation
          • TIPS go up when rates rise treasuries go down use this to hedge against bets.
    10. Corporate Bonds
      • Issued when corps want to raise money, acquisitor dividends
    11. Municipal Bonds
      • State, city, or county needs to raise funds for big public works
      • Exempt from taxes
  2. The Risk / Growth Bucket
    • What ever is placed in this bucket you have to be ready to lose.
      1. Equities
      • stocks
      • ETF’s (exchange traded funds)
        • Groups of stocks like mutual funds or index funds, but you can trade them like individual stocks
        • Normally follow a theme i.e gold, small-cap, municipal bonds, and trace an index.
        • When buying shares of etf not buying actual shares of stock but rather buying shares in an investment fund that owns those assets.
        • Can give you quite a bit of diversity at a low cost
          1. High Yield Bonds
      • Reason they are called junk bonds 3. Real Estate
      • For growth better, the nobel economist Robert Shiller told me that you’re better off investing in REIT;s than owning your own home.
      • Two ways to make money along the way or when you sell on appreciation. 4. Commodities
      • Includes gold, sliver, oil, coffee, cotton, and so on.
      • Gold has been considered the ultimate safe haven, so is good to have in portfolio just in small amount. 5. Currencies
      • Trading currencies higher or lower not for the faint of heart. 6. Collectables
      • Art, wine, coins, etc… requires special knowledge of the domain 7. Structured Notes
      • The ones without 100% principle protection belong in this bucket other wise they belong in the safety bucket.
      • Should always purchase through RIA to save money.

3 Factors to consider:

  1. Stage in Life
  2. Risk Tolerance
  3. Available Liquidity.

3 Factors to Keep in Mind when investing

  1. Dollar-Cost Averaging
    • Allows you to diversify across time
    • Asset Allocation is the theory dollar-cost averaging is how you execute
    • Goal take emotion out of investing
    • When you invest on a set schedule, with the same amount invested each month or week in exact accordance with asset allocation plan the fluctuations in the market work to increase gains.
  2. Rebalancing Act
    • To be successful need to rebalance portfolio at regular intervals
    • Should rebalance twice a year
  3. Tax Harvesting
    • Legal way to lower taxes while keeping portfolio balanced
    • Using losses to write off taxes increasing gains

2 General Categories of Annuitites

  1. Immediate Annuities
    • Best for retirement age or beyond
    • Immediate annuities beat every other potential vehicle for providing a guaranteed lifetime income. Also have Mortality Credits
    • By pooling the risk the annuity buyer who live a long time gets the benefit. Those who die early will leave money on the table.
  2. Deferred Annuities
    • Give insurance company money in one lump sum or over a period of years
    • Instead of receiving immediate income returns are reinvested in a tax deferred environment.
    • 3 Types:
      1. Fixed:
        • Fixed guaranteed rate of return every year independent of market.
        • A lot like CD or bond just with different rates
      2. Indexed:
        • Rate of return tied to market get % of upside with no downside
      3. Hybrid “indexed”:
        • Get benefits of indexed annuity with he addition of a “lifetime income” rider. Give you the ability to turn on a paycheck for life.
        • Ultimate income solution
        • locks in gains
        • Fixed Indexed Annuity (FIA)
  3. Variable Annuities - Avoid

The Ultimate Income Solution

  • Fixed indexed annuity (FIA)
  • Fixed

All people Interview shared 4 Common Obsessions

  1. Don’t Lose:
    • While driven to make money obsessed with not losing it
    • Takes 100% gain to get back a 50% loss.
  2. Risk a Little to Make a Lot
    • They take asymmetric risk i.e risk a little to get a lot
  3. Anticipate and Diversify
    • anticipate to get a symmetric risk/reward and diversify in case they are wrong.
  4. You’re Never Done
    • Never done learning, earning, growing, and giving.

People in This Book: a.k.a Meet the Masters

  1. John C. Bogle -
    • Creator of the index fund
    • Founder Vanguard group #1 mutual fund company in the world.
  2. Ray Dalio - Founder largest hedge fund 160 billion assets.
    • Return of nearly 10% annually for last 40 years
    • Would of made money 85% of the time with only 6 losees
    • Worst loss 3.93%
    • Called on by governments a lot to craft financial intrusments.
    • His main Alpha fun has produced 21% annualized returns
    • Developed all weather fund for kids
    • Most managers have 50% stocks and 50% bonds for “balanced portfolio”
    • Using this approach hoping for 3 things:
      1. We hope stocks will do well
      2. We hope bonds will do well
      3. We really hope both don’t drop at the same time (2008 proved this wrong)
    • This is not balanced because the risk between stocks and bonds is not the same stocks are about 3x more risky
    • 4 Things that Move the Price of Assets:
      1. Inflation
      2. Deflation
      3. Rising Economic Growth
      4. Declining Economic Growth
    • This results in 4 seasons for the economy… in each one there is a product that performs well
      1. Higher than expected inflation (rising prices)
      2. Lower than expected inflation (deflation)
      3. Higher than expected economic growth
      4. Lower than expected economic growth
    • 25% of risk should go in each of the four categories *
    • Portfolio:
  • Asset Class (Index Funds) Weight Stocks 30% Intermediate term treasuries 15% Long Term Bonds 40% Gold 7.5% Commodities 7.5%
    1. David Swenson
    • One of the greatest institutional investors of all time.
      1. Kyle Bass
    • A man who turned 30 million investments into 2 billion.
    • Correctly predicted Housing crash and European debt crises
    • Thinks the new place to invest is Japanese bond market
      1. Carl Icahn
      2. Mary Callahan Erdoes
      3. Charles Schwab
    • The people’s broker
    • Founder and chairman of Charles Schwab Corp
    • 98% into index funds because they have predictable outcomes
      1. Paul Tudor Jones
    • Well known for predicting market down turns
    • Robin Hood Foundation
    • Uses 200 day moving average of closing prices to make investments
    • Demands a 5 to 1 risk to reward ratio so that he only needs a 20% hit rate
      1. Mary Callahan Erdoes
    • a lot to say on work life balance and management style
    • Invest for the long-term only take money out if you truly need it
      1. T. Boone Pickens: Made to be Rich, Made to give
    • Corporate Raider/ Shareholder Activist
    • opposed to most people in the book is just in the energy sector
    • Thinks dependence on foreign oil single greatest threat
    • Work ethic and education are the main things you need to know
    • Downstream is the place to invest for the future in America despite the fact he has been mainly upstream in his career
      1. Marc Faber
    • Commonly referred to as Dr. Doom
    • Money never disappears in a fiat money system what disappears is credit
    • Position 25% stocks, 25% gold, 25% cash & bonds, 25% real estate
    • Not important as much what you buy but more the price you pay.
      1. Sir John Templeton The Greatest Investor of 20th Century
    • Buy when there is blood in the streets
    • The more you help others the more you will prosper personally.
    • Only sell an asset when you have found something that is a 50% better bargain
    • Usually twice every 12 years there is a severe bear market in a major nation, but they don’t occur at the same time

3 Key Decisions:

  1. What are you going to focus on?
    • Only focus on things you can control
  2. What does this Mean?
    • Quality of life is determined by meanings we give things
    • Concentrate on being a giver
  3. What am I Going to Do?
    • Concentrate on 3 things you want to accomplish each day

Scientifically Proven Ways to Spend Money and Increase Happiness:

  1. Investing in Experiences:
    • Travel
    • Learning new skill
    • taking courses
  2. Buying time for Yourself
    • Outsource most dreaded tasks like cleaning
  3. Investing in Others
    • Giving money away
    • No one can take away happiness
    • Volunteering at least once a week yields improvement in well being tantamount to salary increase from $20k to $75k

Quotes:

  • 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
  • To avoid criticism, say nothing, do nothing, be nothing. — Aristotle
  • The secret to getting ahead is getting started. — Mark Twain
  • A moments insight is sometime worth a life’s experience. — Oliver Wendall Holmes
  • Their is no friend as loyal as a book. — Ernest Hemingway
  • Riches are not an end of life, but an instrument of life. — Henry Ward Beecher
  • No person is free who is not master of himself. — Epictetus
  • When a man with experience meets up with a man with money. The man with the experience leaves with the money and the man with the money leaves with the experience.
  • I don’t think people are looking for the meaning of life as much as they are looking for experience of being alive. — Joseph Campbell
  • My Wealth has come from a combination of living in America, some lucky genes, and compound interest. — Warren Buffett
  • Compound interest is the most important invention in all of human history. — Albert Einstein
  • The man on top of the mountain didn’t fall there. — Vince Lombardi
  • I can’t afford to waste my time making money. — Jean Louis Agaissiz
  • Can you remember when the times were not hard and money not scarce? — Ralph Waldo Emerson
  • What you get will never make you happy. Who you become will make you very happy or very sad. — Jim Rohn
  • In any moment of decision, the best you can do is the right thing, the next best is the wrong thing, and the worst thing you can do is nothing. — Theodore Roosevelt
  • The secret of all victory lies in the organization of the non obvious. — Marcus Aurelius
  • American’s should convert at least half of their retirement savings into an annuity — US Treasury Department
  • We make a living by what we get. We make a life by what we give. — Winston Churchill
  • Age is an issue of mind over matter. If you don’t mind then it doesn’t matter. — Mark Twain
  • Success without fulfillment is the ultimate failure. — Tony Robbins
  • Wealth is the ability to fully experience life
  • At the age of 18, I made up my mind to never have another bad day in my life. I dove into an endless see of gratitude from which I have never emerged. — Dr. Patch Adams
  • Everyone can be great because everyone can serve. — MLK
  • Being the richest man in the cemetery doesn’t matter to me. Going to bed at night saying we’ve done something wonderful, thats what matters to me. — Steve Jobs