MONEY MASTER THE GAME REVIEW - Tony Robbins Money - Billionaire Advice.

Hello. In this video, we review the book Money, Master the Game by Tony Robbins. Tony is an American author, philanthropist and life coach. He owns more than 20 companies that produce a stunning $6 billion every year. This book was written to understand how the most intelligent financial minds of our day successfully navigate through every economic condition. It includes interviews with some of the best minds including Ray Dalio and Warren Buffett. Money, Master the Game is split into seven topics and within each, key considerations are made to help the individual achieve financial freedom. The topics are as follows. The jungle. Become an insider, learn the rules. The price of your dreams. The most important investment decision. Upside without a downside. The billionaire's playbook. And finally, taking action. Tony says, The key to success is that your savings should be automatic and put to work, creating a money machine that continually produces money. It needs to be the first payment you make from each of your paychecks. Regular, predetermined amounts which increase alongside your income. In this example, your savings earn interest or dividend payments which are continually invested and compounded providing exponential growth over time. The whole process should become automatic and is the first step in changing from a consumer to an investor. 10%, 20%, 30%, it does not matter. There is no right answer, says Tony. The key is getting started. Once we start the automatic money machine, we need to know what to invest in. And this is where Tony says we need to become an insider and learn the rules. Tony Robbins suggests that mutual funds and institutional investments are bad because the costs of them are high and the performance doesn't always justify such friction. He points out, Index funds, on the other hand, are good. The Vanguard 500 index trackers shown here are great examples of low-cost funds that mimic the S&P index. Not only do index trackers generally outperform actively managed funds, but we can see here that the annual costs to manage such a fund is much higher than an index fund and can have a huge impact on returns over the long term. In summary, if you want mediocre returns, invest in a managed mutual fund. If you want a low-cost passive investment with improved returns, invest in an index fund. Tony Robbins states that you can't manage your finances and make the game winnable unless you can measure them. He suggests measuring in terms of goals or levels of dream. Let's look at these levels. Calculate the cost of those items per month. Multiply it by 12 to get your annual secure income. That's your financial security income, and the first dream is to save enough money to cover that. Dream level 2. Financial independence. What is the cost of your complete lifestyle right now? That will be how much you need to be earning to be completely financially independent. To calculate how much an amount of income needs to be saved, multiple it by 20, therefore if you spent £50,000 a year, you need to save £1 million. Dream level 3. Financial freedom, which means the cost of the lifestyle you want above and beyond the lifestyle you have now. Figure out what you want and determine the annual cost to have it, and add that amount to your current annual total. Dream level 4. Absolute financial freedom. Anything you want, anytime you want it, never worry about money again. Tony says, if you talk about it, it's a dream, if you envision it, it's possible, but if you schedule it, it's real. Save more and invest the difference. Warren Buffett famously said, Rule 1. Don't lose money. Rule 2. See rule 1. Tony Robbins also preaches the same principle. He determined that asset allocation is the most important investment decision you can make. Asset allocation means dividing up your money among different investment classes such as stocks, bonds, commodities, real estate, private equities and other business investments, in predetermined proportions according to your goals, needs, risk tolerance and stage of life. Tony suggests that you don't need to have perfect timing. Instead, use dollar cost averaging and know that volatility can be your friend, providing opportunities to buy investments cheaply when the market is down. This technique can increase your portfolio's value when the markets eventually come back up. Note that this averaging tactic is not for individual stocks. Averaging a losing stock can be disastrous. When dealing with equities, dollar cost averaging works best with an index, ETF, or a well-diversified basket of stocks. Using the concept of a football team, Tony alludes that you should have higher risk positions and lower risk positions. A low risk position could be the goalkeeper, or in this instance, a cash position. Highly unlikely to get you ahead, but a very safe position. Next we have the defenders, a defensive portion of your portfolio, again unlikely to get on the score sheet, but a solid base to defend a big loss of capital. Therefore, we could put government bonds in each of these positions. Next, we have midfield wingers, a blend of attacking and defensive attributes, depending on the situation, sometimes contributing to the score sheet, and sometimes defending the team from big losses. Let's call these commodities. Central midfielders, balanced players competing defensively and in attack. Depending on the situation, these can have a big impact on the score. Sometimes, however, they do not perform as expected. Let's call these large cap stocks. Finally, the attackers, rarely contribute defensively, but can have a huge impact on the score sheet when they perform well. These can be creative, but take risks to get into scoring positions. We can call these mid to small cap stocks. Any variation of formation can be used depending on your own risk profile, for example, switching commodities for small cap stocks, or bonds for large cap stocks, not forgetting that any poor-performing player can be replaced. Tony elaborates further on diversification, asset allocation, and its relationship to risk-adjusted returns. He proceeded to illustrate the all-weather portfolio theory created by Ray Dalio, shown here. 30% in stocks, 15% in intermediate-term bonds, 40% in long-term bonds, 7.5% in gold, and 7.5% in commodities. The result is a diverse group of inflationary and deflationary investments that work to lower volatility in any inflationary environment and potentially enhance returns over the long term. In a deflationary period, government bonds and gold will perform better. In an inflationary period, real estate and stocks will likely perform better. Tony back-tested this all-weather portfolio theory created by Ray Dalio and gave credit to its risk-adjusted returns, which as of November 2019 gave an average 10-year return of 7.65%. Not earth-shattering, but low risk. There are two key rules. Don't lose money, and risk a little to earn a lot. For example, risk $1 to earn $5, also known as the risk-reward ratio. The idea, Tony describes, is asymmetric risk, to minimize your downside risk while having a much greater upside potential. Let's look at this chart to illustrate the impact. You can see here that if your strategy is to risk $3 to win $1, you will need to be right 75% of the time just to break even. If you are right less than 75% of the time, you will lose money. In Tony's example, by only risking $1 to make $5, you only need to be right 17% of the time to break even. Couple this with the asymmetric chart here that we have shown in previous videos. Notice how a 10% loss would require only an 11% gain to recover, whereas a 50% loss would require a 100% gain to recover. Tony's message of controlling losses is a constant throughout all the books we have covered to date, a message that must be implemented to become successful. A powerful reminder is provided by Tony when he said, Repetition is the mother of skill. Action is where all your power is found. Knowledge is not power, execution is. So much of investing is psychology. We can choose to see the world as scarce or abundant. We can see the world filled with problems or opportunities. Daily appreciation of what you already have will ensure your focus on the outcomes you truly want, as opposed to worrying about what you don't have and not taking action because of fear and other negative emotions that are holding you back. So, let's summarise. 1. Stop being a consumer and become an investor. 2. Make your savings automatic and consistent. Make your own money machine and make your money work for you instead of you working for money. 3. Invest in index funds and not mutual funds. Remember, 96% of mutual funds fail to beat the market and their fees can make a big difference. 4. Define your dreams and measure your progress against them. Visualise what you want to achieve and plan how you are going to succeed. 5. Asset allocation and diversification. Remember to allocate your assets accordingly and remain flexible depending on your risk profile and the economic environment. 6. Manage your risk. Remember to risk a little to earn a lot. Study the asymmetric chart showing how increasingly difficult it is to recover from large losses. Keep them small. 7. Maintain a positive mindset. Think in abundance and not scarcity and try to remove any negative thoughts that are holding you back. We believe this book is beneficial for aspiring investors and provides a good foundation of some basic concepts and motivation and as such we have given it a 3 star rating and recommend it for further reading. Thanks for listening. Please hit the like button, subscribe and comment below for further book reviews.