The Awesome Tony Robbins will Help you Master Money

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Tony Robbins has established an extraordinary career for himself.  Tony made a study of human achievement and understands what makes people tick. Using masterful communication he motivates people to live up to their full potential.

He is a successful life coach and adviser to the rich and powerful.  Tony raised himself up by his bootstraps to a level of extraordinary success.  I have learned much from him about human potential, emotional strengths, and ambition.

His books and audio programs have had a positive impact on my life.  I don’t always agree with him on everything (e.g. nutrition tips) but he is very persuasive.

In recent years, he has explored the realm of money.  In typical Tony Robbins fashion, he didn’t skim the surface.   He spent years researching and writing.  His interviews include some of the greatest minds in modern investing.

He has established his credibility as an expert in money. His $500M didn’t fall into your lap.  He has spent time learning from hedge fund managers and billionaires. Fortunately, he is now sharing some of what he learned with the rest of us.

His “money” books, “Money; Master the Game” and “Unshakeable; Your Financial Freedom Playbook.”  inspired this post.

“The single biggest threat to your financial well-being is your own brain.”

“And what counts is not reality, but rather our belief about it.

He offers up a set of solutions to help us cut the harm from our primitive brain thinking.

When interviewing the money “heavy-hitters” he received complex and conflicting advice.  His goal became to simplify the lessons. His study revealed common themes among their investment methods.  He distilled the principles into what he called The Core Four.

 

Core Principle 1: Don’t Lose

The investors he met with were obsessed with avoiding losses.  No one enjoys losing money. But these successful investors were always focused on avoiding loss.  They realize that recovering from a loss is an uphill battle.  They understand math. If there is a 50% decline in value it will take a 100% gain to get back to the starting line.  Going into every deal they explored what could go wrong.  They thought about how to reduce or mitigate any potential loss.

 

Core Principle 2: Asymmetric Risk/Reward

This is a variation of core principle 1.  If there is a potential loss, be sure any upside potential gain is several times larger. Having a limited or negligible downside with an unlimited upside gain is the ideal.  Those deals are out there if you look for them.  Richard Branson negotiated to return the airplanes if his Virgin Airlines failed.  That limited his downside loss but -if successful- preserved an unlimited potential gain.

 

Core Principle 3: Tax Efficiency

Taxes can wipe out 30% or more of your profits if you aren’t careful.  The most successful investors always consider the tax efficiency of any potential deal.  You and I should too.  If you are in the highest tax brackets you may lose half of what you earn to taxes. It isn’t the top line earnings that counts it is the cash you get to keep that goes towards building your wealth.

Disregard taxes and you will have far less to invest and compound.  Think and plan the location of your holdings. Low-cost stock index funds can be in your taxable account. Your real estate investment trusts (REITs) need to be inside your tax-deferred accounts.  Consider master limited partnerships (MLPs) for your taxable dollars.

 

Core Principle 4: Diversification

Don’t put all your eggs in one basket. Not all assets go up or down at the same time. You want to always have some investments that will do well in any economy. 

Now you understand the core principles. Let’s move on to common money mistakes and their solutions.

 

Six Money Mastery Mistakes

 

1.  Seeking Confirmation of Your Beliefs

Too many of us live in an information bubble. If we are conservative, we may watch Fox News or listen to Rush Limbaugh.  If you have a more liberal bent, you may enjoy NPR and the NY Times as your primary information sources.  Many investors get into trouble this way too.  If you hang out only with bullish optimists you may be blindsided by the next market crash.

 

2.  Mistaking Recent Events for Ongoing Trends

This is what psychologists call the “recency bias.”  It can appear as the “momentum factor” in investing.  After a stock crash, we become terrified of further loss since our brain is flooded by what happened.  We can’t put it in a perspective of 100 years of market history.

 

3.  Overconfidence

This is a big one, especially with physicians.  We know we are smart and can figure things out.  How hard could it be to predict or understand a financial market?  We forget that we are outgunned by the brains and technology on the other side of the trade.

 

4.  Greed, Gambling, and the Quest for Home Runs

We all love the big win.  We want to be able to brag that we bought Facebook stock in its early days.  How wise, prescient, and rich we are! This is also a road to poverty more than a road to extraordinary wealth.

 

5.  Staying Home

The U.S. economy has been dazzling for the last two centuries.  We tend to know only about our own country.  There is a whole world out there though.  Much future growth will come from developing countries. By investing in only your home country you lower your returns and increase your risks.

 

6.  Negativity and Loss Aversion

Behavioral economists proved that we despise loss much more than we cherish gain. We ruminate on minor losses and avoid future risks that could reproduce a painful event.  In the process, we prevent gains from embracing risks.
 

Six Money Mastery Solutions

 

1.  Ask Better Questions.  Seek Out Those Who Disagree.

Serious investors like George Soros or Warren Buffett seek out contrary opinions.  Could we ask a colleague for his thoughts?  One who tends to have opposite views of ours?  Could you come up with a strategic plan for scenarios that are the opposite of what you expect?

 

2.  Don’t Sell Out. Rebalance.

If stocks start to decline our animalistic nature starts to panic. We are urged to sell to avoid further losses. This is the opposite of what we should be doing.  One way to counteract this urge is to rebalance rather than sell.  If you start with a 60:40 mix of stocks to bonds and there is a stock market decline, you may end up with a 55:45 allocation.  To get back to 60:40 you will need to sell bonds and buy stocks.  It somehow seems less scary to do the right thing in this case if you are are doing some “rebalancing.”

 

3.  Get Real, Get Honest.

Admit that you are not the next Warren Buffett.  Instead of trying to reproduce what he did, do what he recommends: Buy broad-based low-cost index funds.  You aren’t better than the professional money managers who also can’t beat the index.  Get real.

 

4.  It’s a Marathon, Not a Sprint.

Try to avoid the quarterly earnings obsession. Financial markets are erratic in the short term but predictable in the long-term.  Invest for the long-term.  Make high-yield bets and keep your emotions in check during short-term chaotic episodes.

 

5.  Expand Your Horizons.

Buy some foreign assets. Consider international index funds. Consider overseas REITS.  International diversification is now easy and cheap.  Often foreign markets zig when the U.S. economy is zagging.  Enjoy that diversification.

 

6.  Preparation Is Key.

Have a financial plan and follow it. Know exactly what you will do when the stock market goes into a correction or bear market.  Learn from history and know how to apply its lessons.  Historical cycles repeat themselves.  Those who know what they will do in each scenario are those who profit.

 

What do you think? Do you agree that our own psychology and behaviors predict our wealth?

Do you think Tony Robbins has something to teach us about mastering our money?

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8 Comments

  1. I skimmed Tony’s book. I stopped reading when he started selling Fixed Indexed Annuities as a secret to wealth. I think in his second book he was much more negative about it though… Maybe I’m not remembering this well. WealthyDoc, why did you skip over his recommendation of crappy annuities?

    November 13, 2019
    Reply
    • FiPhysician,
      Ha!
      Good point.
      You are not his target audience. He likely has nothing to teach you.
      He actually has lots of bad advice in his book. And lots of self-serving promotion.
      I’m not a big fan of his “all-weather” portfolio either.
      I managed to pick out a few of his better points to share.

      November 13, 2019
      Reply
  2. Xrayvsn said:

    Very nice summary of important concepts. Getting and listening to contrarian views is very beneficial. You can then see the holes they poke in your strategy and then take countermeasures.

    Thanks for the summary WD

    November 13, 2019
    Reply
  3. WD,

    Which brings up a good point…. someone who inspires millions and has a great overall message but makes some crappy recommendations along the way. How do you value the contribution of that person?

    I bought audio cassette tapes off of late night TV and listened to Tony Robbins in college. Later, I found second hand store CDs of him and listened during my commute in residency. He has meant a lot to me over the years.

    He has a lot to teach me, but maybe I’m not his target audience because I don’t drink anyone’s (not even my own!) kool aid.

    There are all sorts of “thought leaders” out there. Take the best and leave the rest?

    November 14, 2019
    Reply
    • FiPhysician,
      I couldn’t agree more.
      I had similar experiences with his content. He is at his best when dealing with motivation and psyche.
      He is not my guru.
      I picked a few of the ideas about money that I thought were good.
      More people read his views on money than mine or yours. Since they are reading his work, I thought I would highlight the better parts.

      November 14, 2019
      Reply
  4. Crispy Doc said:

    WD,

    I used to visit a Chinese restaurant in town as a high school student for many years. When I came back from college one year it had been remodeled completely, and now displayed a photo of an Asian man I did not recognize shaking hands with ex-president Bush the first.

    I asked my old friend, the long-time owner/manager, who the man in the photo was – had she sold the place to him? Nah, she replied, she had no idea who the guy in the photo was, but a friend gifted it to her as a business ruse. It seemed to impress their clientele who presumed the Asian man was associated with the restaurant, so she opted to leverage the implied prestige.

    Photos with VIPs prominently displayed to establish credibility, such as Tony Robbins uses, have struck me as suspect from that day on. He would not have been my first choice for a financial role model, although I’ll admit I’m biased against him. Slick, good-looking, oozing charisma from every pore – he is trying SO hard to represent success externally.

    I tend to find financial role models among those who are eccentric, socially awkward, and deep divers. More of them seem to be on the long tail of the blogosphere than in the main aisle of Barnes and Noble’s.

    Having said that, I trust your judgment, and if you can sift through his writing to find the valuable nuggets and discard the less savory advice, I’ll accept that he must offer something of value to warrant your attention.

    Fondly,

    CD

    November 14, 2019
    Reply
    • CD,
      Thanks for the comment.

      I love that story about the photo with an ex-president. I’m not good at understanding marketing.

      Robbins is not my role model either.
      He has a knack at understanding people and communicating well.

      He wrote a couple of books about money and there were a few good points he made in them.

      Many of my money mistakes were really behavioral mistakes. The more I understand about psychology, the better I do with money.
      I’m not asking my readers to follow big Tony in a firewalk across hot coals or anything.

      November 14, 2019
      Reply
  5. Financial Independence is the detachment from other people money – their money can no longer enslave you.

    Financial Freedom is the freedom from money itself – money have very little or no role in the true meaning of your life.

    It will take on the average 10 to 30 years for less than 10 percents of the readers on any FIRE related websites to ever cross the Financial Independence mile marker before the age of 55 – limitation in the financial mindset.

    Of the 10 percents who have successfully scaled the Financial Independence summit, again, less than 10 percents will be free of money – Financial Freedom.

    For all the years of focusing on the financial aspect of the journey, they have classically conditioned themselves into a pigeon hole.

    They can no longer capable of distinguish the different between money and the precious passion hidden in their genetic gifts.

    FIRE is a wrong mindset. Financial Independence is a second chance at life to plan and execute your own genetic gift.

    Tony Robin is an example of a successful person who through trials and tribulations found the key to unlock his own potential.

    He repackaged the process and commercialized the journey in accordance to the will of the mass.

    What you are looking for is your own KEY. Tony can only described his own KEY and his KEY is the object of envy for his audience.

    November 25, 2019
    Reply

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