Unshakeable: Your Financial Freedom Playbook

by Anthony Robbins

We can’t control what the markets will do, but we can control how much we pay for our investments. Index funds allow you to invest, at minimal cost, in a portfolio diversified to the nth degree.

By simply owning the entire market, index funds also earn the market’s return at minimal annual cost: as low as 0.05% of the amount you invest.

By buying low-cost, broad-market index funds (and holding them “forever”), you can guarantee that you will receive your fair share of whatever returns the financial markets provide over the long term.

And I’ll tell you this: one of the greatest lessons I’ve learned from these money masters is that you don’t have to predict the future to win this game. Etch that idea into your big, beautiful brain, because it’s important. Really important. Here’s what you do have to do: you have to focus on what you can control, not on what you can’t.

Many people just dabble in and out when it comes to their financial lives, and they pay an enormous price for it. That’s not because they don’t care. It’s because they get swamped by all the stresses and strains of their daily lives.

People love to say that knowledge is power. But the truth is that knowledge is only potential power. You and I both know that it’s useless if you don’t act on it.

You may decide that you’d prefer to handle your finances alone. But if you ever decide that it might be helpful to get a second opinion from the top-ranked firm in the country, you’re welcome to reach out to Creative Planning, at www.getasecondopinion.com.

Even worse, those fees add up massively over time. If you overpay by 1% a year, it will cost you 10 years’ worth of retirement income.

Once you understand these patterns, you can act without fear, not because you’re in denial but because you have the knowledge and clarity of mind to make the right decisions.

There are a couple of additional resources to accelerate your journey. First, we created a mobile app containing videos, planning tools, and a personalized calculator that will help you discover how much you need to accumulate in order to achieve different levels of financial security and freedom. Second is the Unshakeable podcast. Peter Mallouk and I recorded a series of brief conversations around the core principles of becoming Unshakeable.

Along the way, we also learned a vitally important lesson: we’re not rewarded when we do the right thing at the wrong time. If you plant in winter, you’ll get nothing but pain, no matter how hard you work. To survive and thrive, you and I have to do the right thing at the right time.

The majority of investors fail to take full advantage of the incredible power of compounding—the multiplying power of growth times growth. —BURTON MALKIEL

Would love to learn the math

That’s the awesome power of compounding. Over time this force can turn a modest sum of money into a massive fortune. But you know what’s amazing? Most people never take full advantage of this secret that’s lying in full view, this wealth-building miracle that’s sitting there right in front of their eyes. Instead, they continue to believe that they can earn their way to riches. It’s a common misperception—this belief that, if your earned income is big enough, you’ll become financially free.

The lesson? You’re never going to earn your way to financial freedom. The real route to riches is to set aside a portion of your money and invest it, so that it compounds over many years. That’s how you become wealthy while you sleep. That’s how you make money your slave instead of being a slave to money. That’s how you achieve true financial freedom.

In reality, the number you should really aim for is 20 times your income. So, if you currently earn $100,000, you’ll need $2 million.

Pay yourself first by taking a percentage of your income and having it deducted automatically from your paycheck or bank account.

This will build your Freedom Fund: the source of lifetime income that will allow you to never have to work again.

But I’ve got news for you: we do know when winter will arrive. How? Because when we look back at the stock market over an entire century, we discover this extraordinary fact: financial winter comes, on average, every year.

When any market falls by at least 10% from its peak, it’s called a correction—a peculiarly bland and neutral term for an experience that most people relish about as much as dental surgery! When a market falls by at least 20% from its peak, it’s called a bear market.

Finally, we’ll explain the most important fact of all: the biggest danger isn’t a correction or a bear market, it’s being out of the market.

Freedom Fact 1: On Average, Corrections Have Occurred About Once a Year Since 1900

Historically, the average correction has lasted only 54 days—less than two months! In other words, most corrections are over almost before you know it.

But it’s important to note that, in the average correction over the last 100 years, the market has fallen only 13.5%. From 1980 through the end of 2015, the average drop was 14.2%.

Freedom Fact 2: Less Than 20% of All Corrections Turn Into a Bear Market

It turns out that fewer than one in five corrections escalate to the point where they become a bear market. To put it another way, 80% of corrections don’t turn into bear markets.

If you panic and move into cash during a correction, you may well be doing so right before the market rebounds.

Freedom Fact 3: Nobody Can Predict Consistently Whether the Market Will Rise or Fall

Freedom Fact 4: The Stock Market Rises over Time Despite Many Short-Term Setbacks

But one big advantage of owning an index fund that tracks a basket of stocks such as the S&P 500 is that the weaker companies intermittently get culled and replaced by stronger ones. It’s survival of the fittest in action!

a shareholder of an index fund, you own part of the future cash flows of the companies in that index. This means that the American economy is making you money even while you sleep!

Freedom Fact 5: Historically, Bear Markets Have Happened Every Three to Five Years

But here’s what you need to know: bear markets don’t last. If you look at the chart on the next page, you’ll see what happened in the 14 bear markets we’ve experienced in the United States over the last 70 years. They varied widely in duration, from a month and a half (45 days) to nearly 2 years (694 days). On average, they lasted about a year.

The most successful investors take advantage of all that fear and gloom, using these tumultuous periods to invest more money at bargain prices.

Templeton, who made a fortune buying cheap stocks in the midst of World War II, explained: “The best opportunities come in times of maximum pessimism.”

Freedom Fact 6: Bear Markets Become Bull Markets, and Pessimism Becomes Optimism

Now can you see why Warren Buffett says he likes to be greedy when others are fearful?

Why? Because the stock market isn’t looking at today. The market always looks to tomorrow. What matters most isn’t where the economy is right now but where it’s headed. And when everything seems terrible, the pendulum eventually swings in the other direction. In fact, every single bear market in US history has been followed by a bull market, without exception.

As we’ll discuss later, you can protect yourself against this sort of disaster by building a portfolio that’s broadly diversified globally and also among different types of assets.

The stock market is a device for transferring money from the impatient to the patient. —WARREN BUFFETT

Freedom Fact 7: The Greatest Danger Is Being out of the Market

The trouble is, sitting on the sidelines even for short periods of time may be the costliest mistake of all.

From 1996 through 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!

air, falling all the way to zero! Meanwhile, a study by JPMorgan found that 6 of the 10 best days in the market over the last 20 years occurred within two weeks of the 10 worst days. The moral: if you got spooked and sold at the wrong time, you missed out on the fabulous days that followed, which is when patient investors made almost all of their profits. In other words, market turmoil isn’t something to fear. It’s the greatest opportunity for you to leapfrog to financial freedom. You can’t win by sitting on the bench. You have to be in the game. To put it another way, fear isn’t rewarded. Courage is.

“Don’t do something—just stand there!”

If you stay in the market long enough, compounding works its magic, and you end up with a healthy return—even if your timing was hopelessly unlucky.

Knowledge brings understanding, and understanding brings resolve.

“Let’s assume the stock market gives a 7% return over 50 years,” he began. At that rate, because of the power of compounding, “each dollar goes up to 30 dollars.” But the average fund charges you about 2% per year in costs, which drops your average annual return to 5%. At that rate, “you get 10 dollars. So 10 dollars versus 30 dollars. You put up 100% of the capital, you took 100% of the risk, and you got 33% of the return!”

By minimizing fees, you’ll save years—or, more likely, decades—of retirement income.

Policing companies this enormous has become an almost impossible challenge for some. I have lots of friends and clients in the financial industry, so I’m

But let me tell you, there’s a huge prize when you reach the finish line of this crazy obstacle course and find a truly great advisor. For many people, nothing has a more positive impact on their financial future than partnering with an intelligent guide who knows the territory and can show them proven ways to win in any environment. A world-class advisor will help you immeasurably from start to finish: defining your goals, keeping you on a steady path toward them—in particular, by helping you to weather market volatility—and massively increasing the probability that you’ll actually achieve those goals.