Tony Robbins's book "Money Master the Game" was recommended to me on multiple occasions. In short, the book holds amazing information and insights and has been the most valuable book I've read this year. My only criticism is that Tony might be interpreted easily sidetracked because he's used to life coaching advice (which he excels at). I recommend you buy and read the book, his background stories add to the complete picture.
Calculate how much money you need to have an income for life
Use low cost index funds and bonds
Security bucket (your age in %)
Risk bucket
Dream bucket
Don't actively manage
Diversity, diversity, diversity
Invest on a set schedule and rebalance periodically
There are other views
Money is only part of the equation
Final note: this summary is far less powerful if you haven't read the book.
How to read the summary
This summary highlights what I thought were the most important takeaways from the chapters in the book. You will find:
- Short paragraphs and examples per chapter
- TL;DR sections (Too Long Didn't Read, meaning summary for lazy or rushed readers)
I recommend using this summary as a reference after you read the book. You can read it as it is as well. This Money Master the Game summary based on Tony Robbins's book is written as a reference guide for myself, not everything is in here.
Section 1: Welcome to the jungle
Chapter 1.1: It's your money! It's your life! Take control!
TL;DR: Money isn't a goal, it's a means to an end. Most people don't want money, they want a certain lifestyle or emotional security. You are the master of your financial and emotional success.
- Most people in the finance world don't practice what they preach
- People who succeed aren't lucky, they do things differently
- Success leaves clues, model the people who made it
- There are passive ways to win that beat 96%+ of active stock traders
- The financial sector seems needlessly complex
- You need to take control of your money
Chapter 1.2: Create an income for life
TL;DR: Our goal is to create an automatic paycheck machine using investment. You are responsible, act like it.
- Take responsibility for your retirement
- Tax efficiency is very important
- 53% US households are at risk of having insufficient retirement funds
- Complexity is the enemy of execution, make a plan and make it simple
- Make a plan, stick to it and readjust course once or twice a year
Chapter 1.3: Make the most important financial decision of your life
TL;DR: Compound interest is more powerful than you can imagine. Start saving and investing as soon as you can. Example of 2 brothers retiring at 65
Brother 1
- Starts at 20 years old
- Saves $4000 a year for 20 years
- Leaves the money alone for the last 25 years
- Total of $80,000 savings
- 10% growth a year
Brother 2
- Starts at 40 years old
- Saves $4000 a year for 25 years
- Lets the money grow until age 65
- Total savings of $100,000
- 10% growth a year
Results
- Brother 1: $2,500,000
- Brother 2: $400,000
Yes, it is that powerful. Why? The interest of next year also grows your interest of this year.
- You always find ways to spend available money
- Make saving a personal tax (% of income), unavailable for spending no matter what
- Use 'start saving tomorrow', meaning you assign 50% of income increases to saving
- You can live off interest with far less money that you realise
Chapter 1.4: It's time to break through
TL;DR: Humans have common factors that make then feel happy and fulfilled.
Whatever you are after, Tony names 6 basic human needs for success and happiness
Certainty/comfort
Uncertainty/variety
Significance
Love & connection
Growth
Contribution
Inspect in yourself to what extent you have which needs
Gratitude and giving back serve many needs
Section 2: Becoming an insider
Don't get in the game unless you know the rules.
Chapter 2.0: Shattering the 9 financial myths
TL;DR: A whole bunch of stuff you believe is wrong, most of it actually.
Myth 1: Invest with us! We'll beat the market! + 96% of actively managed mutual funds don't beat the market (index funds) over any sustained period of time + Only very few people (the 'unicorns') beat the market consistently, and they take only high value clients
Myth 2: Our fees? They are a small price to pay! - Average mutual fund cost: 3.17% including hidden fees
Example of fee impact
3 friends
- All invest $100,000
- All funds perform at 7%
- All start at 35 years old and stop at 65
Friend 1 (3% fees) result: $324,340
Friend 2 (2% fees) result: $432,194
Friend 3 (1% fees) result: $574,349
Myth 3: Our returns? What you see is what you get. + Time weighed "average" return is deceptive + Imagine the return going up 50% and down 50% every year. Average 0% return. But you lose money
- The dollar weighed return is what you need
- You invest spread out over a year, and thus step in at different points
Myth 4: I'm your broker and I'm here to help
- 96% of actively managed mutual funds don't beat the market (index funds)
- A broker means paying extra fees for lower performance
- 49% of managers own no shares in the fund they manage
- Brokers get paid affiliate fees for financial products
- Fiduciaries on the other hand are paid by you, so don't have ulterior motives
- 46% of financial planners have no retirement plan
- The difference between brokers and fiduciaries in a video
Myth 5: Your retirement is just a 401(k) away
- 401(k) is an American construct. Inapplicable for me.
- Many 401(k)'s are very high in fees, see myth 2
- Ask your employer to switch to a better 401(k)
Myth 6: Target-date funds: "Just set it and forget it"
- Target date funds automatically become more conservative as you approach retirement
- TDF's are based on assumptions about predictability that may very well be wrong
- TDF's are basically managed funds, no guarantee at all
Myth 7: I hate annuities, and you should too
- These are basically 'income insurance'. You pay now to get money back at a fixed rate later.
- The concept is great, but they are often abused (high fees, bad terms etc)
- Variable annuities are bad
- Jack Bogle likes annuities, if they are done right
- Always check the details, better yet let an expert look at them
Myth 8: You gotta take huge risks to get big rewards
- Big money looks for asymmetric risk/reward
- Example of Nickles: US nickles are worth more as melted metal than as coins. Kyle Bass bought $1 million in nickles. He had a 25% gain in value the second he bought them. And if the metal price drops, he has 100% of his initial investment.
- It is possible to have reward with low risk. People with money know this and use it.
Myth 9: The lies we tell ourselves
Our biggest limits are not external but self imposed
Cultivate a breakthrough moment where the impossible feels possible
Find a proven strategy that works for you
Tell yourself the right story, psychology is important in getting results
Example: "I have dyslexia so I can't study well" vs "I have dyslexia meaning I take more time studying and thus remember it better"
Example: two groups of people feel stress. Those who believe it is harmful experience issues biologically, those who see it as a performance booster get no side effects. (Mentor's note: yup, proven science)
Put yourself in the right state to achieve success
Change your body before your mind (easier to measure thus more motivation)
Section 3: What is the price of your dreams?
Chapter 3.1: Make the game winnable
TL;DR: Create a concrete picture of how much money you need
Pick three financial dream levels that matter to you, a short, medium and long term goal
Write down the among of money per year you need to achieve them
Monthly x 12 = yearly
There are 5 levels of financial dreams
Financial security: you can survive without working
Mortgage, utilities, food, transportation, insurance
Financial vitality: you can survive and indulge a little
Half of: clothing cost, dining & entertainment, small indulgences. Add your financial security to this.
Financial independence: you don't need to work to have your current lifestyle
Calculate your current yearly costs to live
Financial freedom: independence plus 2 or 3 extra luxuries
These luxuries you don't have to work for either. Think a boat, condo in a ski resort etc.
Absolute financial freedom: you can do whatever you want, whenever you want, within reason.
You are the creator of your life, not the manager
Tony's 3 step process
Unleash your hunger and desire, and awaken laser like focus
Take massive and effective action
Grace (luck, coincidence, god's hand)
Tony with this means a state of gratitude and trust that eliminates fear and insecurities
Calculate how much money you need to save
Assuming 5% interest you need 20 times your yearly target income
Assuming 10% interest you need 10 times your yearly target income
Interest x multiplier = 100
So if you assume 2.5% interest you need 40 times your target income
Chapter 3.2: What's your plan?
TL;DR: make a goal and stick to it.
Whatever your goal is, you need to make a plan and stick to it
It's not about having the most money, it's about knowing how much you need
Life is not a competition. It doesn't matter where you start, it matters where you draw the finish line and that you reach it
Save more strategies
Save more and invest the difference
Rate recurring expenses from 0 pleasure to 10 pleasure
Invest in yourself also
Earn more and invest the difference
There are always ways to make money
Reduce fees and taxes
Get better returns
Change your life and lifestyle for the better
You can save a lot of money by moving or changing habits, whilst increasing life quality
Section 4: The most important investment decision of your life
Chapter 4.1: Asset allocation
TL;DR: Asset allocation is the single most important thing
- Asset allocation is what keeps you wealthy over time
- Divide your investments over asset classes
- Bonds, stocks, real estate etc
Diversity across risk, make 3 buckets
- Security/peace of mind bucket
- Cash, cash equivalents, bonds, certificates of deposit, home, pension, annuities, life insurance, structured notes,
- Risk/growth bucket
- Dream bucket
Chapter 4.2: The risk bucket
TL;DR: Separate risk from security
Be willing to lose most or all of this
Asset classes
Equities, equity etf, high yield bonds, real estate, commodities, currencies, collectibles, structured notes
Diversify. When indoubt, diversity. On second thought, diversity.
Diversity across classes, markets and across time
Index funds are diverse by nature
Want to day trade? Use a small portion of the risk bucket
Determine the sizes of the buckets
based on age, risk tolerance and liquidity
70% risk bucket is very aggressive
Rule of thumb, invest your age in bonds (portion of security bucket)
Chapter 4.3: The dream bucket
TL;DR: Save for treats.
- For strategic splurges, enjoy your wealth along the way
- How to fill it
- Unexpected big scores
- Risk/growth gets a positive hit
- Set percentage of income
Chapter 4.4: Timing is everything?
TL;DR: Don't try to time markets. Use dollar cost averaging.
- You can never predict a market, only estimate. Don't bet on entry points
- If you think you can time the markets, you are wrong
- Use dollar cost averaging (diversifying across time)
- Invest on a set schedule on a set plan
Example of dollar cost averaging
Index fund 1
- Invest $1000/year ($5000 total)
- Year 1: $100/share
- Year 2: $60/share
- Year 3: $60/share
- Year 4: $140/share
- Year 5: $100/share
Index fund 2
- Invest $1000/year ($5000 total)
- Year 1: $100/share
- Year 2: $110/share
- Year 3: $120/share
- Year 4: $130/share
- Year 5: $140/share
Intuition: index 2 is better. Reality: dollar cost averaging over a volatile market can be very good
- Results index 1: $6048
- Results index 2: $5915
If the market dips, your shares get cheaper
Balance your portfolio 1 or twice a year to keep your security/risk bucket percentages stable
Use tax-loss harvesting
Section 5: Upside without the downside
Chapter 5.1: The all seasons strategy
TL;DR: A historically stable portfolio.
Ray Dalio's recommendation
10% returns anually between 1974 - 2013
High safety and low volatility
The 1% of the 1% invest with Ray Dalio
Stock is 3x more risky than bonds, a 50/50 portfolio in stocks and bonds means you have a vast majority of your risk in the stocks
The portfolio is optimized to withstand the 4 seasons
The combo's of inflation, deflation, rising economic growth and falling economic growth
The all seasons portfolio
- 7.5% in gold
- 7.5% in commodities
- 30% in stocks
- 15% in intermediate US bonds
- 40% in long term US bonds
- Portfolio must be readjusted to maintain these ratios
Chapter 5.2: It's time to thrive
- Shows how well the all seasons portfolio does
- If you lose 50% of your money, you need 100% gain to get back up
- Recommends stronghold financial to look at your broker/401(k) for free
Chapter 5.3: Creating your life income plan
- The end game of investing is income
- Average returns is a deceptive statistic
- Annuities can be great secure income generators
Chapter 5.4: Time to win
TL;DR: Annuities can be good if you take the right ones.
Immediate annuities
For starting at a late age
Pay a bunch of money now and get income
The company bets that more people die than live to cash in
Deferred annuities
Fixed annuity: Independent of the market. You know what you will get
Indexed annuity: Get paid a bit more if that market does well, but lose nothing (and gain nothing) if it doesn't
Hybrid/fixed indexed annuity: Get the benefits of both of the above (Tony likes, upside no downside)
Variable annuities: avoid.
The longer you wait the more you get
Chapter 5.5: Secrets of the ultra wealthy
TL;DR: US tax benefits.
- All US based tactics
- Private placement life insurance
- Living revocable trust
Section 6: Invest like the 0.001%
Chapter 6.0: Meet the masters
- Tony talks about the people he interviewed
- Common obsessions/focus he found
- Don't lose money
- Risk a little, and make a lot
- Anticipate and diversify
- You're never done (learning, earning, growing etc)
Chapter 6.1: Carl Icahn
- Came from nothing, made his fortune
- Activist investor
- Improves companies by replacing management with good people
Chapter 6.2: David Swensen
Yale's chief investment officer
Mutual find performance is even worse than it seems because it only includes surviving companies
Don't just chase historically well performing things
Three levers you can push as an investor
Asset allocation
Market timing
Security selection
Likes index funds, it's easy diversification
Also diversify across funds
Equities are at the core for long term portfolios
Use different types of securities
Chapter 6.3: John Bogle
- Creator of the index fund and the Vanguard group
- Started working at age 9 delivering newspapers
- There is no such thing as a permanently good investment manager, it's 95% luck 5% skill
- Loved low cost index funds, obviously
- Chances of a worldwide depression maybe 1 in 10
- Three core principles
- Asset allocation based on your risk tolerance and goals
- Diversify through low cost index funds
- Have as much in bonds as your age (crude benchmark)
Chapter 6.4: Warren Buffet
- Tony and Warren talked briefly by chance
- "I'd love to help, but have said everything there is to say"
- 10% in government bonds and 90% in a very low cost S&P 500 index fund
Chapter 6.5: Paul Tudor Jones
Robin hood foundation
28 consecutive lossless years
Risk control is the single most important focus every day
Two things to remember
Be with what the predominant trend is
Five to one ratio of asymmetric risk/reward
Bases his decisions on the 200 day moving average
Chapter 6.6: Ray Dalio
- Founder Bridgewater Associates
- He's covered earlier
Copy for convenience: the all seasons portfolio
- 7.5% in gold
- 7.5% in commodities
- 30% in stocks
- 15% in intermediate US bonds
- 40% in long term US bonds
- Portfolio must be readjusted to maintain these ratios
Chapter 6.7: Mary Callahan Erdoes
- CEO JP Morgan asset management division
- Since she took over the division it grew more than half a trillion
- Money business is about results, as a woman it is great
- There is no one size fits all
- Active management works if the trader is good
- Invest for the long term and only take money out if you really need it
Chapter 6.8: T. Boone Pickens
- CEO BP Capital Management
- Shareholder activist (corporate raider)
- Willing to take big risks for big rewards
- Have a good work ethic
- Get a good education
- Virtually all assets in energy
Chapter 6.9: Kyle Bass
- Founder Hayman Capital management
- Was a springboard/block diver (Mentor's note: approval)
- Predicted housing crash and made money on it
- Uses asymmetrical risk and reward
- Buy a whole load of nickles if you can
Chapter 6.10: Marc faber
Publisher of Gloom, Bloom & Doom
In the investment world, everything is a lie
Emerging world is risky, US too stagnant
His portfolio for the climate of 2013 (roughly)
30% bonds and cash
20% stocks
30% real estate
25% gold
He realizes this is above 100%, it's a guesstimate
Traditionally holds emerging market bonds
Most important: it's not important what you buy, but what price you buy it at
Be careful not to buy things at a high price
Chapter 6.11: Charles Schwab
- Charles Schwab Foundation
- Trying to make products for the customer
- 98% of people should use low cost index funds
- Asset allocation is the single most important desicion you make
- Advice to his kids and grandkids
- Get the right education
- Get a well paying job
- Put money in your IRA/401(k)
- Then start 'proper' investing
Chapter 6.12: Sit John Templeton
- Founder Templeton Mutual Funds
- There is no disparity between spirituality/ethics and business
- You don't want to be your own doctor, you don't want to be your own investment manager
- Invests in anything he thinks will turn a profit
- Only sell an asset if you find an asset that is a 50% better bargain
- Don't be a go getter be a go giver
Section 7: Just do it, enjoy it and share it
TL;DR: Money is only one part of the equation.
Chapter 7.1: the future is brighter than you think
Technology is awesome
It will decrease cost of living
It will increase life span
Technology develops exponentially
Basically a chapter about technological awesomeness
Chapter 7.2: The wealth of passion
Everyone wants to be happy
Success without fulfillment is the ultimate failure
Change your life in 3 decisions
What will you focus on
What does this mean
What am I going to do
Use priming, Tony does it every morning
Chapter 7.3: the final secret
Money can increase hapiness if used right
Invest in experiences
Buy time for yourself (outsource)
Invest in others
It's been shown that spending money on others increases happiness more than spending it on yourself
Especially when you experience the result together
Focus on being grateful, forgiving and compassionate
The secret to living is giving