Unshakeable: Your Financial Freedom Playbook

by Anthony Robbins

Jack Bogle, the founder of Vanguard, which has more than $3 trillion in assets under management, has said, “Sure, it would be great to get out of the stock market at the high and back in at the low, but in 65 years in the business, I not only have never met anybody that knew how to do it, I’ve never met anybody who had met anybody that knew how to do it.”

And Warren Buffett has said, “The only value of stock forecasters is to make fortune-tellers look good.”

Freedom Fact 4: The Stock Market Rises over

Time Despite Many Short-Term Setbacks

the market ended up achieving a positive return in 27 of those 36 years. That’s 75% of the time!

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.

But it’s worth mentioning that 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.

I’m not saying that every company—or every individual stock—will do well over time. As you and I both know, the business world is a Darwinian jungle! Some companies will die, and some stocks will fall to zero. But one big advantage of owning an index fund that tracks a basket

The great thing is that you benefit from these upgrades in the quality of the companies in the index. How? Well, as 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

it’s a good idea to be a long-term investor in the stock market and not merely a short-term trader.

How bad does it get when the market really crashes? Well, historically, the S&P 500 has dropped by an average of 33% during bear markets.

I’m not going to sugarcoat this. If you’re someone who panics, sells everything in the midst of this mayhem, and locks in a loss of more than 40%, you’re going to feel like a grizzly bear mauled you for real.

But remember: winter never lasts! Spring always follows.

“The best opportunities come in times of maximum pessimism.”

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

As you can see from the chart on the next page, the market finally hit rock bottom on March 9, 2009. And do you know what happened next? The S&P 500 index surged by 69.5% over the next 12 months.

That’s a spectacular return! 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.

when the mood in the market is overwhelmingly bleak, superinvestors such as Buffett tend to view it as a positive sign that better times lie ahead.

The stock market is a device for transferring money from the impatient to the

Thanks to inflation, the price of almost everything is at an all-time high almost all the time. If you don’t believe me, check the price of your

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

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

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.

The message is clear: the greatest danger to your financial health isn’t a market crash; it’s being out of the market.

In fact, one of the most fundamental rules for achieving long-term financial success is that you need to get in the market and stay in it...

Hell is truth seen too late. —THOMAS HOBBES,

The most successful of these five investors—let’s call her Ms. Perfect—invested her money on the best possible day each year: the day when the market hit its exact low point for that year. This mythical investor, who perfectly timed the market for 20 years running, ended up with $87,004. The investor with the worst timing—let’s call him Mr. Hapless—invested all of his money on the worst possible day each year: the day when the market hit its exact high point for that year. The result? He ended up with $72,487. What’s striking is that, even after this 20-year run of spectacularly bad luck, Mr. Hapless still made a substantial profit. The lesson? 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. And you know what? The worst-performing investor wasn’t the unlucky one, but the one who stayed on the bench, the one in cash: he ended up with only $51,291.

But the market never took a dime from anyone! If you lose money in the market, it’s because of a decision you made—and if you make money in the market, it’s because of a decision you made. The market is going to do whatever it’s going to do. But you determine whether you’ll win or lose.

Knowledge brings understanding, and understanding brings resolve.

The name of the game? Moving the money from the client’s pocket to your pocket. —MATTHEW MCCONAUGHEY TO LEONARDO DICAPRIO IN THE WOLF OF WALL STREET

The nonprofit organization AARP published a report in which it found that 71% of Americans believe that they pay no fees at all to have a 401(k) plan. That’s right: 7 out of 10 people are entirely unaware that they’re even being charged a fee! This is the equivalent of believing that fast food contains no calories.

If you’re looking to achieve financial security, the obvious route is to invest in mutual funds. Maybe your brother-in-law was lucky enough to buy shares in Amazon, Google, and Apple before they skyrocketed. But for the rest of us, picking individual stocks is a losing game. There are just too many things we don’t know, too many variables, too much that can go wrong. Mutual funds offer a simple and logical alternative. For a start, they provide you with the benefit of broad diversification, which helps to reduce your overall risk.

But Wall Street has evolved into an ecosystem that exists first and foremost to make money for itself. It’s not an evil industry made up of evil individuals. It’s made up of corporations whose purpose is to maximize profits for their shareholders. That’s their job.

When active fund managers trade in and out of stocks, there are plenty of opportunities to make mistakes. For example, they don’t just have to decide which stocks to buy or sell, but when to buy or sell them. And every decision obliges them to make another decision. The more decisions they face, the more chances they have to mess up.

If you’re not careful, taxes can have a catastrophic impact on your returns.

Because your profits could be slashed by 30% or more, unless you’re holding the fund inside a tax-deferred account such as an IRA (individual retirement account) or a 401(k) plan.

Index funds take a “passive” approach that eliminates almost all trading activity. Instead of trading in and out of the market, they simply buy and hold every stock in an index such as the S&P 500. This includes companies like Apple, Alphabet, Microsoft, ExxonMobil, and Johnson & Johnson—currently the five biggest stocks in the S&P 500.

Index funds are almost entirely on autopilot: they make very few trades, so their transaction costs and tax bills are incredibly low.

When you own an index fund, you’re also protected against all the downright dumb, mildly misguided, or merely unlucky decisions that active fund managers are liable to make.

What about index funds? Instead of sitting on cash, they remain almost fully invested at all times.

just holding the market (via an index fund) outperformed more than 80% of market-timing strategies.

The mutual fund industry is now the world’s largest skimming operation, a $7 trillion trough from which fund managers, brokers, and other insiders are steadily siphoning off an excessive slice of the nation’s household, college, and retirement savings. —SENATOR PETER FITZGERALD OF ILLINOIS, cosponsor of the Mutual Fund Reform Act of 2004 (killed by the Senate Banking Committee)

But would you pay $20 for a $2 taco? No way! Let me tell you, that’s what most people are doing when they invest in actively managed mutual funds.

If the fund is held in a nontaxable account like a 401(k), you’re looking at total costs of 3.17% a year! If it’s in a taxable account, the total costs amount to a staggering 4.17% a year!

You’ve got to look very carefully at the small print. I don’t like things that require small print, by the way. —JACK BOGLE

an actively managed fund that charges you 3% a year is 60 times more expensive than an index fund that charges you 0.05%!

Imagine going to Starbucks with a friend. She orders a venti caffé latte and pays $4.15. But you decide that you’re happy to pay 60 times more. Your price: $249! I’m guessing you’d think twice before doing that.

Imagine that you just bought that caffé latte for $249, took a sip, and discovered that the milk had gone bad.

If you systematically buy the ones that have performed well and sell the ones that have performed poorly, you’re going to end up underperforming.”