No. 1 New York Times best-selling author Tony Robbins discusses the tenets to smart investing from his new book ‘Unshakeable’
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Tony Robbins is a top life and business strategist, a multiple No. 1 New York Times best-selling author and an avid philanthropist. He speaks with on our podcast, “Charged Up! with Jenny Hoff” on the importance of investing: How to do it, when to do it and what you’ll lose if you don’t. With examples from his new book “Unshakeable,” Robbins takes us step-by-step through the four important core values of investing, based on interviews with 50 of the country’s most successful investors (think Warren Buffet, John Bogle, Ray Dalio). These lessons apply to you whether you are in debt or have cash sitting in the bank.
Get ready to get Charged Up! about becoming an owner, instead of just a consumer.
The full transcript is below; to read an abridged version, see Q&A with Tony Robbins.
JENNY HOFF: Tony Robbins, it is an honor to speak with you today. Thank you so much for joining us.
TONY ROBBINS: Thanks, it’s great to be here.
ROBBINS: Well, most of the books that I’ve seen, quite frankly, don’t really give you a comprehensive understanding that allows you to overcome your fear when we participate in the market.
There’s some great books out there about cutting debt, and there are people out there who talk about how to just crunch your numbers, so to speak. But, what I found in 2008 was that most Americans were not prepared for the crash, and we may have another one. I’m not a negative person, it’s just reality. Today, is the eighth anniversary of the bull market. It’s the second-largest bull market in history. We’re due for another one. We don’t know if it’s going to take six, 12, 18, 24, 36 months, no one knows, but there’s going to be a giant correction, there’s going to be a giant crash, and what I wanted to do in this book was bring you the best of what I learned over five years of interviewing the best of the best in the world of finance.
So, I interviewed more than 50 investors and put my findings originally in my 700-page book “Money: Master the Game,” which became the No. 1 best-seller for The New York Times. This one became the No. 1 best-seller today, but it’s 200 pages and it’s focused on just showing you that if you’re a millennial and you’ve got an amazing amount of debt from college and you think you’ll never be free or you’re a baby boomer and you feel like it’s too late, that you didn’t start early enough, or you’re Gen X, and you are confused, I want you to see that your financial life can change for the positive, from the largest extent it ever has during the next crash. You want to be prepared and not only know how to protect yourself, but to take advantage of it so you’ll be able to get to where you want to be.
An example of this would be President John Kennedy’s father Joe Kennedy, who in 1929 [the year of the crash] had $23 million net worth. In 1932, three years later he had $185 million net worth.
ROBBINS: And the reason is, when things melt down, you can make money faster when they grow. They grow slowly, you build the building over 10 years of World Trade Center, unfortunately, and you can burn down in a few hours. So, when things crash and fail, which is what happens every five years, that’s the one chance for your kids, for you, for anybody you care about to jump on the next level, but you can’t do it if you’re fearful.
What I wanted to show people is, there’s been a correction of the market every year since 1900. You see a change, a drop of 10-20 percent and you had it last year in January, it was a giant drop there, you saw $2 trillion disappear, yet we ended the year in record territory. So, the corrections happen every year. A crash happens every five years. Again, we’re overdue, but here’s what really cool. If you study history for two and a half centuries of American history, every crash is followed by a bull market, every single one with no exceptions.
So, in 2008, the market dropped 50 percent from peak to trough, but you didn’t lose a dime unless you sold. If you’d stayed in, you were great, and within 12 months starting on this day March 9, 12 months after that, the bull market started and the first year it went up 69 percent. Those numbers will completely transform your financial life and you have the opportunity to tap in to them, but only if you get in the game.
HOFF: So, you talked about the psychology of wealth in the book and how — while these things all make sense, our very nature is to get into a fight or flight mode, and essentially get everything out because you get scared when everything is crashing. How do we change our very natural response to wanting to get out of something that looks like it’s a burning building and just stay in and hold on?
ROBBINS: The most important question to ask is really answer within ourselves. The only way you’re going to do this is if you know the truth. The metaphor I give: There’s this old Sufi story, we’ve all had a version of this happen in life, where the man’s walking down the path in the middle of the night and he sees this snake and immediately runs back the other direction. The next morning, he has to go get some water and he’s walking down the same path in the daylight and he looks now and what he thought was a snake was a rope. From now on, every time he walks by, night or day, every time he walks by he knows it’s a rope, there’s no fear.
The same thing is true with investing. So, let me give you an example. A lot of people say, “Yeah, I don’t know where you to get in. Right now, the market is really valued really highly. I got to wait and see what happens. Well, some people wait and see for eight years and they missed the 250 percent growth or just as President Trump got in, a lot of people went to cash and said “This is not going to be good.” We’re up 14 percent since that time. You’ve got to be in the market.
Here’s what found out that’s invaluable. JP Morgan did a 20-year study and everyone should hear this. Over the last 20 years, the S&P 500, the index, has gone up 8.2 percent a year, like clockwork on average, which means your money is doubling every nine years. That’s how people get wealthy. But, if you missed just the 10 best trading days because you’re out of the market saying “I don’t know, I want to wait and see what happens” or “I want to build up my cash,” – whatever reason, if you missed just 10 trading days in those 20 years, the top 10 trading days, your 8.5 percent drops to 4.5 percent. If you missed the top 20 days, you get a 2 percent return per year. If you miss the top 30 days, just one and a half days out of each year in 20 years, you make no money even though you’re in the rest of the time. And the six of the 10 best trading days happen within one of the worst trading days.
So, if you’re trying to time the market, you’re totally screwed. Warren Buffet said to me, “Look, the only purpose for these guys on CNBC, these market forecasters, is to make fortunetellers look good. Nobody can time the market. So, it’s not about timing the market, it’s getting in the market and staying there.
Now, here’s one more thing. A lot of your listeners might say, “But Tony, what if I get in right now and the market has been going for so long and it crashes tomorrow?” Great question. So, Schwab did a study, 20 years study, and they said “Let’s try these things and see what happens. Let’s pick one person who gets in to the market at the perfect time by accident, we’ll call them Mr. Lucky. Mrs. Lucky gets in on the day of the market crashes, let’s say March 9 for example – eight years ago – and it went straight up in that fair position. The second person gets in the worst day. They get into the peak of the market and then the next day it crashes. Pretty unlucky. Third person gets dollar cost averaging which simply means every monthly investment, the same amount of money, no matter what price the stocks are and that averages the stock price better. And then, a fourth person says, this is not something that I want to participate in, it may go down further and then they stay in cash.
Twenty years later, who’s worse off? The person with cash has no money, right? Because it hasn’t grown and inflation has eaten up some of their money. The person who has perfect timing, the lucky one, which never exists: That person did win. They have the most money. But here’s what’s amazing and please listeners, listen. The person who got on the worst day, got in at the peak and then it crashed, if they stayed in the market for those 20 years, they only had $14,000 less than the lucky person. So, the lesson is, you have to get in the game and stay in the game. As Jack Bogle, who created Vanguard – a $3 trillion industry – and has been 65 years in the market, he’s 85, he told me “get into the market and here’s what you do. Nothing. Just stay in there and get rich. Because if you stay in there and you don’t overreact, you’ll be there.”
In fact, women make more money as investors than most men because men are overconfident. They always try to beat the market. They’re always trading. When you trade, you incur costs and those costs reduce your return. Women on average make 2.5 percent more per year because they stay in. Men lose 2.5 percent per year. So they think they’re making 7 percent, but they’re really making 4.5 percent because of overtrading. So, it’s incredibly important that you decide right now that I’m not just going to be a consumer anymore. The most important decision for your listeners, no matter how little money they have is to decide “I’m going to become an owner of American business.” And, how am I going to do that? I’m going to make the most important decision of my life. I’m going to be an owner of American Business and I’m going to do it by taking a percentage of my income and decide to automate that to an investment account, no matter what, whether I think I have money or not, that’s going to be my most important investment.
Let me explain why.
There is a gentleman that I share with you in the book who is such a great example. His name is Theodore Johnson. And, in the 1950s he worked for UPS as a driver. He never made more than $14,000 a year in annual income. When he retired, check this out, he had $70 million dollars. He did what I teach. Someone had come to him and said “I’m going to make you a wealthy man.” He said “I’ll never be a wealthy man. I make $14,000 a year.” He says, “Yes, you are. I’m going to put a 20 percent tax on you.” And Theodore says to him, “Are you crazy? I can barely pay my bills. I can’t give up 20 percent.” Friends, listen to me. If the government raised your taxes by 20 percent, you’d scream, you would whine and you would pay it and you would get used to it. He said, “This is not for the government. This is for your future self and you will never have to worry and be totally financially free. He did it, and that 20 percent turned into $70 million. So, everyone needs to get in the game.
If you’re a millennial, I’ll give you one other example. In the book, I share a man who’s very smart financially. He understood compound interest and taught his son, an 18 years old, to save $300 out of every paycheck, every month, $150 per paycheck. His son said, “That’s impossible.” The man said, “It’s not impossible. We’re not going to do it, we’re going to automate it and you’ll get used to it.” He said, “If you’ll do this my son, only from 18 years old to 27, just eight years, you’ll never have to invest again because you will have all the money you need for your retirement. “That seems to be impossible Dad.” He goes, “It’s not. The market has gone up 10 percent a year on average over 30 years. Let’s assume it was only 8 percent. If we take the money you put in, you’re only going to put in over those eight years $300/month, which is $4,000 a year, so in total $28,800. How much money does he have when he retires? $1.8 million and he never added another dime. That’s the power of compounding. People think they have to make this big investment. What they need to do is consistently start putting money in investments and where to put that, we’ll teach you on the book as well.
HOFF: Yeah, absolutely and I want to get to that. So, one of the big things that you talked about in the book is avoiding fees and how fees can really eat away of what you ultimately get to take home. How do we avoid fees? And let’s say, perhaps, our investment device is a 401(k) from work, how do we avoid some of those fees? And tell us how those fees affect your overall take-home pay.
ROBBINS: I’m really glad you asked that question, because most people here, 1 percent, 2 percent, 3 percent, well, those numbers are so small, they think it doesn’t matter. Fees matter. So, let’s talk to the 401(k), because that’s where most people put their money. More people have a 401(k) in the United States – 90 million people – than have a home, to give you an idea. So, it’s the most important place. So, the problem is, you get your 401(k), and someone tells you, “Now you’ve got to decide where to invest it.” Well, first question that you’ll ask yourself is “Why are those mutual funds on the platform and not others?” Because they pay to be on there. They’re are not the best mutual funds. They are not the best performing mutual funds, they’re not the best cost mutual funds, but they paid the most money. Now, how do they get their money back? They tell you they’re going to charge you a 1 percent expense ratio and you think that’s all the fees. But, the rest of fees are in the document, there’s 17 and the average mutual fund that is actively managed, a traditional mutual fund, charges 3.12. You say, “Tony, who cares? 3 percent, 1 percent.” Here’s why you should care. Every 1 percent you are charged more than you need and a minimum usually give or take is 1 percent or a little less. But if you pay 2 or 3 percent, every 1 percent above the initial 1 percent, costs you 10 years of income in your retirement. So, if you’re paying 3 percent instead of 1, you just lost 20 years of income.
Or, another way to describe it, if you have $100,000, you work your tail off, you’re 35 and you save a 100 grand and you put it in the market and it grows at 8 percent a year which is what it has done over the last 20 years and you go to retire. If you didn’t add a penny, what do you have? Well, it depends on whether you paid 1 percent or 3 percent in fees. Both people own the exact same stocks. They just own it through different people at different fee structures. If you have 3 percent in fees, your $100,000 will go to $432,000. That’s pretty damn exciting. But that person [who paid 3 percent in fees], by the way, is going to run out of money at 79 and try to figure out how to survive. The second person will money until they’re 93 years old, which is past the life expectancy of most people.
So, fees matter immensely. I want you to know, you don’t want to own these actively managed mutual funds. Ninety-six percent of all mutual funds fail to match the market, only 4 percent do and the 4 percent are always changing.
So, if you’re out trying to find the 4 percent, the metaphor I always tell people is: If you played blackjack for 21, the game is face cards are worth 10 and you go to 21. If you get 22 or above, you crap out. You lose. So, if you got two face cards worth 20 and your inner idiot inside of you says, “I think there’s an ace in there. I’m going to take the risk.” You have an 8 percent chance of finding the ace, you got a 4 percent chance of finding a [successful] actively managed mutual fund.
So, you’ve really gotta change this. So, how do you change this? In the book, I’ll show you how I did it. I went out once I found out about the abuse in the system and yet 72 percent of Americans think that they pay no fees for their 401(k). So, what I did was, I have 31 companies, I took my education company first, my original company called Robbins Research, and I looked around and I found a company called America’s Best 401(k). I said “Look, great name, prove it.” So, they came in and they saved my employees $5 million and they own all the same stocks, they just don’t have those fees. So, I referred this to all my friends and eventually, I said to these guys, “I want to be your partner.” So, now you can go to showmethefees.com. Put in three answers and we’ll give you a printout instantly of how much you’re being charged and what that charge means compounded through time. And if you want to change, you can change literally for nothing. There’s no charge to change, you’ll end up with the same stocks, you just won’t have the same fees.
HOFF: What if you’re getting your 401(k) through your work and they’re matching whatever you put into it? Do you still have any power to change whatever system that they’re using and the fees that you’re paying?
ROBBINS: Jenny, great question, really great question. Well, for those who are listening who are business owners and employees, the owner, he doesn’t know it 99.9 percent at the time, but they are called the fiduciary, the big legal term. What it means is the owner of your company is legally responsible to make sure your 401(k) is appropriate in its fees. In fact, the law changed 3 or four years ago, the Department of Labor now requires and most of us don’t know this, that every year you need to benchmark your 401(k) for your company against the best in the business. Now, there’s all kind of lawsuits happening now because most business owners aren’t doing this and the Department of Labor is auditing companies and they said last year, they have a thousand more auditors and they said 75 percent of the people they audited were out of compliance and the cost to those companies, the penalties, the average is $666,000.
If you going to show me the fees and you see your company’s overpaying, which 90 percent plus usually are, it takes three minutes. All you do is you sit down with your employer and you say, “I don’t know if you’re aware of this rule,” – we have a document that we can send it to them so they become educated – you say, “You’re required to this and this company can do it for you for free and then you can put the report in your safe if you’re ever audited or the numbers aren’t great, you can change to this company with the same stocks and it costs nothing to convert. You’re just paying that fee going forward. Most employers are pretty thrilled to do that because they have money in the 401(k) as well.
HOFF: Fantastic, everyone should do that right? It’s all of our money. This is our retirement and our future that we’re talking about. You don’t want your money going to fees unnecessarily.
ROBBINS: And they all really compound, so it’s really important. I just want people to know that if you get this book, please hear me. I’m not getting anything. My last book, I donated the entire $5 million royalty to Feeding America and then I added to that, I said, 50 million people and I provided matching funds to feed 100 million. I fed another 100 million people last year and you know, there’s 47 million people in our country who go to bed not knowing where their next meal is going to come from. 17 million are children in the elderly; I was one of those kids. So, this book, I’m donating 100 percent of the profits too, as well. So, we’re going to feed another 100 million people this year and I’m going to feed in the next 7 and a half years, a billion people. And, if you buy this book, you get this transformation for your own life. You’ll know what to do to protect yourself, you can take advantage of the bear market that’s coming, but you will also feed 50 people for every book. I hope people will help themselves and make a difference to someone else today too.
HOFF: I love that. Speaking of that really quickly, I want to get to the last part of your book which is fulfillment and finding fulfillment outside of just wealth. Can you briefly touch on that and talk about where we can get this sense of fulfillment right now in our lives as we build toward financial independence?
ROBBINS: I’m really glad you asked that too because when I wrote this book, I wrote it so you can read it rapidly to get a financial game plan, to get in the game, and know exactly what to do to get rid of your fears. But, that will give you a lot of money.
But, you know,I’ve interviewed 50 billionaires plus and I’ve dealt with 50 million people over the last 40 years of what I do and I can tell you money does not make you happy. Certainly, more money when you make less than $100,000 a year, makes a significance difference in happiness but all the research above $100,000 it doesn’t make much difference. So, the reason is, you can be a billionaire and be angry or be fearful or be worried and the quality of our lives is not based in money. Money is a tool. The thing that controls you are your thoughts and your emotions. We’re the only creatures on the planet that can think of thought and make ourselves angry, think a thought and make ourselves scared or stressed. Think a thought and make yourself feel loved. Think a thought and get excited.
Most of us don’t know how to do that and that’s my No. 1 skill before I was ever in involved in the financial side of business. It’s the last chapter of the work and it’s about real wealth. It’s showing you how to break a pattern of this two-million-year-old brain that we all have. Our brains are 2 million years old and they haven’t evolved as fast as the world has. So, what happens is, this part of our brain is always looking to survive but it’s not looking to make you happy. That’s your job. It’s just looking for you to survive so it’s always looking for what hurt you or created a problem but there’s no saber-toothed tiger to be afraid of, so we have a fight or flight problem. So, now we have to fill the blank in. So, now have to worry of what people will think of us or how our social behavior is going or whether we have enough money or not. All of which are pretty simple compared to life and death, they’re not life and death but our nervous system responds like life and death. So, I teach you a series of tools and a meditation that I put online for you, where in two minutes you can end that feeling of suffering or frustration or stress. And I talk about how to really shift that so you really have joy today while you’re getting more money, not waiting for some time in the future when you feel rich and alive.
HOFF: Yeah, I love how you said that you can live in the state of suffering, you can live in the state of beauty and it’s ultimately your choice.
ROBBINS: Totally is, and it’s all a habit, right? You got to train your mind and to notice because your mind, “Oh my god, that’s coming up.” I always told people, “Figure out what your favorite flavor of suffering is.” I got 31 companies, I got 12 hundred employees across the world in 7 different industries and get 5 billion in sales. All you do is pull out my phone to get stressed, but I learned to do is let go of that. Look, everybody is learning, everybody is growing, it’s not life and death. Life is too short to suffer. So, I find the beauty in just about everything. When I don’t, I catch myself and I put that happiness right back in my life because that’s real wealth.
HOFF: Fantastic. Finally, Tony, what gets you charged up about teaching the strategies to fulfillment and financial independence?
ROBBINS: What charges me up is to see the look, the excitement in somebody’s eyes, face, and body when they realize “My God, I really can be financially secure and stable for a lifetime. I can be financially free. I can get to a point where I don’t have to work and then I’ll probably work because I enjoy my work, not because I have to. And, when you see that change in somebody, when the fear leaves them, when excitement enters their body, and it’s not fake excitement, it’s not enthusiasm – it’s based on a plan. I feel like my life has got some damn good meaning in it. So, that’s what’s driving me.
HOFF: All right. Thank you so much for joining us today Tony.
ROBBINS: Take care of yourself and I hope your readers will take care of themselves as challenges show up. There are really amazing opportunities if you prepare for it.
HOFF: Thank you so much. Bye-bye.
See related: Charged Up! podcast: Lessons from Robert Kiyosaki