Unshakeable: Your Financial Freedom Playbook

by Anthony Robbins

You need to learn the rules of the financial game, who the players are, what their agendas are, where you can get hurt, and how you can win. This knowledge can set you free.

Concept framework for understanding and navigating financial risk.

None of us likes putting effort into things that make us feel unsuccessful and out of our depth! 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.

Core value proposition of a good financial advisor.

But while the market returned 10.28% per year, Dalbar found that the average investor made only 3.66% a year over those three decades! At that rate, your money doubles only every 20 years. The result? Instead of that million-dollar windfall, you ended up with only $146,996.

A mix of fees and terrible behavioral implications.

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

Ha! That Warren Buffet has a million folksy colloquialisms.

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. In more than a third of bear markets, the index plunged by more than 40%. 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. Even if you have the knowledge and fortitude not to sell, you’ll likely find that bear markets are a gut-wrenching experience.

If you take one thing away from this book, let it be this. So many people set their bar as the S&P 500, not realizing what that volatility actually feels like when it comes. Unless you have lived through bear markets without cashing in any of your ships, or better yet, made the decision to invest more during the downturn, you don't get to say you have the stomach for it. It always feels like the drop is different (and perhaps worse) than the ones in the rear-view mirror. I took over management of a family trust in 2007, right before the market collapsed in 2008. It was the largest sum of money I had ever dealt with, and it felt terrible to see it drop precipitously within months. I had trailing stops that automatically sold out of many of those positions and was frightened to re-invest. How long was the downturn going to last? Thankfully, I regrouped and put that money back to work right away. When the market recovered, it came back insanely fast; so fast that if I had waited and tried to time it, I would have missed a large percentage of the recovery. I'm happy I handled it the way I did but it was a rude awakening to what it can feel like to manage other people's money.

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

...and the fearful to the courageous.

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! It gets worse! If you missed out on the top 20 trading days, your returns dropped from 8.2% a year to a paltry 2.1%. And if you missed out on the top 30 trading days? Your returns vanished into thin 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.

These are some of my favorite investment facts ever.

But what if you get into the market at exactly the wrong time? What if you get unlucky, and you’re hit immediately by a correction or a crash? As you can see in the chart below, the Schwab Center for Financial Research studied the impact of timing on the returns of five hypothetical investors who had $2,000 in cash to invest once a year for 20 years, starting in 1993. 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.

I don't think I've ever seen this example, but it is a super powerful scenario to illustrate the power of consistency.

SKEPTICAL ABOUT THE VALUE OF THE RIGHT ADVISOR? While the wrong advisors can be detrimental to your financial health, the right ones can be worth their value in gold. A recent Vanguard study explored exactly how much monetary value an advisor can bring to your investments. • Lowering expense ratios: 45 basis points (0.45%) back in your pocket • Rebalancing portfolio: 35 basis points (0.35%) of increased performance • Asset allocation: 75 basis points (0.75%) of increased performance • Withdrawing the right investments in retirement: 70 basis points (0.70%) in savings • Behavioral coaching: 150 basis points (1.50%) for serving as your practical psychologist The grand total: 3.75% of added value! That’s more than three times what a sophisticated advisor would charge. And heck, that doesn’t include reducing taxes and more. Francis M. Kinniry Jr. et al., Putting a Value on Your Value: Quantifying Vanguard Advisor’s Alpha, Vanguard Research (September 2016).

The biggest reason most people should have an advisor is the behavioral coaching.

What asset classes will give you the highest probability of getting from where you are today to where you need to be?

Your advisor should start by getting a clear picture of where you are today (your starting point), how much you’re willing and able to save, how much money you’ll need, and when you’ll need it (your ending point). Once these needs have been clearly identified, your advisor should provide a customized solution to help you achieve them.

Do you think it’s a coincidence that your online trading platform looks and sounds like a casino, with green and red colors, scrolling tickers, flashing images, and dinging sounds? It’s all designed to unleash your inner speculator!

Your edge is time, don't let the brokers proceed to take more trades from you than you need.