Tony Robbins – Money: Master the Game Step 2

Step 2 – Become an insider

Tony’s second step is: You need to know the rules of the game before you start playing, right? So in this section he covers the top marketing and investment lies.

The myth: Invest with us.  We’ll beat the market. When it comes to investing, ask yourself – what don’t I know? What you don’t know can hurt you, so don’t be arrogant about knowing – this is how people lose tons of money. Admit what you don’t know. As with everything in life, the more you learn the more you realize that you don’t know anything! As an average Joe, you don’t want to play against the market. The best investors do this for a living and guess what? 96% of fund managers do no better than the market anyways, so you won’t fare any better (most likely). Don’t pick individual stocks or invest with a fund manager just because they say they can beat the market. It’s simple, be passive and play the market. Go for a low-cost S&P index fund.

The myth: Mutual fund fees are a small price to pay. Mutual funds cost an arm and a leg, so stay away from these! These mutual fund companies make the fees look negligible, but they are killing you! Even Senator Peter Fitzgerald stated,

The mutual fund industry is now the world’s largest skimming operation, a $7 trillion trough from which fund managers, brokers, and other insiders are steadily siphoning off an excessive slice of the nation’s household, college and retirement savings.

Below is the impact of fees on fictitious ending account balance:

Jason: $100,000 growing at 7% minus 3% in annual fees = $324,340
Matthew: $100,000 growing at 7% minus 2% in annual fees = $432,194
Taylor: $100,000 growing at 7% minus 1% in annual fees = $574,349

That’s just ridiculous! Jason and Matthew got ripped off.   Bottom line.   You want to go after low cost index funds. These have low fees, and you should aim for 1.25% or lower on fees.

Still don’t believe me? Read this article by Ty A Bernicke – The real cost of owning a mutual fund  

The myth: Brokers have your best interest at heart. You are basically financing their retirement, not yours. Sometimes they are not even investing in the mutual funds they are managing.  That’s saying a lot. Consider a fiduciary instead. They are independent financial advisers.

The myth: Target date funds, set it and forget it. In general, stay away from target date funds (aka life cycle funds). It goes like this – you pick a date and some company will allocate your portfolio. They basically pick a glide path based on your age. They decrease stock and increase bonds as retirement nears.   Sometimes these are ok but if based on stocks and bonds they can both go down at the same time, like in 2008. As Warren Buffet says, bonds should come with a warning label. See this article for more info on this “warning label”.

Look for a low cost target date fund like those offered by Vanguard. Vanguard is a company that Tony highly recommends, but I’m not sure how I feel about him recommending a company that he is trying to become partners with, just due to the perceived conflict of interest there. But it’s worth checking them out.

The myth: Variable annuities are great. Be careful with annuities, especially variable annuities. These should be avoided because they are basically mutual funds wrapped in annuity wrapper to avoid taxes during growth. This type of annuity comes with lots of fees as well.

The myth: You have to take huge risks to make money. You don’t have to take big risks to make money. In fact, you want to protect the down side. This is the number one rule of most investors – don’t lose money! It seems pretty obvious, but when people think investing, they think they need to take big risks to get ahead. This is not the case. Look for low risk, high reward.

The myth: The lies we tell ourselves. Don’t limit yourself. Often times it’s not someone else’s limitations that stop us, it’s our own limitations. It’s our limiting perceptions and beliefs. This goes back to the negative perceptions about money. All of us have limiting beliefs and perceptions that we have to identify and change.   Tony Robbins goes into a lot of this stuff in his previous works, so if you want more info/advice, I suggest you look at some of his other books.

Have a proven strategy for investing (coming up in later posts) and just do it. If you have a limiting story, change it! More money is beneficial to you and all of those around you. Have a positive state. Look for the good and look for strategies. Strategies are all around you, but they are invisible if you’re not in the right state. Evaluate yourself in all areas and call bullshit on yourself if needed.

Continue to Step 3 – Make the Game winnable