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each dollar in expenses means one less dollar that can grow in coming years.
“the purpose of business is to produce happiness, not to pile up money.”
commerce and philanthropy are not polar opposites; they are two sides of the same coin.
successful businesspeople often become successful philanthropists.
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.
But what does it really mean to be unshakeable? It’s not just a matter of money. It’s a state of mind. When you’re truly unshakeable, you have unwavering confidence even amidst the storm.
This state of mind allows you to be a leader, not a follower.
To be one of the few who do, not one of the many who merely talk!
you don’t have to predict the future to win this game.
you have to focus on what you can control, not on what you can’t.
Control what you can control.
we’re not going to become unshakeable through wishful thinking, or by lying to ourselves, or by merely thinking positive, or by putting photos of exotic cars on our “vision boards.” It’s not enough to believe. You need the insights, the tools, the skills, the expertise, and the specific strategies that will empower you to achieve true and lasting prosperity.
When people are forced to make financial decisions, they often act out of fear—and any decision made in a state of fear is likely to be wrong.
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.
one of the simplest yet most important rules is this: fees matter.
The problem is, most funds do a terrific job of charging high fees but a terrible job of picking successful investments. One study showed that 96% of mutual funds failed to beat the market over a 15-year period.I The result? You overpay for underperformance.
If you overpay by 1% a year, it will cost you 10 years’ worth of retirement income.II
investment success is largely a matter of smart “asset allocation”—of knowing precisely how much of your money to put in different asset classes such as stocks, bonds, real estate, gold, and cash.
your own anxiety is equally unfounded—that the snake you fear is really just a rope.
you can’t win this game unless you have the emotional fortitude to get in it and stay in it for the long term. Once you realize that there’s no snake blocking your way, you can walk calmly and confidently on the path to financial freedom.
Once you recognize the patterns in the financial markets, you can adapt to them, utilize them, and profit from them.
That’s the awesome power of compounding. Over time this force can turn a modest sum of money into a massive fortune.
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.
First, you’ve got to save and invest—become an owner, not just a consumer. 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. My
You start by saving just 3% and gradually raise this to 15% or 20% over time.
The single best place to compound money over many years is in the stock market.
this is incredibly fertile land! Like our ancestors, we need to plant our seeds where we can reap the greatest harvest.
the stock market has made millions of people rich.
In an era of compressed interest rates, you earn nothing when you keep your cash in a savings account.
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.
the biggest danger isn’t a correction or a bear market, it’s being out of the market.
we have to remove as much emotion as possible from this game.
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. Not
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.
Once you understand that the vast majority of corrections aren’t that bad, it’s easier to keep calm and resist the temptation to hit the eject button at the first sign of turbulence.
nobody can consistently predict whether markets will rise or fall. It’s delusional to think that you or I could successfully “time the market” by jumping in and out at the right moments.
The Stock Market Rises over Time Despite Many Short-Term Setbacks
always remember that the long-term trajectory is likely to be good, even when the short-term news is dismal and the market is getting smacked.
the US stock market typically rises over time because the economy expands as American companies become more profitable, as American workers become more efficient and productive, as the population grows, and as technology drives new innovation.
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!
“For 240 years, it’s been a terrible mistake to bet against America, and now is no time to start.”
Historically, Bear Markets Have Happened Every Three to Five Years
The most successful investors take advantage of all that fear and gloom, using these tumultuous periods to invest more money at bargain prices.
“The best opportunities come in times of maximum pessimism.”
Bear Markets Become Bull Markets, and Pessimism Becomes Optimism
One moment, the market was reeling. The next moment, we began one of the greatest bull markets in history! As I write this in late 2016, the S&P 500 has risen by an astonishing 266% since its low point in March 2009.
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.
