Hello my fellow dukes, and welcome to our first book review!

Tony Robbins released Unshakeable last week as your financial freedom playbook. The book was co-authored by Peter Mallouck from Creative Planning. After reading it this weekend, we want to take you through highlights of each section/chapter, and provide our thoughts or share the great knowledge.

Before we start the review, I want to highlight that each purchase of this book will result in 50 meals from Feeding America. Tony has partnered with them and all profits will be going there way! Basically, for our $15 donation to feeding America, we were able to get financial knowledge from the 50 top financial minds he interviewed for the book!!!

Buy the book below to feed 50 people!

Section 1  – Wealth: The Rule Book

Chapter 1: Unshakeable

The book begins with a definition of its title – “An unwavering and undisputed confidence; a steadfast commitment to the truth; presence, peace of mind, and a calm amidst the storm”.

Being unshakeable from a financial perspective means that even when the stock market collapses, real estate market prices drop, or the economy is in a recession (like the 2008 era), it is imperative to be the calm in the storm. We must “focus on what we can control” and know that you don’t need to be able to predict the future to win in the financial game. Tony explains that becoming unshakeable isn’t “wishful thinking or lying to ourselves, or merely thinking positive.” You need to have the “insights, the skills, the expertise, and the specific strategies…to achieve true and lasting prosperity.”

He believes that by putting the plan he will describe in the book in place, you can keep your financial freedom plan on target with only 1-2 hours per year. I find this one a bit tough to agree with, because even budgeting for us here at Duke of dollars takes >= 30 minutes a month. Later in the book, he does recommend using a financial advisor and that will offload a bit of the work. At Duke of Dollars, we don’t discourage using a financial advisor with the caveat that it does cost you moolah galore. If your situation is not complex, then following our roadmap will be your advisor :).

Some Top Financial Minds

  • Ray Dalio
    • “Most successful hedge fund manager in history”
  • John C. Bogle
    • “Founder of Vanguard and revered pioneer of index funds”
  • Mary Callahan Erdoes
    • “Oversees $2.4 trillion in assets at JPMorgan Chase & Co.”
  • T. Boone Pickens
    • “Billionaire oil tycoon”
  • Carl Icahn
    • “America’s formidable activist investor”
  • David Swensen
    • “transformed Yale into one of the world’s wealthiest universities”
  • John Paulson
    • “Head fund manager who personally earned $4.9 billion in 2010
  • Warren Buffet
    • “Most celebrated investor ever to walk the earth”

What a list! Lastly, for chapter one, the 3 reasons being writing the book are listed:

  1. This book was written to be “a concise companion that contains all of the essential facts and strategies you need to transform your financial life.”
  2. Winter is coming in the financial world. This means that the stock market will fall, but it never last forever. “Unshakeable will show you how the masters of the financial world prepare themselves – how they profit by anticipating winter, instead of just reacting to it.”
    • Example: January 2016, first 10 days the stock market plummeted and $2.3T went up in smoke. It was the worst 10 day start in history. If you follow Mr. Robbin’s “all-seasons” portfolio suggestions, then instead you would have profited during this crazy 10 days.
  3. Avoid the Sharks by choosing financial advisors that are legally required to help you and want what is best for you. More details on this in a later chapter.

Chapter one ends with a story about a Buddhist monk traveling on his way home. He catches sight of a poisonous snake blocking his way, panics and runs for dear life in the opposite direction. The next morning, he returns to this scene of terror. But now, in the brightness of day, he realizes that the coiled snake in his path was just a harmless piece of rope. In other words, “you can’t win this game, unless you have the emotional fortitude to get in it and stay in it for the long term”

Chapter 2 : Winter is Coming… But When?

As humans, we owe much of our power in the world to our development of the ability to recognize patterns. As we changed into an agriculture society, the annual seasons became one of our most important realizations. We learned that planting crops in the winter did not reward us much, and this is how our power continued to grow…learning best timing to reap the most reward. This capacity is “the number one skill that can empower us to achieve financial prosperity.” We are able to recognize the market patterns and get the biggest reward as we did for crops. Throughout the chapter Tony uses winter as a metaphor for down turns, and spring as upturns.

The Power of Compound interest

Investopedia definition – “Compound interest (or compounding interest) is interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

  1. An example from the book to drive its benefits home
    • Bob and Joe both decide to invest $300 a month.
      • Joe starts at 19 and stops at 27 (8 years), for total savings of $28,800. With 10% compounding rate, he will have $1,863,287 at age 65
      • Bob starts at 27 until 65 (29 years). His money compounds at the same rate, he retires with $1,589,733.
      • The craziness???
        • Joe invested a total of $28,800, while Bob invested 5x more, $140,000. The difference? $273,554 for Joe. That’s the time of compounding!!

The lesson here is that you can’t “earn your way to financial freedom””, you have to invest money so it can compound over the years to earn money for you while you sleep!

How much do you need to retire?

The book recommends a financial advisor for your unique situation, and/or 20 times your income. Here at Duke of Dollars, we will be providing an article for building your milestone map that will help you determine this. We agree that each person has their own situation and goals, like financial security vs. financial independence. Student loan vs credit card debt, etc. But we disagree that a simple multiple of your income is an accurate representation of your retirement needs. Instead, we advocate measuring your actual expenditures, adjusting them for retirement-related changes, and using real spending figures – not income – to determine your golden years’ budgets.

Where should I put my money?

Low risk savings accounts and high quality bonds do not return as much as they used to. When you factor in inflation, it is next to nothing, sometimes less! This is why stocks are the best choice for return on your investment. Even though there is much uncertainty based on the unrelenting valuation rise in the last 7 years, the stock market has a “financial winter…on average, every year.” For this reason we can stay unshakeable during the winters by sticking to an effective approach.

There are 7 Freedom Facts that will “free you from all of the fear and anxiety that dominate most people’s financial lives.”

2 Terms before the facts:

Correction – When markets fall by at least 10% from its peak

Bear market – When markets fall by at least 20% from its peak

In either case, the “biggest danger isn’t a correction or a bear market, it’s being out of the market.”

Freedom Facts:

  1. “On average, corrections have occurred about once a year since 1900”
    1. Average length = 54 days
  2. “Less than 20% of all corrections turn into a bear market”
  3. “Nobody can predict consistently whether the market will rise or fall”
  4. “The stock market rises over time despite many short-term setbacks”
    1. “Despite a 14.2 average drop within each year, the US market ended up with a positive return in 27 of the last 36 years.”
  5. “Historically, bear markets have happened every three to five years”
  6. “Bear markets become bull markets, and pessimism becomes optimism”
  7. “The greatest danger is being out of the market”

The chapter ends by iterating again that financial winters always come, and spring always follows. By taking advantage of the winters by planting seeds, you will be reaping the harvest well during the Spring!

Chapter 3: Hidden Fees and Half-Truths

The reason most people invest in is freedom! It is a wonderful, and achievable dream. But how can you sail off into the sunset if your boat has a hole in it? Fees are the hole in your investments! “Excessive fees can destroy two-thirds of your nest egg!”

Actively Managed Funds – Active managers attempt to generate market-beating returns. Does this sound good to you?

For most individuals, picking individual stocks is a losing game. This is where mutual funds come in to save the day right? They provide diversification to reduce risk. Unfortunately, “mutual funds extract enormous sums from investors in exchange for providing a shocking disservice”. They are incentivized to think short term, raising fees by trading stocks regularly. Trading constantly creates fees from the brokers who charge for trades and results in far too much money diverted away to taxes. Actively managed funds must pay salaries to the managers and keep cash on hand instead of in the market for “great opportunities.” This + fees + taxes are destroying your nest egg in the meantime.

Tony instead recommends low-cost index funds, which attempt to replicate the returns of the market instead. They have low fees and follow the indexes that make up the stock market bench marks, meaning there is no need for an active manager to actively pick stocks for the fund. This reduces the fees, reduces the taxes, and helps you build your nest egg!

One of my favorite metaphors from the book to explain the cost of active funds vs index funds is quoted below:

Background: An actively managed fund charges you 3% a year vs an index fund that charges you .05%. This is 60 times more expensive!!

Real life example: “Imagine going to Starbucks with a friend. She orders a venti caffe latte and pays $4.15. But you decide that you’re happy to pay 60 times more. Your price: $249!”

This chapter truly highlights the value of using index funds as an average investor just looking to get returns with the market. It comes back to the old says, “if you can’t beat them, join them!”

Chapter 4: Rescuing Our Retirement Plans

401(k)s are American’s biggest vehicle for financial security. “nearly 90 million…participate” in one, “with more than $6 trillion invested” in them. With so much being invested, financial firms wanted a piece of the pie, so they discovered a way to get theirs through more FEES. “71% of people enrolled in 401(k)s think there are no fees.  Instead, providers are constantly creating new categories for fees you are required to pay.

Employers pay providers who, in turn, provide funds to you as an employee. Smaller plans have less bargaining power and are often shunted into an undesirable pool of costly, actively managed funds, allowing the provider to still make money from fees. Further, the few index funds they do offer are often marked up significantly.  The Obama administration sought to help fix this through law, via the fiduciary rule. Trump is working to undo the regulation in his presidency.

To analyze the fees you’re currently paying, check out our favorite free analyzer:

Personal Capital
  • Personal Capital is Mint for Investors. They have a 401K fee analyzer that is free and helps you find the leaks in your boat

The tool will show you the fees that you are currently paying and give you an opportunity to talk to your employer about the options provided. Employers also don’t always know how the financial game is working against their employees.

Chapter 5: Who can you really trust?

“More than 40% of Americans now use an advisor…81% of people with more than $5 million have an advisor.” But how do you find an advisor you trust?

Financial advisors come with a multitude of different titles, but what we really need to know is that 90% of them are brokers. Brokers are “paid to sell financial products to customers like you and me in return for a fee.” They are required to produce sales for their company to keep their job, meaning they are incentivized to do what’s best for them, not for you. “They’re working for the house.”

The best financial advisors provide value by helping with everything you need help with. From Investing to taxes to insurance.

3 Categories of financial advisors:

  1. Broker – Sells products for a company in his best interest
  2. Independent Advisor or Registered Investment Advisors – “Have a legal obligation to act in clients’ best interest at all times”
  3. Dually registered advisor – These are advisors who are registered as both 1 and 2 above. They act as if they are investing for you, and your best interest, but are still selling a product they get a commission for.

#2 is the recommend advisor type!

Checklist to vet a financial advisor:

  1. “Check out the advisor’s credentials.” – Make sure the credentials match what you need. Taxes? CPA. Financial Planning? CFP.
  2. Ideally, if you’re seeking an advisor, you should be getting more than just someone to design your investment strategy. They should be able to show you how to “grow overall wealth, save money on mortgage, insurance, taxes, and so on.”
  3. “Make sure our advisor has experience working with people just like you”
  4. “Make sure that you and your advisor are aligned philosophically”
  5. “Find an advisor you can relate to on a personal level”

7 Questions to ask any advisor:

  1. “Are you a registered investment advisor?”
    1. If the answer is no, then he/she is a broker
  2. “Are you (or your firm) affiliated with a broker-dealer?”
    1. If yes, then you’re working with a broker
  3. “Does your firm offer proprietary mutual funds or separately managed accounts?
    1. You’re looking for a no here
  4. “Do you or your firm receive any third party compensation for recommending particular investments?”
    1. You don’t want your adviser conflicted by commission opportunities
  5. “What’s your philosophy when it comes to investing?”
    1. Are the picking individual stocks themselves? Are they using actively managed funds?
  6. “What financial services do you offer beyond investment strategy and portfolio management?
    1. You want a range of options to meet your needs as you go through life’s complexities
  7. “Where will my money be held?”
    1. A third-party custodian should hold your moolah
    2. “Sign a limited power of attorney that gives the advisor the right to manage the money, but never to make withdrawals.”

The financial world, your wealth, and your future are important to us here at Duke of Dollars. By hiring an advisor, you will be paying for their services, using the criteria above to select an appropriate guide.

If you’re interested, Tony partnered with www.getasecondopionion.com for free to get a second look at your situation.

Concluding thoughts for part 1

The first half of the book, section 1 – the rulebook – really gave the overview for to mindsets when building wealth. The mindset with rules to be unshakeable drives the same message we want to share to help enrich the lives of our reads.

Thank you for taking the time to read part 1 of our Unshakeable review – look for part two next week.