This is part of our Rockstar Book Review series.
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“Unshakeable: Your Financial Freedom Playbook” Distills Top Drawer Investment Advice Down to the Bare Essentials
Most investment books are long, dry and overly complicated for most fledgeling investors, not to mention their more seasoned counterparts. Unfortunately, complexity can easily cloud fundamentals. This is not the case in this book. The reader gets the straight goods: the basic information needed to be successful and the reasons why the information represents sound advice.
The book is organized in three sections:
- The rule book on wealth that addresses market uncertainty and the fear of crashes, along with the real impact fees have on our returns and what we can do about it
- How to select investments and how to diversify in a way that insulates us from market volatility and risk
- How to overcome our tendencies to become our own worst enemy when it comes to building and protecting our wealth
#1. Addressing Uncertainty and What Erodes Returns
To say we are living in interesting times would be an understatement. Robbins addresses this fact up front. From the 2008-2009 crash to the continued unsettling nature of U.S. politics these days, it’s no surprise that an investment book written in 2016 and released in 2017 needed to address market uncertainty overall. The author used history and advice from five-star investors to help us understand that even in turbulent times, our reality is not much different than other times in history. Despite this, markets have a tendency to continue on a positive trend overall, as long as investors stay in the market over the long-term. It can feel as though it requires nerves of steel, but nerves of steel are only required if we keep constant tabs on the market and listen to the loud investment gurus featured on television.
His advice is to not pay attention to the market unless you’re making decisions, such as rebalancing your portfolio on a yearly basis, because the constant ups and downs can drive us crazy. Plus, if we’re in it for the long-term, the short-term ups and downs are inconsequential.
The second thing to watch for is fees. Fees are usually hidden and often egregious (yes, you are paying fees even if you think you’re not). Wall Street is in business to make money and financial firms only handle your money if there’s something in it for them. They are, first and foremost, out to maximize profits, just like any other corporate enterprise. We need to be informed of what the fees are (front loaded, back end, recurring, fixed, variable), as levied by the advisor, his/her firm and the fund companies in question. The total cost can be staggering, cutting an average investor’s returns in half!
#2. Choosing Prudent Investments and Mitigating Volatility & Risk
An important aspect of finding the right investments is where we’re getting our advice. Fiduciaries are the only source we can trust for unbiased advice, but not all financial advisers are fiduciaries. In fact, the vast majority of financial advisors are brokers, which means we’re asking sales people for advice. As Buffett would say, would you ask a barber if you need a haircut? And, to make matters worse, some fiduciaries are also brokers, which leads us to ask which hat they’re wearing when they’re advising us on fund options?! Robbins stresses that finding an advisor who is a fiduciary and only a fiduciary is akin to finding a needle in a haystack (thanks in part to the lure of highly-lucrative brokerage commissions). That said, it’s worth the effort to look because these fiduciaries are required to act in your best interest and are more likely to recommend funds that offer superior performance at a fraction of the cost of other investments (such as index funds).
Second only to receiving sound advice on the types of funds to consider is asset allocation, which can help reduce the volatility and risk associated with our portfolio. Robbins suggests the best advice is to hold a portfolio of stocks, bonds, real estate and other exploratory investments, that is in line with your objectives and personal financial goals. His contributor and business partner, Peter Mallouk, stresses that a cookie cutter approach is almost never appropriate. Instead, the portfolio we choose needs to match who we are and what we need, not one that is simply based on our age and risk tolerance.
Finally, Robbins stresses there are four rules to follow when selecting investments:
- Don’t lose money: the more money we lose, the more difficult it is to make up the lost ground.
- Look for what he calls “asymmetric rewards” (mitigate risk exposure and increase the potential payoff).
- Ensure investments are tax efficient (hint: actively managed funds usually are not due to the frequent buying and selling activity).
- Diversify (choose diverse, uncorrelated investments).
[T]he best investors are obsessed with avoiding losses. Why? Because they understand a simple but profound fact: the more money you lose, the harder it is to get back to where you started. (pg. 97)
#3. Protecting Ourselves…From Ourselves
We are our own worst enemy. We think we have nerves of steel…until we don’t.
Unfortunately for the average investor, fear is a powerful motivator. We need to establish a plan of action up front and agree on what action we will take and when. Better still, we need to select a co-pilot who we can check in with to help ensure we’re not doing anything off plan and/or rash. In fact, Robbins stresses that the best of the best investors always have a wingman/woman for just this type of sanity check. (This could be a fiduciary or a knowledgeable even-keeled friend who is consistently successful in his/her investment efforts.) Then, and only then, can we feel secure in knowing that we’ve reduced our potential to behave irrationally with our hard-earned money.
The single biggest threat to your financial well-being is your own brain. (pg. 142)
Care for one last piece of advice when it comes to self-management and optimizing our investment returns? Robbins tells us that the less we feel we need, the more likely we will be satisfied and successful over both the near and the long-term.
Tony Robbins packs a lot of wisdom from the legends of the investment community in a small package. The information is straightforward, sound and highly actionable. This book is a great investment reference to add to your library.
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