Book notes: Unshakeable by Tony Robbins

Unshakeable by Tony Robbins

Synopsis: “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 thought possible.

Robbins, who has coached more than 50 million people from 100 countries, is the world’s number-one life and business strategist. In this book he teams up with Peter Mallouk, the only man in history to be ranked the number-one financial advisor in the United States for three consecutive years by Barron’s. Together they reveal how to become unshakeable – someone who can not only maintain true peace of mind in a world of immense uncertainty, economic volatility, and unprecedented change but profit from the fear that immobilizes so many. Through plain English and inspiring stories, you’ll discover…

• How to put together a simple, actionable plan that will deliver true financial freedom
• Strategies from the world’s top investors on how to protect yourself and your family and maximize profit from the inevitable crashes and corrections to come
• How a few simple steps can add a decade or more of additional retirement income by discovering what your 401(k) provider doesn’t want you to know
• The core four principles that most of the world’s greatest financial minds utilize so that you can maximize upside and minimize downside
• The fastest way to put money back in your pocket: uncover the hidden fees and half truths of Wall Street – how the biggest firms keep you overpaying for underperformance” -Amazon

Opening thoughts:

I preordered this book as soon as I got the email promotion from Tony Robbins’ newsletter. It’s a Tony Robbins book and its about money, one of the most important things to understand. I feel like those reasons are two of the most compelling I can think of to ever pick up a book.

Key notes/ideas:

• The purpose of business is to produce happiness, not pile up money
• Commerce and philanthropy are two sides of the same coin
  • In free markets, you only succeed by providing a product or service others want (you prosper by meeting the needs and wants of others)
  • Philanthropy is all about meeting the needs of others
• By buying low-cost, broad-market index funds and holding them forever, you’ll receive your fair share of whatever return the financial market will provide over the long-term
• Being unshakeable is not only about money but a state of mind, unwavering confidence amidst the storm
  • You don’t have to predict the future to win the game
  • Focus on what you can control, not what you can’t
• Any decision made in a state of fear is likely to be wrong
• Important rule: fees matter!
  • Hedge fund: private fund for the high net worth investors, flexibility to bet in both directions of the market, have hefty management fees and share in profits
  • Mutual fund: public fund available to anyone, actively managed by team who assembles stocks, bonds, or other assets and routinely trade their holdings in hopes to beat the market
  • Index fund: requires no manager, the fund simply owns all the stocks in the index
• You can’t win the game unless you have the emotional fortitude to get in and stay in the game for the long-term
  • Like planting crops in the wrong season, to survive we have to do the right thing at the right time
• Compounding is a force that can catapult you to total financial freedom
• Lesson from celebrities: you’ll never earn your way to financial freedom. The real rout to riches is to set aside a portion of your money and invest it so that it compounds over many years. That’s how you make money in your sleep
• The stock market has been the best place for the long-term investor to build wealth
• When the market falls 10% it’s called a “correction”
  • When the market falls 20% from it’s peak, it’s called a “bear market”
  • The biggest danger is not a correction or bear markets, but being OUT of the market
• Freedom Facts:
  1. On average, corrections have occurred about once a year since 1900
     • A routine part of the game, they don’t last very long (longest was 2 months)
  2. Less than 20% of all corrections turn into a bear market
  3. Nobody can predict consistently whether the market will rise or fall
     • It’s delusional to think anybody can consistently time the market
     • Both Jack Bogle and Warren Buffet know timing the market is impossible
     • Financial forecasters are either liars or idiots
     • Market “seers” thrive by scaring the living daylights out of you and they’ve been wrong again and again and again
  4. The stock market rises overtime despite many short term setbacks
  5. Historically, bear markets have happened every 3 to 5 years
     • As the saying goes, history does not repeat itself, but it rhymes
  6. Bear markets become bull markets and pessimism becomes optimism
  7. The greatest danger is being out of the market
• Take responsibility as the market never took a dime from you. If you lose or make money in the market, it is because of a decision you made
• One thing that is healthy to fear is financial firms that charge clients outrageous fees for lousy performance
  • For finances, ignorance is not bliss. It is pain, poverty, disaster for you and your family, and bliss for the firms that are exploiting your inattention
• Wall street has evolved into an ecosystem that exists first and foremost to make money for itself
  • It is not an evil industry made up of evil individuals, it is made up of corporations whose purpose is to maximize profits for their shareholders
  • Mutual fund managers have no better chance of predicting the market than anyone else. The more decisions they make, the more chances they have to make a bad decision
  • For investors in an actively managed fund, the combination of hefty transaction costs and taxes is a silent killer, quietly eating away at the fund’s returns
• Capital gains tax: not a fair tax code as you will get hit with a tax even though you did not participate in the gains simply because you own it
• If there’s one thing in plentiful supply in the financial services industry it is active managers who will overcharge you for underperformance
  • When you buy 4-5 star funds, you are buying funds that have performed well, but may not in the future
  • The unicorns and superstars who beat the market over several decades (Warren Buffet, Ray Dahlio, Carl Icahn, Paul Turdo Jones, etc) are not only brilliantly clever but have ideal temperaments, enabling them to remain calm when markets are imploding and most people are losing their minds
  • One reason they win is they base every investment decision on a deep understanding of probabilities, not emotion, desire, or luck
• Regardless of the title for financial advisors, roughly 90% of the financial advisors in America are just brokers (get paid to sell financial products for a fee)
  • These brokers are simply sales people who want to sell the largest, most bloated products, regardless if they are any good
• The best financial advisors can add extraordinary value by helping you with everything from investing to taxes to insurance (invaluable holistic advice)
• Find out which of the three categories your advisor falls under: broker, independent advisor, or a duly registered advisor
  • Brokers don’t have to recommend the best product for you. The “suitability standard” they follow, that they must simply believe it is suitable for their client
  • For the financial industry, profits over people have become the accepted standard
  • In America, doctors, lawyers, and CPAs are legally required to act in the best interest of the people they help. Financial advisors are not
  • The system is riddled with conflicts of interest that it puts you in a highly vulnerable position
  • About 10% are registered investment advisors, aka RIAs or independent advisors
    • Only 1.6% of financial advisors are truly and pure registered independent advisors as the rest can register as both
• Financial advisor schemes:
  • Pretending to be a fiduciary, but sell a sister company’s funds and keep all the fees in-house
  • Adding an additional fee for doing nothing
  • Getting paid a commission from investment companies but simply calling it a “consulting fee”
• Criteria for high fiduciary, high sophisticated advisor
  1. Look for credentials
  2. Find someone with a breadth of experience that can help with your finances long-term
  3. Make sure your advisor has experience in working with people just like you
  4. Important to make sure you and your advisor are aligned philosophically
  5. Find an advisor that you can relate to on a personal level
• Key Questions to ask any advisor:
  1. Are you a registered investment advisor?
  2. Are you or your firm affiliated with a broker dealer?
  3. Does your firm offer proprietary mutual funds or separately managed accounts?
  4. Do you or your firm received any 3rd party compensation for recommending particular investments?
  5. What’s your philosophy when it comes to investing?
  6. What financial planning services do you offer beyond investment strategy and portfolio management?
  7. Where will my money be held?
     • A fiduciary advisor should always use a 3rd-party custodian to hold your funds
• 4 Core Principles of your investment playbook
  1. Don’t lose
     • “How can I avoid losing money?”
     • The more money you lose, the harder it is to get back to where you started
     • Design the right asset allocation so that you’ll be okay even if you’re wrong
  2. Asymmetrical risk/reward
     • Protect the downside
  3. Tax efficiency
     • Income tax can be 50%, and so can capital gains tax
     • Long-term capital gains can be 20% which is way lower
     • It’s not what you earn but what you keep. This is real money you can spend, reinvest, or give away to improve the lives of others
     • Steer clear of actively managed funds, especially ones that trade a lot
       • One benefit of index funds is that they keep trading to a minimum which means your tax bill is going to be lower
     • Your goal is to always maximize the net. The gross returns can be phony
  4. Diversification
     • 4 important ways to diversify:
       1. Diversify across different asset classes
       2. Diversify within asset classes
       3. Diversify across markets, countries, and currencies around the world
       4. Diversify across time
     • David Swenson recommends diversifying using low-cost index funds in 6 important asset classes:
       1. U.S. stocks
       2. International stocks
       3. Emerging market stocks
       4. Real estate investment trusts (REITs)
       5. Long-term U.S. treasuries
       6. Treasury inflation protected securities (TIPS)
     • Ray Dahlio: by owning 15 uncorrelated investments, you can reduce your overall risk by about 80% and you will increase the return to risk ratio by a factor of 5.
• You can’t outsource important decisions in your life, like your finances
  • If you live in fear, you’ve already lost the game before you’ve begun
  • Bear markets are either the best of times or worst of times depending on your decisions
• 2 Ways to prepare for market turmoil:
  1. You need the right asset allocation (proportion of portfolio invested in different types of assets, such as stocks, bonds, real estate, and alternative investments)
  2. You must be positioned conservatively enough with some income set aside for a rainy day so that you won’t be forced to sell when stocks are down
• 90% of surviving a bear market comes down to preparation. 10% is all about how you react emotionally in the midst of a storm
  • Invest at the point of maximum pessimism when bargains are everywhere
  • Bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked down price
  • As much as possibly, try to keep a financial cushion so that you’ll never have to raise cash by selling stocks when the market is crashing
• Bonds are essentially loans
  • Treasury bonds = government
  • Municipal bonds = city, state, or county
  • Corporate bonds = for companies like Microsoft
  • High-yield/junk bonds = less dependable companies
• Any investments other than stocks, bonds, and cash are defined as “alternative investments”
  • Includes exotic assets such as paintings, rare wines, vintage cars, priceless jewels, and a hundred thousand acre ranch
  • Many alternatives are hard to sell, tax inefficient, and laden with expenses
  • However, they have 2 attractive attributes: they can sometimes generate superior returns, and may be uncorrelated with stock and bond markets which will help diversify your portfolio and reduce overall risk
  • 5 alternatives worth mentioning:
    • REITS: no hassle, low-cost way to diversify both geographically and across different types of property for people who can’t afford to invest directly into real estate
    • Private equity funds: high fees but can generate great returns
    • Master Limited Partnerships (MLPs): publicly traded partnerships that typically invest in energy infrastructure including oil and gas pipelines
      • Sometimes recommend because they pay out a lot of income in a tax efficient way. Doesn’t make sense for young investors with an IRA, but good for old investors with a large, taxable account
    • Gold: some people swear by it, but Peter believes it generates NO income and is not a critical resource
      • Historically, stocks, bonds, real estate, and energy commodities have outperformed gold
    • Hedge funds
• The type of assets you own should be matched to what you personally need to accomplish and your specific needs
• Key Guidelines for Constructing your portfolio
  1. Asset allocation drives returns
  2. Use index funds for the core of your portfolio
  3. Always have a cushion
     • maintain appropriate amount of income producing investments
  4. Rule of 7
     • Ideally, have 7 years of income set aside in income producing investments such as bonds and MLPs. You can start small like 3-6 months worth, and then work your way up
  5. Explore
     • While the core of your portfolio may be index funds, at the margins it can make sense to explore additional strategies that may offer a reasonable chance of out-performance
  6. Rebalance
     • This forces you to do the opposite of what unsuccessful investors do, it makes you buy the underperforming asset
• The biggest barrier to your financial success is YOU
  • In every area, we have the tendency to be our own worst enemy. Our brains are wired to avoid pain and seek pleasure. We instinctively yearn for whatever feels likely to be immediately rewarding
• What counts is our beliefs about reality. Beliefs are what delivers direct commands to our nervous system
  • Beliefs are nothing but feelings of absolute certainty governing our behavior
  • Handled effectively, they can be the most powerful force for creating good
  • All we need is a system of simple solutions, checks and balances to neutralize or minimize the harmful effects of our faulty wiring
  • Psychology either makes you or breaks you, so it is imperative to have a robust system to keep you on track
    • 80% psychology, 20% mechanics
  • Psychological mistakes:
    • Seeking confirmation of your beliefs. The best investors welcome opinions from reputable sources that contradict their own
      • Confirmation bias: the human tendency to seek out and value information that confirms our own preconceptions and beliefs. Also leads us to avoid, undervalue, and disregard any information that conflicts with our beliefs
      • The endowment affect: investors place greater value on something they already own regardless of its objective value
        • Solution: ask better questions and find qualified people who disagree with you
    • Mistaking recent events for ongoing trends. Most investors buy the wrong thing at exactly the wrong moment
      • Recency bias: recent experiences carry more weight in our mind when evaluating the odds of something happening in the future
        • Today’s winners tend to be tomorrow’s losers
      • Regularly rebalance your portfolio once a year
    • Overconfidence. Overestimating our abilities and our knowledge is a recipe for disaster
      • If you buy and hold index funds, you can get the market’s return without the triple burden that active investors must carry
        • Exorbitant management fees, high transaction costs, hefty tax bills
      • If you cannot add value or create asymmetry, then the best thing you can do is minimize costs
    • Greed, gambling, and the quest for home-runs: it is tempting to swing for the fences but victory goes to the steady survivors
      • We all have the tendency to want the biggest and best results as fast as possible rather than focusing on small, incremental changes that compound overtime
    • Staying home
      • Home bias: leads people to invest disproportionately in their own countries and markets. Too much in their own employer’s stock and their own industry
    • Negativity and loss-aversion
      • Your brain wants you to be fearful in times of turmoil. Don’t listen
      • Best way to handle turmoil is to prepare for it
• 3 Steps to Achieving Anything
  1. Focus
  2. Take massive action
  3. Grace (or luck or God)
• The art and principles of fulfillment
  1. We must keep growing
  2. You have to give to feel fully alive
     • The fundamental nature of a human being is not to be selfish
     • We are driven by our desire to contribute on a deep level. We want to share, it makes our lives richer
• If you’re not happy, you can’t have a magnificent life no matter how fat your wallet may be
  • Money doesn’t change people, it just magnifies who they really are
  • Success without fulfillment is the ultimate failure
• We are always in one of two states: high energy or low energy
  • An undirected mind operates naturally in survival mode, constantly identifying and magnifying potential threats to our well-being
  • Your sense of suffering is cause by your undirected mind being engaged in one or more of these particular patters of perception
    • Trigger 1: loss
    • Trigger 2: the thought of less
    • Trigger 3: the thought of never
• The secret to living an extraordinary life is to take control of the mind. It alone with determine if you live in a suffering state or a beautiful state regardless of your financial freedom or lack thereof
• Our lives are shaped by our decisions, not our conditions
  • One of the biggest decisions is deciding who you will spend time with
  • The most important decision is “are you committed to being happy no matter what happens to you?”
    • All you have to do is commit your heart and soul to find something you can appreciate in every moment
    • When you catch yourself in a stressful state signified by tension, give yourself 90 seconds to calm down and withdraw from that state
    • Find something to appreciate in the moment. You can’t suffer and appreciate at the same time
• The true wealth we all want is an abundance of joy. There is a real advantage in many areas of life to being happy
• 2-Minute Meditation Technique
  • Your heart always knows the answer to the problem you are stressed about
• Trade your expectations for appreciation and your whole life changes in a moment
• Woman who was a pianist and survived Nazi concentration camp who sees joy and beauty in every moment
• Living in a beautiful state is the ultimate jackpot and treasure. It is rarer and a greater achievement than becoming a millionaire or billionaire
• The secret to living is giving
  • There can be no greater gift than for your life to have meaning beyond itself
  • The psychological shift from scarcity to abundance makes you wealthy and brings you a glorious sense of freedom
• Putting together a plan for your death
  • Because Prince didn’t take the time to plan and protect his estate of $300 million, it will be tied up in court for years, not go to his family, and the government is guaranteed at least $120 million or 40% of it
  • Family office services at Creative Planning: if you don’t have a financial advisor, tax expert, insurance specialist, and an attorney, you can get a second opinion from them
  • Health care power of attorney, and financial power of attorney
  • A Living Will to direct doctors which kinds of procedures you would like in certain scenarios
  • Core essentials to reducing your taxable income and increasing your tax efficiency
    • Setting up a will and key decisions: who are the beneficiaries and who gets what? Who will be your child(ren)’s guardian? Who will be the executor of your will, to make sure these things happen? Do you want funds to be distributed directly to recipients or into trusts on their behalf?
    • The point of probate is to allow creditors to receive payment you owe, and allow time for your executor to receive money owed to you
      • Probate involves payment of taxes and debt and distribution of what is left under court supervision
      • Downsides of probate: control of assets rely on courts, time as it can take a minimum of 6 months, costs can be in the tens or hundreds of thousands, and privacy as it is public record for personal information
    • Trusts should be the center of estate planning for all people
    • Estate tax planning: the IRS will allow you to donate or give away $5.45 million over your lifetime, aka “Lifetime Exemption”
      • The IRS also allows you to give away $14,000/year to whomever you choose that doesn’t count towards your lifetime exemption, aka “annual exclusion”
    • Living trust: all assets in trust avoid complex, state-run proceedings of probate
    • Irrevocable Trust/Asset Protection Trust (own nothing, control everything): considered a separate legal entity so the assets inside it are not subject to estate tax. It can also protect your assets even while alive
      • Can give annual gifts by putting into irrevocable trusts for beneficiary
      • Irrevocable Life Insurance Trust (ILIT): Holding life insurance, able to avoid both income tax and estate tax
    • Insurance
      • Life insurance: term life insurance is the most appropriate for most Americans
      • Homeowners insurance
      • Umbrella policy
    • Giving back and donating to charity can play a huge part in tax efficiency

Closing thoughts:

Maybe I’m biased, but its hard to not love a guy like Tony and all he does for people. You can tell everything he does comes from the hard. Because of this, it really legitimizes the information in my head. I follow Tony’s teachings like the gospel. It’s one of those things where you really have to analyze who you’re listening to. If you buy someone’s opinion, you buy their results. Tony undoubtedly lives a life I would love to live, so I readily follow his advice.

Moving forward though, I think this was a great compliment to Money: Master the Game. Pretty much the same principles, just a bit updated, a lot more concise, and very actionable. Not only that, in a typical Tony fashion, the last 10% or so ends on mindset. As Tony says, results are 80% mindset and 20% mechanics. He really stresses the importance of having a wealthy mindset before even attempting to have financial freedom because without gratitude, money will not give you fulfillment.

Again, this is one of those books I would highly recommend for myself if I could go back in time (though this book was published last month so that would be impossible, haha). I even dare to say that this book has made it into my personal Top 5 most recommended reads.

Nutshell: Tony gives the goods on how to become financially Unshakeable.

Rating: 5/5

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