Unshakeable


Unshakeable
Author: Tony Robbins
Publisher: Simon & Schuster
Published: 2/28/2017
After interviewing fifty of the world’s greatest financial minds and penning the #1 New York Times bestseller Money: Master the Game, Tony Robbins returns with a step-by-step playbook, taking you on a journey to transform your financial life and accelerate your path to financial freedom. No matter your salary, your stage of life, or when you started, this book will provide the tools to help you achieve your financial goals more rapidly than you ever…

Book Summary - Unshakeable by Tony Robbins

Key Insights

As we usher in this era of uncertainty, it is critical, now more than ever, that we are savvy in our financial decisions. While it can be tempting to focus only on the chaos of the present situation, Tony Robbins encourages readers to plan for what lies ahead.

Let us not be guided by our fear, but instead, by possibility. We focus on our mental health and our physical health, but we must prioritize opportunities to improve our financial well-being too. Don’t let buying stock or the prospect of investing money scare you. In this highly readable financial literacy guide, you will learn how to make the market work to your advantage.

Key Points

Compound Interest

Throughout our education, some of us stealthily avoided any class with the word ‘accounting’ or ‘finance’ in the title. It is not that we did not care about managing our money or making the most of what we had. We simply felt unprepared to take on the complexities of financial markets in our ever-changing world.

So, with the economy more unpredictable now than ever, how can we overcome our fears and reap the best financial rewards possible?

It starts with recognizing patterns.

Humans are innately drawn to patterns and we can pick up on their nuances quickly, often unconsciously adjusting our behaviors to fit in with a particular sequence. For instance, if someone rattles off the numbers two, four, and six, we are quickly able to predict that the next value will be eight.

Financial markets operate similarly. Through diligent observation, patterns can be recognized that help potential investors determine the most effective time to invest.

One of these patterns is compound interest. Compound interest refers to money that is added to the initial sum of your savings over time, which ultimately adds value to an investment. Compound interest is the reason that you should start investing a portion of your paycheck right away--the more years that pass, the larger a return you will see.

Consider the following example.

Beginning on your 19th birthday, you decide to take $3,600 per year out of your annual earnings and invest it. Based on the average return of the U.S. stock market for the past century, you can expect this investment to grow by roughly ten percent each year. If you keep up with these investments, you will have $106,782 by the time you are 35.

The length of time really matters, though. For instance, if you saved $3,600 each paycheck from the age of 27 to the age of 35, your return would only be $53,775, approximately half as much. Those extra eight years of compound interest make a huge difference in the overall result!

Avoiding Loss

So, now you know that in order to achieve wealth, you need to start investing as soon as possible. But, there is more to successful investing than opening a random bank account and depositing a portion of your paycheck inside each month.

You must carefully examine the particulars of where you plan to invest and keep the following rule of thumb in mind: it is better to focus on avoiding losses than to aim for big gains.

And, by avoiding loss, we actually mean minimizing loss.

Anytime you invest your money anywhere, there is always a chance that the market will tank and your compound interest will not grow the way you want it to.

So, to offset this risk, you want to make sure that you are investing in safer options, even if they appear to have less earning potential. After all, no one knows for certain what the future holds and while previous trends can be helpful in assessing possible outcomes, the overall market leaves even the most proficient investors with many unknowns.

Consider a situation where you make a $1,000 investment and lose 50%. Okay, so now you have $500 and in order to get back up to where you started, you just need a 50% gain, right?

Not exactly.

The 50% gain would be coming from the $500 you have left, not the original investment amount, which would only bring you up to $750 rather than the initial $1,000.

Play it safe, because it is harder than you think to recoup gains.

Falling Prices

In making smart investment decisions, experts recommend employing a strategy that is called asymmetric risk/reward. To embody this approach, investors must seek out opportunities that are low risk with high reward.

One investor, Paul Tutor Jones, who is highly respected within the trading industry, utilizes a five-to-one rule in assessing potential asymmetric risk/reward situations.

As such, he only makes an investment if he is confident that he will be able to earn five times the initial investment. If Paul puts in $200, he will expect to earn $1,000, and if that does not seem feasible, it is not a smart investment.

With this mind, Paul can make poor investment decisions 80% of the time and still come out even, because of the buffer he builds for himself with the five-to-one rule. For instance, if Paul makes five $1,000 investments, he only needs one to reach his projected 500% earning goal in order to break even with what he spent.

Another way to make smart investment decisions is by investing in assets that are undervalued. Given that U.S. markets are currently in a COVID-19-inspired downturn, this could be an effective time to take advantage of this approach.

Essentially, due to economic difficulties across the board, stock prices are falling and it is now way less expensive to buy a stock than it was before. It is hard to say how long periods of economic struggle on a national scale will last, so it could be in an investor’s best interest to act quickly while the share prices are low.

Who knows what tomorrow will bring?

Tax Knowledge

The majority of us hate taxes because they are time-consuming to do and often lead to money owed to the government, but how many of us really understand the meaning behind what we write on those pesky forms?

Experts argue that there are a few tax-related terms that every American should know before they file.

Mutual Fund--A mutual fund refers to a type of investment that compiles stocks, bonds, and assets from a group of investors.

If you are going to invest in one of these, make sure you are aware that mutual funds trade their shares often, and therefore, their gains will be taxed at the higher short-term gains tax rate.

Index Fund--A distinguishing factor between a mutual fund and an index fund is that an index fund leaves you with significantly fewer investment fees and taxes.

If you are going to invest in one of these, you do not have to worry about managers who cost you a lot of money. Instead, you are investing in a portfolio of stocks from a specific index, such as S&P 500, which includes Apple and Microsoft.

Net sum--A net sum is the total return on an investment AFTER taxes and fees.

Gross sum--A gross sum, on the other hand, is the total return on investment BEFORE those deductions.

Pay more attention to the net sum when determining the quality of an investment.

Diverse Portfolio

There are four key ways to diversify your portfolio:

  • Across different asset classes
  • Within asset classes
  • Across different markets, countries, and currencies
  • Across time

Why is diversification important?

If you diversify, you ensure that your investments stay afloat even in the face of an unpredictable market.

Bottom line: do not put all of your eggs in one basket!

So, now we know that we must diversify and we must do so by considering the factors listed above. But what does each factor really mean?

Asset classes include stocks, real estate, or bonds, so rather than putting all of your money in stocks, for instance, you may want to spread some of your investments to real estate or bonds as well. This process is referred to as investing across asset classes.

Investing in asset classes is making multiple investments in one of the areas listed above. For instance, if you buy stock in both Microsoft and Apple, you are investing in the stock asset class.

The third factor of investment diversification is somewhat self-explanatory. When investing, consider the physical location of the company you are investing in. If you put money into a company based in China, one in the United States, and two in Germany, and the one in China goes under, at least you still have your gains from the other three investments.

Finally, we have to invest across time. Because markets are constantly changing, it is smart to space out your investments. For instance, if you invest in five stocks in five different companies, you might want to do the first two and then wait to do the last three. Why? Because if you do all five at once, you run the risk that all will follow similar market trends. If you spread the investments out, there is more variability in what will take place.

Following Your Instincts

Our brains are wired to fear loss. We actively react to the loss of money the same way that we respond to situations that are considered life-threatening. If we consider the way our ancestors lived many moons ago, we will recognize that we react to a crashing stock market in the same way that our ancestors responded to a tiger attack: not well.

For this reason, we cannot make financial decisions based on our feelings and emotions alone. We must be guided by rules and principles that keep us rational in the decision-making process. A good way to make sure we are always abiding by strict parameters is by creating a checklist each time we have a major financial decision to make. This checklist should list the criteria we are considering and ultimately act as a pro and con comparison to assist us in our choice.

The Main Take-away

One of the many oddities of human nature is that our brains react to the sudden loss of money in the same way that we would respond to a giant snake appearing in the middle of the road. With fear.

With this in mind, how can we overcome the ‘snakes in the road’ that deter us from living financially healthy lives?

Through pragmatism.

While humans are often encouraged to consider their emotions when making decisions, Unshakeable wants readers to do the exact opposite. Instead of acting on a feeling, individuals should be making their financial decisions based on a working knowledge of the tax process, portfolio diversification, compound interest, and a thorough understanding of several common types of investments.

And if you don’t have a working knowledge of these topics yet, Unshakeable is the perfect place to start.

About the Author

Anthony (Tony) Robbins was born in 1960 in North Hollywood, California. A staunch advocate for self-help books, Robbins has written multiple texts within this genre in addition to Unshakeable, including Unlimited Power and Awaken the Giant Within.

Robbins is also a motivational speaker, life coach, and philanthropist who is well-known for his seminars and infomercials.

Robbins and his wife, Bonnie, currently reside in Manalapan, Florida.

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