Everybody loves Tony Robbins, right? The guy is a superhuman. So when he published his first book in almost 20 years and it wasn’t about peak potential or flow, but about how to win in the money game, people took notice. Well, don’t go out and buy the book just yet. It’s 688 pages and has mixed reviews. Let me help distill his best advice into something more easily consumable. Here are some of the better takeaways from an interview he did with Inc. (video after the break).
“Get in the game.”
Tony recommends that people who have yet to invest in the stock market to ‘get in the game.’ He says the financial market is still ‘winnable’. He’s absolutely right. Don’t wait to invest. He says “get started with whatever you have.” Naturally that assumes you have something to invest. This is what to know before you start DIY investing. Basically, be debt free and have some money saved up. Then get in the game. Most people invest through their 401k and then invest in mutual funds. This isn’t bad if done correctly. But people don’t take the time to check if done correctly.
“96% of mutual funds fail to match the market”
He does a good job of explaining why you shouldn’t blindly invest in any mutual fund. And he makes it extremely clear that your chances of finding the 4% of mutual fund (managers) who beat the market is less likely than you getting an Ace in blackjack when you’re dealt two face cards (20). What I think Tony could’ve explained better was the fact that you can beat 96% of mutual fund managers of any 10 year period if you invest in index funds. That’s not Tony’s focus in the conversation. His focus is to tout his partnership with a 401k management company. Nothing wrong with that. Tony is a salesman at heart. One of the best in the world. (I wish he’d put his efforts behind renewable energy but I guess smart personal finance is good too.) So he emphasizes how you can’t beat the market but then quickly switches to the problem with fees.
How do you beat the market, Tony? How can I win? Index funds all day long. And if you’re looking for a truly diversified portfolio that includes bonds, international exposure and REIT’s, you’re going to want to look into a robo-advisor like Wisebanyan.
“Fees do matter”
Tony ends up talking to business owners on this point. He’s being interviewed by Inc.com so he knows his audience is likely business owners, operators, and entrepreneurs. Ultimately he seems like he’s trying to get people to switch to a 401k company he’s now “partnered with.” Sounds legit. But I’m talking to the individual investor who doesn’t want to lose out on retiring as a millionaire the easy way. So let me simplify this point for the individual investor:
Choose low-cost index funds to invest in.
“Fees do matter” as Tony says because even a small difference in fees can add up over time and eat up $100,000’s worth of potential gain. Take a look at Vanguard’s minimize cost tool. Set the returns on that page to about 8% and slide the expense ratio back and forth between 0.05% (VTI expense ratio) and 3% (some actively managed fund expense ratios). The difference can be huge! Fees do matter, so invest in low cost index funds to maximize your earnings. Any expense ratio less than 1% is considered low. But like limbo, the lower you can go, the better.