Disclaimer this information is for informational purposes only. It should not be considered legal or financial advice.

Rating 10/10

Money, “Sshh don’t talk about that in front of other people it’s rude.” Money, it’s just a game, and in life, you either learn how to play it, or you don’t. Now, where can you get the manual for said game? Well, that’s easy from the one and only Tony Robbins and his book Money Master the Game. Being a novice investor, I was looking for that 101-109 book in finance. That would make reading all those other investing books easier to digest and implement. Instead what I found was the holy grail of defensive investing. That’s right it doesn’t matter if you want to join the upper echelon of investing or just make 10% a year this book is for you!

Let’s go over some of the basics, first take advantage of compound interest. Amount = Principal (1 + interest rate/compounds per year)^years. You can try plugging in numbers to see what you are missing out on or watch the Futurama episode about it. Next, don’t enter the game unless you know the rules. You will be eaten alive by the market who has no feelings or remorse. Then there are only two actions that you will perform in investing accumulating and decumulating money. The key is not to buy when everyone else is buying (a bear market) and sell when you are confident with your profits.

Now, what if you don’t care for trading individual stocks. You can invest in index funds which track a whole section of the market. The Intelligent Investor said it best, “why own a needle in a haystack when you can own the whole haystack?” What if this is still too much for you? Go ahead and seek out a fiduciary like the ones at Creative Planning. Never ever go to a normal broker and avoid managed mutual funds as much as possible. Another thing to avoid is 401K’s with high fee’s, only sign up if the annual fee is under 1%. “What I thought that 401K’s and Uncle Sam were looking out for me?”

Well, fees and taxes are the dragons of the investing world. So, you want to do everything in your power to avoid them. This is where Roth 401k’s and IRA’s come into play. You only pay for taxes on these when you sing up for them, and that’s it. Both have their limitations, so spend a bit of time researching them and your state’s laws. Other topics that need research are bonds and TDF’s. Target day funds are not the perfect defensive investment that they are advertised as. Next, bonds are highly liquid, but most come with low-interest rates. I know that this is going through things a bit quickly, but these are just supposed road signs to keep you from hitting a dead end.

Now for those that are stressing about their retirement, I have one word. Annuities, this is the ultimate investment. Everyone puts money into a pool then when you retire you keep getting monthly checks until you die. The book will go over the four major types of annuities for you. No, I am not being an A-hole I’m just in my twenties, so I have room to play before considering retirement. I digress, being a Tony Robbins book, you can bet your hinny that you will get some motivational bits. Make sure to change your story, strategy, and state. They all depend on each other so make sure to keep them in check. Then remember to never seek great wealth. There is always someone that is smarter, faster, and stronger that will end up kicking your ass.

My favorite section of the book was calculating my financial vitality. First, you need to figure out your cost of living. Rent + food/household + utilities + transport + insurance x 12 = annual cost of living. Then your vitality is what you need for the luxuries of life. This can include dining, entertainment, clothes, and your small personal indulgences. Then you add everything up and voila you have a target to hit. Having a precise goal makes everything more measurable and achievable. Another section that I enjoyed was the one about REIT’s (Real estate investment trusts). Which are a very affordable way of investing in a managed collection of real estate. “What’s the point of investing in real estate if you don’t get to walk around and look at properties?” Diversification my friend diversification, think of this as your life jacket.

Diversification is the foundation of a solid portfolio, but what if you want to go balls to the wall with your investing? Fear not Tony interviews a good number of heavy hitters for us. His first interviewee was drum roll please, David Swensen. Who gives us three rules to live by. First, the selecting of security, through healthy stocks and investments. Two, work on market timing, like short-term bets in the direction of the broader market. Lastly, a long-term strategy for asset allocation is needed. For example, you can partake in stocks, bonds, commodities, and real estate based on the economic climate.

 

While we are talking about allocation here are different forms of secure investing:

  1. Cast/Cash equivalents – banks offer insured money market deposit accounts, and US treasury money market funds with checking privileges are solid options.

 

  1. Bonds are a promise to give x your money and get it back with some interest. That is if x still exists when it is time to pay. Usually, with bonds interest rates go down when they are of high value and safe, and vice versa.

 

  1. CD’s – let the bank use your money for a low return, marked linked CD’s offer an 8% return with no downside.

 

  1. Homes – owning your home with a fixed-rate mortgage is a hedge against inflation and a tax advantage.

 

  1. Use your pension wisely!

 

  1. Annuities – a private pension if done right.

 

  1. Get a life insurance policy, nothing is guaranteed.

 

  1. Structured notes – you lend the bank money, which they then invest into an index fund. You get the majority of the upside plus the original investment after x time. Make sure to choose large banks like JP Morgan and the Royal Bank of Canada.

 

  1. Structured Notes
    • 100% principal protection for the security bucket.
    • High return notes that offer less protection if the index falls, market drops 25% you lose 0%, if it drops 35% you lose 10%. These can bring you 150% returns, meaning that when an index goes up 10% you get 15%.

 

US Treasury Bonds – #verysafe:

  1. T-Bills – government debt obligations that come due in less than 12 months.

 

  1. T-Notes – mature in 1-10 years at a fixed interest rate, paid every 6 months.

 

  1. T-Bonds – the same as T notes but mature in 30 years.

 

  1. TIPS Treasury Inflation Protected Securities – interest rates rise parallel to inflation.

 

  1. Corporate Bonds – bonds in a company.

 

  1. Municipal Bonds – bonds with a city, state, or country that needs money.

 

Forms of growth/risk investing:

  1. Equities – stocks or ownership of shares of individual companies or vehicles that hold many of them like funds and indexes.
    • ETF Exchange traded funds – have a theme like all small-cap stocks, municipal bonds, or gold. Can be traded at any time.
    • Index and Mutual funds – can only be traded when the market is open.

 

  1. High Yield Bonds – High risk and high interest.

 

  1. REIT’s – invest in large pools of real-estate like senior housing.

 

  1. Commodities – gold, silver, oil, coffee, and cotton.
    • Gold is worth buying during the correct economic season. Which season is that? What’s the fun in telling you? Do your due-diligence.

 

  1. Currencies – the forex market is ruthless. Forex is not for the faint of heart!

 

  1. Collectables – art, wine, coins, antiques, and cars.

 

Key Point: Diversify, diversify, and diversify across asset classes, markets, and time. Per David Swensen, 100% of gains are in asset allocation! Next, your portfolio should be a mix of growth and secure investments. The younger you are the more aggressive your portfolio should be.

 

Some of you may be half asleep at this point, so here is some more bullet points😉:

  • Find more ways to earn and save so that you can invest more.

 

  • Never get greedy and buy high.

 

  • Never get scared and sell low.

 

  • Buy like crazy during a crisis. Everyone praises the bull when the market is going up, but learn to embrace the bear for without it the bull cannot exist.

 

  • Make regular investments in a volatile stock market.

 

  • Dollar cost averaging – investing parts of your income as you earn them. Over time this works best with volatility.

 

  • Rebalancing – as your portfolio makes money you have to move it around to make sure that it is divided according to your predefined standards. For example, if you decided that 40% of your portfolio should be in stocks for security. But it grows to 60% you will move some of that money into bonds, commodities, or another section of your portfolio who’s percentage went down when the stocks grew.
    • Rebalance at least twice a year.

 

Tony recommends that you watch this economics video to learn how the machine works: http://www.economicprinciples.org/.

 

The Best Portfolio on Earth

Now, for the part that you have been waiting for. Ray Dalio’s 4 Seasons Portfolio. If you want to get the walkthrough of the four seasons, I would recommend getting Tony’s book. For those of you that just want to know what to do with your money here it is, the ultimate defensive investment:

  • 30% in stock indexes

 

  • 15% in intermediate-term 7-10-year treasuries

 

  • 40% in long-term bonds 20-25 year treasuries

 

  • 5% in gold

 

  • 5% in commodities

 

  • Rebalance annually for an average yearly return of 9.72%

 

  • Some quick math one-million-dollars in this portfolio would get you an annual average of $97,200.00. That is basically six figures for just moving some money around once a year!

 

I hope that your mind was blown just as much as mine, back to the notes.

 

The 4 Obsessions of Investing:

  • Don’t lose money – Warren Buffet’s rule #1

 

  • Risk a little to make a lot – #riskmanagement #CYA

 

  • Anticipate and diversify – never put all of your eggs and one basket and study your baskets.

 

  • You’re never done – Socrates, “All I know is that I know nothing.”

 

The 7 Tips for Investing Success:

  1. Make the most important finical decisions now. Money is just a game when you have enough of it. When you are lacking money, it can be a source of pain. Have those difficult conversations with your spouse and family to find a solution.

 

  1. Become an insider know the rules before you get into the game. When you lose money, it’s your fault. Just face it you sucked. In that respect, we have Google, so there are no excuses.

 

  1. Make the game winnable. Follow the basics diversification, risk management, and not getting emotionally involved.

 

  1. Make the most important investment decisions. This means that when you get a raise or start an online business that you don’t go out and blow 40k every 100k that you make! (Millennials cough, cough).

 

  1. Create a lifetime income plan. Always prepare for the worst.

 

  1. Invest like the .001%. This means making Tony’s book your code of conduct in all investing decisions.

 

  1. Just do it, enjoy it, and share it! Actions speak louder than words. Enjoy mastering the game and helping others get your level.

 

I hope that you are still awake and pat yourself on the back if you made it here. If this book made spaz out as much as it did to me, don’t forget to get your copy here.

Click here to master the game.