Reading notes.. “Money: Master The Game” — Tony Robbins
This book was recommended by a few YouTubers, I didn’t even realize who Tony Robbins is when I bought the book. When I received the book and found the author’s face looks familiar so I searched online. Ah, the guy who talks all the time. How could a “motivating” speaker have time to write a good book?
So I skimmed the table of content and found one very intriguing chapter, “Invest like the 0.001%”. This whole chapter recorded Tony’s interview with 12 renowned investors, and I found the insight from this chapter to be extremely beneficial. Some of the ideas are not only for investment, they also help you navigate your life.
Preface by Marc Benioff
The quality of my life was the quality of my questions.
What do I really want ? Vision.
What is important about it? Values.
How will I get it? Methods.
What is preventing me from having it? Obstacles.
How will I know I am successful? Measurements.
Chapter 2.1 The $13T Lie
“Invest with us. We’ll beat the market.”
An incredible 96% of actively managed mutual funds fail to beat the market over any sustained period of time.
Chapter 6 Meet the masters
Common obsessions:
- Don’t Lose. If you lose 50%, it takes 100% to get back where you started — and that takes something you can never get back: time.
- Risk a Little to Make a Lot. They live to uncover investments where they can risk a little and make a lot. They call it asymmetric risk/reward.
- Anticipate and Diversify. The best of the best anticipate; they find the opportunity for asymmetric risk/reward. They do homework until they know in their gut that they are right. To protect Themselves, they anticipate failure by diversifying. “A lot of brilliant people are terrible investors. The reason is that they don’t have the ability to make decisions with limited information. By the time you get all the information, everyone else knows it, and you no longer have the edge.”
- You’re never done. They never done learning, earning, growing, giving.
6.1 Carl Icahn: The Most Feared Man on Wall Street
“I started looking at these companies and really analyzing them. I tell you, it’s sort of like arbitrage, but nobody appreciates that. When you buy a company, what you’re really buying are its assets.”
6.2 David Swensen: Chief Investment Officer, Yale University.
“Asset allocation actually explains more than 100% of returns in investing.”
From an asset-allocation perspective, when we talk about diversification, we’re talking about investing in multiple asset classes. There are six that I think are really important and they are:
- US stocks.
- US treasury bonds
- US treasury inflation-protected securities (TIPS)
- Foreign developed equities
- Foreign emerging market equities
- Real estate investment trusts (REITS)
“70% in equities, 30% in fixed income.”
“We should never underestimate the resilience of the US economy. It’s very powerful.”
6.3 John C. Bogle: The Vanguard of Investing. Creator of Index Fund; Founder and former CEO of Vanguard.
“At 6.95%, you turn $1 into $30 over 50 years. But at 5%, you get $10 instead of $30.”
“The fact is that over the long term, half of the return in the stock market has come from dividends.”
“What are the chances of a world depression? I’d say maybe one in ten. But it’s not one in a thousand.”
“Choose your asset allocation in accordance with your risk tolerance and your objectives. Number two would be, diversify. And be sure and diversify through low-cost index funds. And don’t trade. Don’t do something-just stand there!”
“Have as much in bond funds as your age”. A very young person could be 100% equities.
6.4 Warren Buffet
“It’s so simple,” he said. “Indexing is the way to go. Invest in great American businesses without paying all the fees of a mutual fund manager and hang on to those companies, and you will win over the long term!”
“Put 10%… In short-term government bonds ad 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s) I believe the trust’s long term results from this policy will be superior to those attained by most investors — whether pension funds, institutions, or individuals — who employ high-fee managers.”
6.5 Paul Tudor Jones
“So I’ve created a process over time whereby risk control is the number one single most important focus that I have, every day walking in.”
“You don’t need to go to business school; you’ve only got to remember two things. The first is, you always want to be with whatever the predominant trend is. You don’t ever want to be a contrarian investor.”
Question: how do you determine the trend?
“My metrics for everything I look at is the 200-day moving average of closing prices.”
“Second thought: Five to one. Five to one means I’m risking one dollar to make five. What five to one does is allow you to have a hit rate of 20%. I can actually be a complete imbecile. I can be wrong 80% of the time, and I’m still not going to lose.”
6.7 Mary Callahan Erdoes: CEO JPMorgan Asset Management Division.
She seems to want people to look for active asset managers.
6.8 T. Boone Pickens: CEO of BP Capital Management.
“Our dependence on foreign oil is the single greatest threat not only to national security but also to our economic well-being.”
Picken Plan: Pickens Plan
“The secret to leadership is being decisive”
6.9 Kyle Bass: The Master of Risk; Founder, Hayman Capital Management
This guy successfully bet against the subprime mortgage crisis and he is betting the economic collapse of Japan.
6.10 Marc Faber: Director of Marc Faber Limited;
Marc claims: many fund managers have actually significantly outperformed the markets over time. He believes that some people have some skills at analyzing companies because they’re either good accountants or they have skills.
“It’s not important what you buy; it’s the price at which you pay for something. You have to be very careful about buying things at a high price. Because then they drop, and you’re discouraged. You have to keep cool and have money when your neighbors and everybody else is depressed. You don’t want to have money when everybody else has money, because then everybody else also competes for asses, and they are expensive.”
6.11 Charles Schwab: Founder and Chairman of Charles Schwab Corporation
“I wanted to look at every product, every service that we offer clients, through clients’ eyes.”
How do you feel about it for the average investor: passive versus active?
“And the 98% should really predominantly go into index funds, in my view. They have the most predictable outcomes. Better than they would do by trying to pick different things, which is very difficult to do. And then do their other job too. YOU CAN’T DO BOTH!”
“You don’t realize the cost of fees. For every 1% over the lifetime of investing, it’s 20% of your money you’re giving up.”
“You can’t do it all yourself. You need to have people around you who are better than you are at most other things. But you have to be able to inspire the people around you to work together for whatever your common purpose is. And that is what I’ve been able to do all these years.”
“Never lose a customer!”
“I feel really proud about the fact that I really made a huge change to the practice of Wall Street.”
6.12 Sir John Templeton: The Greatest Investor of the 20th Century?
“How little we know, how eager to learn.”
“The more you help others, the more prosperous you will be personally.”
“It’s very rare for any one person, particularly any one person working in just their spare time, to select the right investments. Any more than you would want to be your own medical doctor or your own lawyer, it’s not wise to try to be your own investment manager. It’s better to find the best professionals; the wisest security analyst to help you.”
Do not try to be a go-getter. Try to be a go-giver.”
My Takeaways
- Don’t hire a fund manager for your $$, unless you are confident to assess the capabilities of fund managers. Only 4% out of all fund managers beat market, and perhaps 90% out of that 4% were just lucky. If you have 10000 people flipping coins, there will always be a few guys who flip the heads 10 times in consecutive.
- Focus on what you’re good at. You can’t be good at everything, diversify your portfolio and invest semi-passively.
- Don’t risk unless you get an asymmetric risk/reward. You risk $1, but you could get $5 back with high chance.
- There are some ways to anticipate the market. It is not possible to time the market to always buy at lowest and sell at the peak, but I believe there are some high level signals. The 200 day & 50 day average lines do provide some signal for selling and buying, however, you should only trade every 2–3 years (beside balancing portfolio).
There is a very interesting lesson from Paul Tudor Jones.
Question: there is a stock like this, “how many people want to be long and stay long on this chart?”
About 60% say yes, and the rest 40% say they will get out.
Paul: “You 40% should never ever invest your own money in your entire life! Because you’ve got this contrarian bug, and it’s the greatest way to ruin that there possibly is. It means you’re going to buy every brand-you’re going to buy things that go to zero and sell things that go to infinity, and one day, you’re going to die.”