Book Notes: Unshakeable

Here are my notes from Unshakeable, by Tony Robbins.

Screen Shot 2017-05-01 at 9.19.33 PM.png

I've always been interested in finances, money, and investments, but never interested enough to do anything out of the ordinary.

I say, but I am a bit out of the ordinary. I got my first check book when I was in 4th grade. I started making money in middle school but pet sitting and running a lawn care business. I've been managing my own money for quite some time. Investing, however, is a whole different beast and I feel completely unqualified to even think about the stock market, retirement accounts, and more.

I picked up this book from Tony Robbins, not really even know much about the author. I've heard his name and even watched his documentary on Netflix. But I was, and still am to an extent, skeptical of the "guru".

With that said, I found this book to be very enlightening when it comes to personal finance.

Here are the notes I took:

  • A hedge fund is a private fund available only to high net worth investors. The managers have complete flexibility to get on both directions of the market. They charge hefty management fees (typically 2%) and share in the profits (typically 20% of profits go to the manager). 
  • A mutual fund is a public fund available to anyone. In most cases they are actively managed by a team who assembled a portfolio of stocks, bonds, or other assets and continually trades their holdings in hopes to beat the "market". 
  • An index fund is also a public fund but requires no "active" managers. The fund simply owns all the stocks in the index (for example, they would own all 500 stocks in the S&P 500 index). 
  • "The only value of stock forecasters is to make fortune-tellers look good." -Warren Buffet
  • Personal musing: I wish I had given a crap in 2009. And had invested every single penny I owned in to stocks when the market was at it's bottom (or near it). 
  • The fact that the market is hovering close to an all time high might tempt you to play it safe by waiting on the sidelines in cash until stock prices have fallen. The trouble is, sitting on the sidelines even for short periods of time may be the costliest mistake of all. 
  • It has a devastating impact on your returns when you miss even a few of the markets best trading days. 
  • From 1996 to 2015, the S&P 500 returned an average of 8.2% a year. But if you missed out on the top 10 trading days during those 20 years, your returns dwindled to just 4.5% a year. Can you believe it? Your returns would have been cut almost in half just by missing the 10 best trading days in 20 years. 
  • 71% of people enrolled in 401ks think there are no fees and 92% admit that they have no clue what they are!
  • Registered Investment Advisors: Only 31,000 in the US, but ONLY 5,000 of those are PURE FIDUCIARIES (meaning they HAVE to act with your best interests in mind
  • Beware the 3 things
    • The Poison of Proprietary Funds
    • Generally created by their own firm. And usually owned/managed by sister company. 
    • Additional Fees
      • You pay 1% of assets as a fee and he recommends a model portfolio which has its own fees, but nothing additional is being done for you
        • Its like buying $100 worth of groceries and then getting slapped with a $25 fee for the right to carry them out of the store
  • If an advisor charges a money management fee for selecting investments, that should be it. End of story.
  • Some independent advisors make private deals with investment firms that enable the advisor to earn commissions without you knowing it. 
  • Use these criteria to vet a fiduciary
  1. Check out the advisors credentials
  2. If you're using an advisor, you should be getting more than just someone to design your investment strategy. 
  3. Make sure your advisor has experience working with people just like you
  4. Make sure you and your advisor are aligned philosophically. Does he believe he can beat the market over the long run by picking individual stocks or actively managed funds? Or does he recognize the odds of beating the market are low, leading him to focus on selecting a well-diversified portfolio of index funds?
  5. Find an investor you can relate to on a personal level

Core Principles 

  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...The most successful investors recognize that none of us can consistently guard against the risk of unexpected events and the risk that they themselves can be wrong regardless of how smart they are...We have to design an asset allocation that ensures we'll "still be okay" even when we're wrong. 
  2. Asymmetric Risk/Reward - hunt for rewards that vastly outweigh the risks. 
  3. Tax Efficiency - They know that it's not what they earn that counts. It's what they keep. That's real money, which they can spend, reinvest, or give away to improve the lives of others. 
  4. Diversification - don't put all your eggs in one basket. Diversify across different asset classes ( avoid putting all money in real estate, stocks, bonds, etc). Diversify within asset classes (don't invest in a single stock). Diversify across markets, countries, and currencies around the world. Diversify across time. 
  • Bonds are loans. When you loan money to the federal government it's called a Treasury Bond. When you lend money to a city state or county it's a Municipal Bond. When you lend money to a company such as Microsoft it's called a corporate bond. When you lend money to a less dependable company it's called a high yield bond or a junk bond. 

I don't presume to know everything about personal finances as a result of reading this book. It has, however, served as an incredible STARTING POINT for me. For some, the information above may feel like common knowledge, but to me it is the foundation of my financial education. I'm lucky enough to work with a financial advisor and now I feel comfortable enough sitting and asking him questions. Before, I felt like an idiot when I talked with my advisor, but now I feel like I have enough of a basic understanding to sit across from him, ask him questions, and move in the direction of my personal financial freedom.

If you're anything like me, I highly recommend this book. It will give you the confidence you need to ask the questions for which you deserve answers.