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Good Read: Unshakeable – Your Financial Freedom Playbook by Tony Robbins(8-min read)

Came across the name Tony Robbins multiple times as he is frequently mentioned by some of the successful and full-time local stock traders that I follow. Turns out he’s a global name in investments, not the technical skills type, but more of investments and trading psychology, mentoring and partnering with the billion-dollar names in the investment world. His talks are attended by thousands from all over the world. Reminds me of Wendy Rhodes in the Billionaire series but level her up a billion times, and maybe fusion her ala Dragon Ball Z with Wilson Sy.

Among his books, the Unshakeable: Your Financial Freedom Playbook is the first and only book I’ve read, so far. The experiences he mentioned in the book are mostly from the US, but the lessons are definitely applicable elsewhere. Likewise, the book is a friendly read to newbies seeking guidance and a good reminder to the more experienced ones in investing, be it in the stock market, bonds, real estate etc. Caveat though, he is leaning towards long-term investing, on how to weather and survive the ups and downs of the market (that’s why I said more suitable to newbies) but I guess the psychology behind it shall also be helpful to short-term and swing traders. Sharing my notes below and a glimpse of what to expect from the book.

The book is divided into 3 sections: (1) Wealth: The Rule Book, (2) The Unshakeable Playbook, and (3) The Psychology of Wealth.

A GOOD REMINDER

  • For long-term investors and wealth building, market corrections and bear markets are great opportunities to buy cheap, just like how Warren Buffet does it, buying when others are fearful, buying during maximum pessimism. Caveat here, risk only the money you can afford to lose, risk only the money you will not need in the short- to medium-term
  • Businesses are cyclical, economies are cyclical, hence the stock market (which represent economies and businesses) shall also be cyclical. This should be expected and anticipated, managed but not feared
  • Likens bear markets and corrections into winter. Winter is coming (annually), but so is spring and summer afterwards. The trick is how to survive the winter, how to make the most of out it.

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FREEDOM FACTS

He shared seven freedom facts in the book, listed 3 of them below:

  • Fact 2: Less than 20% of all corrections turn into bear markets (at least in the US)
  • Fact 3: Nobody can predict consistently whether the market will rise or fall
  • Fact 7: The greatest danger is being out of the market

Key takeaways: Corrections are frequent occurrences (almost every year in the US since 1900) so it should be nothing new for investors, it’s like a 3-day sale declared by malls frequently. And a smaller portion of that (20%) continue to become bear markets, so 80% of the time, the correction is just a pit stop and the bullish market continues. But say it does proceed into a bear market, chances are even the “experts” and “veterans” can only spot it when it’s already happening.

Nobody can consistently predict what will happen to the market, but for the long haul, at least the stocks indices are bound to go up because the index is a survival of the fittest (that’s why he also advocates investing in index funds). Consider the following graph recreated from the book (based on the research of Schwab Center for Financial Research):

Five hypothetical people invested differently since 1993, $2K per year for the next 20 years. Total amount saved over the course of 2 decades is $40K. Here are the varying results:

  • For Juan who stayed in cash (and low bank deposit rates), he’ll end up with $51K
  • For the perfect timer who was able to invest in all the market lows, he’ll end up with $87K
  • For the bad timer who invested in all worst days in the market (all time high before the plunge), he still came out with $72K
  • For Juan who invested immediately during recovery (a few days after the lows but missed the actual lows), he’ll still end up with $81K (big difference from the perfect timer but still not so bad!)
  • For Juan who used dollar-cost-averaging, he’ll end up with $79K

The one who lost is not the one with the bad timing, but the one who stayed in the sidelines and remained in cash for the last 20 years. Even the worst timer is able to grow his money substantially. It is very difficult, and actually futile, to time the market, especially for Juans who don’t even bother to monitor the markets, for Juans who are not equipped for short-term trading (or maybe uninterested). As such, Robbins’ suggested strategy is to be in the market for the long long term, through thick and thin. Note, stay with the index market and managed funds, not the selective trading of individual stocks because this requires much much effort and studies.

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INDEX FUNDS VS ACTIVELY MANAGED FUNDS

In Unshakeable, the effective way to be unshakeable and fearless in the seasonal market turmoils is to be invested in index-tracking funds, again not in select stocks, but in managed funds – because the index captures the survival of the fittest and the best companies over time. He points out that investing in actively managed funds can even be counter-productive because of higher management fees, precisely because it is actively managed.

He even pointed out the mediocre performance of fund managers in actively managed funds (because they earn from management fees anyway), whereas for index funds, very minimal management and trading is needed, they just copy the index and change it as and when the index changes (quarterly or longer). The discrepancy is so big that for the same amount invested in an index fund and an actively managed fund, the ending amount upon retirement is drastically different. Based on their simulation, the amount invested in actively managed fund will run out 10 years earlier than the money invested in index funds, all because of higher management fees.

Here in the Philippines, management fees are also published by the fund managers so better check them out before you decide which fund you will invest on. The cheaper it is, as long as it matches your investment OHA, the better.

MINIMUM REQUIRED TAXES

Aside from fees, Robbins is also particular about the taxes. Usually, even here in the country, returns are quoted in gross returns but what we actually receive is net of tax. As such, as investors seeking to maximize our wealth through investments, we should also explore all the legal means wherein we can pay less taxes on our investment income.

The PERA investment for our retirement carries tax benefits. Admittedly, here in the Philippines, Juan is not too mindful about the taxes on investments, maybe because we’re resigned to the fact that we cannot escape taxes, or maybe there’s a lack of tax exemptions for retail investments in the country, and if there are, it’s not being promulgated by the government (why would they? they need all the taxes they can get!)

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OPENNESS & DIVERSIFICATION

Here are some more concepts from Unshakeable:

Confirmation Bias

The human tendency to seek out and value information that confirms our own preconceptions and beliefs. This tendency also leads us to avoid, undervalue, or disregard any information that conflicts our beliefs.

We should welcome differing opinions and positions about the investments we have, as long as it is done respectfully. As long as it is a qualified, objective opinion, not just some troll or basher fooling around and with personal motive. Who knows, they might be correct and you’re might be wrong, at least you see both sides of the story and make wiser financial decisions from there. It’s good that we ask “What don’t I know?” from time to time. After all, it is not good to fall in love with a stock, or with any investment for that matter. Speaking of falling in love with a stock:

Endowment Effect

An emotional bias wherein investors place greater value on something they already own, regardless of its objective value. This makes it harder to part ways and buy something superior.

Don’t fall in love with a stock or an investment. Review your positions at least annually and see if there is a need to re-balance your positions.

Home Bias

Psychological bias that leads people to invest disproportionately in their own country’s markets and sometimes invest too heavily in their employers stock and their own industry.

Don’t put all your eggs in one basket. Diversification is key. Everything in moderation. For beginners, building a diversified investment portfolio locally through the years should be second-nature. As the investor matures, it’s then time to consider the countless opportunities internationally, especially during times when the country is experiencing inflation and a weak market (like now) while there are markets out there with strong growth trajectory.

In today’s world, investing globally is actually now possible through the internet. It can actually reduce overall risk as different markets and countries are imperfectly correlated. For other investment options available to Pinoys, download our #10Steps to a Richer Life book.

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IT GOES BACK TO WHAT’S INSIDE

At the end of the day, it’s not just wealth building, but attaining the emotions involved that we associate with wealth. As Robbins says, yes we need the money, but we strive to build wealth not for the money per se, but because of the feelings and emotions we associate with having wealth — happiness, love, security, achievement, fulfillment, etc.

In this journey towards financial freedom, through all the ups and downs, do not forget the secret to happiness and emotional wealth — the attitude of gratitude.

I leave you with these parting words from the book:

Anybody can make money […] the tools and principles you need are pretty simple […] harness the power of compounding, stay in the market for the long term, diversify intelligently, keep your expenses and taxes as low as possible, […] your odds of attaining financial freedom are extremely high.

But what if you achieve financial freedom and you’re still not happy? […] If you get what you want and you’re still miserable, the you’re really screwed!

As Truly Rich Club always reminds us, money is just a tool, financial freedom is a means, not an end. A means to a greater purpose, that is to love and give love to the world.

 

My Rating: ★ ★ ★ ★ ★ ★ ★ ☆ ☆ ☆

The book indeed talks about how to be unshakeable in this ever-changing and unpredictable investments world. The book is able to tell us how to “create peace of mind in a world of volatility.” Maybe I just expected a bit more technical know-how and, and modesty aside, something new in terms of trading mindset. Maybe because I was hyped about who the author is. A good reminder nonetheless to the initiated, and a good orientation for those just starting out.

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May you have richer life!

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