Welcome dukes to part two of our first book review: Unshakeable by Tony Robbins. In part 1, we summarized and talked through section one, the first four chapters, on your wealth playbook. In part two, we will be focusing on section two and three, the unshakeable playbook and psychology of wealth. See them below!
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 2 – The Unshakeable Playbook
Chapter 6: The Core Four
Tony “came to realize that there are four major principles that nearly all great investors use to guide them in making decisions.” They must be executed and lived by to truly utilize their power for building wealth!
|Core Principle 1: Don't Lose||"The more money you lose, the harder it is to get back to where you started"
Example from the book:
- If you invest 100K and lose 50%. How much does it take to get back? Many would think 50%, but this is incorrect. 50% means you gain 50% on 25K, so your total is only back to 75K. This means you need a 100% return on the first 50K to get back to the original amount!
Design an asset allocation strategy that diversify's your money, so when there is a loss, it is only on part of your nest egg! In other words, "reduce your risks and maximize your rewards"
|Core Principle 2: Asymmetric Risk/Reward||Contrary to traditional high risk/high reward mentality. Great investors look for investments that "the rewards should vastly outweigh the risks."
"Invest in undervalued assets during times of mass pessimism and gloom."
- He uses the 2008-2009 financial crises an example, since so many stocks went on sale. One thing he doesn't really take into consideration, is that many people during that time lost their jobs or couldn't afford to really invest.
This is where our roadmap comes into play - if you take the necessary steps when your money is flowing, you will be ready to take advantage of the investment sales!
|Core Principle 3: Tax Efficiency||"Mutual fund companies love to tout their pretax returns...there's only one number that truly matters: the net amount you actually get to keep"
- Basically, if your mutual fund company is taking fees and taxes, but boast on their pretax returns, you aren't getting the amount they boast.
Index fund trading tremendously saves you on taxes because they do not trade as much, meaning you aren't having to pay as much in taxes. More net income!
On our roadmap, we utilize retirement accounts for tax savings. Check out our 401(k) articles for a few examples on how much it can save you on taxes and make you in investments. The more money you save on taxes, the faster you build your kingdom.
|Core Principle 4: Diversification:||Four important ways to diversify:
1. "Diversify across different asset classes"
- Invest in bonds, stocks, real estate, etc.
2. "Diversify within asset classes"
- Buy different stocks in different industries
3. "Diversify across markets, countries, and currencies around the world"
- We recommend foreign stocks, but not Forex trading
4. "Diversify across time"
- Dollar cost averaging - this is the principle of consistently investing the same amount over the same period of time to average out the price your buying stocks. The average will always reduce your risk and increase returns as it takes away trying to time the market
"everything comes down to owning an array of attractive assets that don't move in tandem"
Chapter 7: Slay the Bear
Tony begins this chapter with a story describing his journey with discovering the risks and treatment options for his brain tumor. He ends the story with his decision of living with it and not getting treatment at that time, showing his courage to be unshakeable! The take way is given to the readers – “your family, your faith, your health, your finances – you can’t rely on anybody else to tell you what to do.” It is imperative to know “that there’s never absolute certainty in life.” Get the facts and make the decision that is best for you.
Prepare for the bear – Peter Mallouk
If you recall from part 1, the bear market is when the stock market goes down by at least 20%. “Constructing a diversified portfolio that reduces your risks and enhances your returns.”
- Over time the economy grows, so owning the businesses that are growing with it = returns
- “When you buy a bond, you’re making a loan to a government, a company, or some other entity.”
- Different types
- Treasury – lending money to the federal gov
- Municipal – lending money to city, state, or county
- Corporate – lending money to a great company with high credit ratings, like Microsoft
- Junk – lending money to risky credit ratings, meaning you may not get your money back
- Different types
- Bonds are great for conservative and less risky investments and can hold cash until a crash occurs. You can sell the bonds, buy on sale stocks, then repeat for the next bear.
- “When you buy a bond, you’re making a loan to a government, a company, or some other entity.”
- Alternative Investments
- Investments other than stocks/bonds/cash
- REITs – Real Estate Investment Trusts
- Private Equity Funds – purchasing part or all of an operating company with the fund
- Master Limited Partnerships
- Recommended for older investors without an IRA (from the book)
- “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again, and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head”
- Hedge Funds
- Most hedge funds charge high fees, don’t beat the market, and suck your money dry
Creative Planning Principles for Diversification
- “Asset Allocation Drives Returns”
- “Diversify globally across multiple asset classes” – See above for his descriptions
- “Use Index Funds for the core of your portfolio”
- Broad diversification with low fees
- Use index funds of all sizes
- “Always have a cushion”
- To prevent having to sell your stocks at low prices, keep a financial cushion for yourself during those time
- “The rule of 7”
- “Have seven years of income set aside in income-producing investments”
- Outside of the core index funds, find opportunities for different strategies to make money
- Taking a look at your portfolio to make it match your desired allocations
Section 3 – The Psychology of Wealth
Chapter 8: Silencing the Enemy Within
“This chapter is designed to give you the key insights and tools you can use to free yourself from the natural psychological tendencies that derail…financial freedom.”
The 6 mistakes investors make:
|Mistake 1: Seeking confirmation of your beliefs||Confirmation Bias - Human's "seek out and value information that confirms our own preconceptions and beliefs."|
This mistake happens to investors when they find a stock or investment in their portfolio, so you ignore proof of its future failure based on facts
|"Actively seek out qualified opinions that different from your own."|
|Mistake 2: Mistaking recent events for ongoing trends||"Recent experiences carry more weigh in our minds when we're evaluating odds of something happening in the future."|
For investors, this will hurt their recognition of a long performing investment under the most recent events.
|"Don't sell out. Rebalance"
"Best investors...create a list of simple rules to guide them when things get emotional, they stay the course and remain on-target for the long term."
|Mistake 3: Overconfidence||"We consistently overestimate our abilities, our knowledge, and our future prospects."|
Investors should ask themselves, am I really qualified to find investments that will do better than the market?
|"Get real, get honest"
If your an average investor, "invest in a portfolio of low-cost index funds, and then hold them through thick and thin."
|Mistake 4: Greed, Gambling, and the Quest for Home Runs||"The best way to win the game of investing is to achieve sustainable long-term returns."|
Don't pay attention to media hype - they are trying to invoke emotions that change your guide from solution to mistake number two above. There is no get rich quick scheme that works. In life, success comes to those who work hard and work smart as they grow through their journey.
|"It's a marathon, not a sprint."
Create a "wholesome information diet." AKA make a blog feed of intelligent commentary on from top investors (Bogle, Buffet, Cahn, etc).
|Mistake 5: Staying home||"home bias...leads people to invest disproportionately in their own country's market - and sometimes ...in their employer's stock."|
US Stocks only make up about 50% percent of the world stock market
|"Expand your horizons"
Diversify your investments in assets and in location
|Mistake 6: Negativity and Loss Aversion||Humans tend to "recall negative experiences more vividly than they do positive ones"|
In part 1, Tony describes the various seasons and how Spring always returns. Remember that to stay on course.
|Prepare for the winters by having a diversified portfolio as discussed in chapter 7|
Now that you know of the mistakes our human tendencies commit, you are better equipped to using the solutions given to beat them!
Chapter 9: Real Wealth
Our favorite quote in the book: “Real wealth is emotional, psychological, and spiritual. If you’re financially free, but…suffering emotionally, then what kind of victory is that?
In the last chapter of Unshakeable, Tony defines the real wealth in our lives and gives his principles on obtaining a beautiful state. Before getting to the emotional states, he gives two areas of life to excel in that lead to an extraordinary life.
3 Fundamental Steps of Achievement:
- “Where your focus goes, your energy flows”
- Go beyond hunger, drive, and desire, and to consistently take massive action
- Follow the “do something” principle. Talk is cheap. An action is expensive – take it!
- “The more you acknowledge grace in your life, the more you seem to have it!”
The art of fulfillment:
“If you master the external world without mastering the internal world, how can you be truly and sustainably happy?
Principle 1: You must keep growing
- “Everything in life either grows or dies – same for relationships, business, or anything else.
Principle 2: You have to give
- “We’re driven by our desire to contribute. If we stop feeling that deep sense of contribution, we can never feel truly fulfilled
From here we dive into mental states that drive us to a fulfilling life.
Two emotional and mental states:
- Beautiful state – “When you feel love, joy, gratitude, aw, playfulness, ease, creative, driven, caring, growth, curiosity, or appreciation
- Suffering state – “When you’re feeling stressed out, worried, frustrated, angry, depress, irritable, overwhelmed, resentful, or fearful”
We can choose which state we are in by focusing our thoughts on the correct state! To do so, we need to be aware of the three triggers for suffering:
- Loss – Focusing on a problem that will cause or has caused you to lose value or something to lose value
- Less – Focusing on an idea that “you have less or will have less”
- Examples – Less money
- Never – Focusing on an idea that “you will never have something you value”
Tools for getting back to the beautiful state:
- 90 seconds rule – Whenever you start suffering, give yourself 90 seconds to stop it then return to your beautiful state
- Change your thoughts to focus on things you appreciate – gratitude is the #1 emotion for true happiness
- Two-minute gratitude meditation -> check it out on www.unshakeable.com if you’re interested!
Money doesn’t make people happy. Fulfillment, growth, achievement, and relationships do. By being in a beautiful state you are working to better yourself to put together the pieces of happiness. By building your kingdom, you are already on your journey to creating a wealthy life for yourself.
Our overall review and comments:
- There were many great quotes from his interviews with the top investors that helped drive many of his points home
- His examples helped solidify that you can stay psychologically strong during the “winters”
- He broke down his rules or principles to allow us to easily digest and follow (if we agree) them, along with anecdotes to realize they are possible to follow
- All profits go to feeding those in need
- We felt the book was a bit repetitive at times, making it take longer to read. It felt at times it was too long and a bit unorganized when moving from story to principle back to stories.
- The book didn’t give a specific action plan, more like guidance on creating one or hiring a financial advisor to help you
- For those who have been into personal finance or have read a few blogs, most of the topics in this book are topics you know. For advanced readers, this may not be worth your 4-5 hours of reading time
Overall we were glad to give this book a read.
Did it live up to its hype? In some ways yes, the principles and values were very good, but it didn’t give people an exact plan to execute to reach freedom. We understand as each person has a different situation, so it can be tough to give a generic plan.
Even Peter mentions how financial advisors should be creating one specifically for you. The book also psychologically solidifies some of the principles we have read in the past while providing some great example that followed them. Tony interviewed top minds and is helping the average investor create wealth. We totally respect him and his motive for the book!
For our readers, we have created a plan to help you stay unshakeable during the winter seasons! We want you to reach your financial dreams and build your kingdom. We are here to help!! With that being said – thank you for taking the time to read part 2 of our Unshakeable review. If you enjoyed the summaries: buy the book and enjoy!