BOOK – Money: Master the Game – Tony Robbins Book Key Points
Key Take Aways from Money: Master the Game
By Tony Robbins is a wealth of eye-opening information to help anyone achieve financial freedom. I am a big fan of Tony Robbins and he does not disappoint with this book. Money: Master the game is a 600+ monster which makes it a bit daunting. Tony’s book Unshakeable (only a little over 200 pages) focuses on the topic of money as well might be a little easier to digest. But of course, it lacks some of the details in Money: Master the Game. Being Canadian, the information is quite US focused so if you’re not American then you’ll want to fact check to see if all the information is really applicable to your country. And with the same disclosure as Tony has in the book, I am not a financial advisor, so you can take all of the information as being paraphrased and you should do your own due diligence based on your own financial situation.
The Truth about Active Fund Management
A surprising amount of money is currently invested in mutual funds. I understood that mutual funds were basically a collection of stocks picked by someone way smarter than me at finance. What Tony provides eye-opening insights that actively managed funds will only beat the market 4% of the time. To understand what 4% is like, compare to the casino game of blackjack. If you have 20 in blackjack, hitting to try to get an ace would be an 8% chance. To make matters worse, 4% change from year over year. It’s actually more likely that a high performing fund will be low performing in the future. Warren Buffett made this statistic come to life with his bet against 5 actively managed publicly available hedge funds. His pick: the market index. As of now, the index is beating the hedge funds by almost 4 times. The bet is in year 9 out of 10. It is unlikely the hedge funds will make a comeback this late in the game. You can check here for an update in case they do.
The truth about fees
To make matters worse is the fees associated with those actively managed funds would eat away at whatever you do end up making. Now 1 or 2% of fees might not seem like much, but the math tells a different story. That seemingly small 1-2% difference difference could reduce your retirement earnings by 10 years based on the same amount invested over the same period of time.
In Money: Master the Game, Tony recommends to us that low-fee index funds are the way to go. It’s no wonder that the investment fund industry is coming under attack from robo-advisor offerings. They skip the fund manager altogether and focus solely on index funds using computer algorithms.
The all-weather system
Now that Money: Master the Game has taught you to invest in low-fee index funds, you should also know about asset allocation. At the end of the day, the index funds are just stocks. Tony’s interviews with one of the best portfolio managers out there outlines his winning asset allocation formula. The allocation diversifies his money across more than just stocks. Balancing between bonds, and real estate are other investments to include in order to make your portfolio “all-weather”. Tony explains that the markets are cyclical just like the seasons. There is spring and summer (rising markets) and fall and winter (falling markets). Even in the market, winter comes about once a year. And a harsh winter (also known as a bear market) happens every 8 years or so. Some of which also might end up in a recession. The balanced allocation of assets allows these market winters to be weathered so that you can maintain your wealth.
Achieving real wealth
After all of his time explaining markets and financial matters, Tony spends time focusing on the psychology of money. I find that the last few chapters of Money: Master the Game might be even more important than the others (though I’d still want you to consider his other advice). Here is where he speaks to people’s relationship with money, having an abundance mindset and focusing on gratitude. The basic point is that money won’t give you real wealth. He knows billionaires that are miserable and people without a lot of money that are happy and fulfilled with their lives. The goal here is to see to live in a beautiful state (happiness, job, gratitude, etc.) instead of in suffering states (sadness, anger, worry, stress, etc.). You can make the choice to be in a beautiful state regardless of whether you have money or not.
Other amazing SIWIKE from the book:
- Compound interest: the miracle of saving over time, which you’ve probably learned if you took a business class and need to put it into practice.
- Why: Get your money in early and it will grow more than saving more later in your life
- How: it’s just math. Your principal is increased
- Save more later: a great concept for those that can barely make ends meet right now
- Why: if you’re living off that amount already, deferring luxuries now, can help you get to financial freedom sooner
- How: When you get a raise, take some (or all) of the increase in cash and put that into your savings
- Understand what your retirement number really is
- Why: many people don’t know how much they need to retire and taking the time to calculate more realistically will help you to achieve that amount
- How: actually spend the time to consider how much you would want to spend during retirement (the book does a good job at breaking it down)
- Speed it up: get rid of your mortgage faster, as much as twice as fast!
- Why: much of your mortgage is spent paying interest, so bringing forward some
- How: after you’ve used Save more later to get a good set % of your income saved, set aside the principle amount from the next payment and pay it with the current month’s mortgage payment. Rinse and repeat for next month.
A recommended read for those looking to find financial security!
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