Today I am going to be talking about the good and the bad in Tony Robbins book on Finance. But I am going to go even further than that. I am going to give you the secret on how you can tell if you are getting good financial advice from anybody. WATCH NOW
Everyone knows Tony Robbins. He is an inspirational speaker and life coach to celebrities and world leaders. He is incredibly successful with business and money. But he is not a finance person, and so I found it curious that he wrote a book on finance. The book is called Money: Master the Game: 7 Simple Steps to Financial Freedom and it was released in 2014. We should note, that all the profits of the book were donated to charity to provide meals to families in need.
This is a massive book. It is 688 pages long. And I read it so that you do not have to. Here is my review of the book.
Tony is upfront in the book and explains that he is not a financial expert. But his career has put him in the unique opportunity to have access to the top financial minds in the world. So what he does is sit down with all these financial experts and ask them questions about money. And he writes everything down in this book.
What I appreciate the most about this book, is that is it written in a way to be easily understood by the ordinary person. That is something I try to do as well on this channel, is take complex financial concepts and make them easy to understand. He does a really good job. Most of the book covers basic financial ideas, and most of this book is really solid, credible information. He talks about well accepted ideas of diversification, and how stocks work. This is like an Intro to Finance class you might take in college, but in an easy to understand, and fun to read book.
My problem with the book comes at the very end in the final chapters. In one section, Tony sits down with Ray Dalio, a billionaire hedge fund manager and one of the smartest finance minds in the world. Tony puts Ray on the spot and asks him a bombshell question. “What is the best asset allocation?” Just so you realize what is going on… this is one of the biggest questions people in finance struggle with when you look at portfolios and decide how much to invest in stocks versus bonds.
In the book, Ray describes for Tony what he calls the “All Weather Portfolio.” This is an asset allocation that is supposed to perform well in any type of financial environment.
- 30% stocks
- 15% intermediate term bonds [7-10 yr Treasuries]
- 40% long term bonds [20-25 yr Treasuries]
- 7.5% gold
- 7.5% commodities
According to the book, this would be the ideal investment portfolio that would give you the best performance in any situation, with the greatest amount of return with the least amount of risk. Tony spends the rest of the book claiming that he has found the holy grail of investing, and telling his readers that this is the perfect asset allocation that everyone should use.
This is where I am going to disagree with this book. This is actually bad financial advice. If you ask any financial professional the question “What is the best asset allocation?” they would answer with “It depends.” That is the correct answer to the question, and it has to do with how finance works.
Finance is a set of tools to help you make financial decisions for your situation. The key to this statement is “for your situation.” Everyone’s situation is different. What might be good financial advice for one person, might actually be bad financial advice for someone else. For instance, someone who is one year away from retirement should probably not be using Tony’s proposed asset allocation. They need to be worrying about how they are going to live on a fixed income, not investing in commodities. In contrast, this asset allocation is also going to be different for someone in their 20s. The common approach in finance is to base asset allocations on your age. As you get older you accept lower returns so you can hold lower amounts of risk.
What Tony Robbins is doing, is offering a quick and easy fix. He is providing a solution, regardless of anyone’s situation, and that is incorrect. I think what really happened is that Tony probably did not understand what Ray Dalio was saying. Ray Dalio was probably saying that this was the best asset allocation for himself. For his situation, running a billionaire hedge fund, this asset allocation works for him. Think about it. For Ray Dalio, he has a huge amount of money on an infinite investment timeline. Hedge funds are trusts that are meant to last for generations. But very few people are in that situation. Most people do not have an infinite timeline. Most people are worried about dying. They do not care if they have great returns over a 200 year period. They are not going to live as long as Ray Dalio’s hedge fund. Because the situations are different, you need to be careful with financial advice. The correct answer to the question of “What is the best asset allocation?” is “It depends.”
This illustrates how you should look at any financial advice. As you go through life, people are going to give you money advice all the time. Right now there are people giving investment tips on Reddit. People will try and sell you books claiming they have found the roadmap to riches. You might run into someone at a party who knows a great get rich quick scheme. All of these are probably bad financial advice, and the way you know, is because none of them start with you. Financial advice should start with your situation. You figure out your goals and dreams, and then find the financial opportunities that make sense for you. If the financial advice does not start with you, the other person is probably looking out for themselves, not you.
Everyone is in a unique situation and so the best financial advice will be different for everyone. There is no step-by-step roadmap on how to get rich, because then everyone would follow it. You get rich by understanding your unique situation, and going after the right opportunities.
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Neither Zach De Gregorio or Wolves and Finance shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.