Tony Robbins - Unshakeable (Audiobook)

to those Souls who will never settle for less than they can be do share or give hi this is Tony Robbins listen I'm really excited you joined me here for unshakable I think you're going to find this book to be transformative to not only your financial life but hopefully your mental emotional and perhaps even spiritual side of your life as well I know that's a big promise but I'm going to deliver on it I have the privilege of reading the first and last chapters myself so you'll be hearing my voice and and after that you'll

hear professional reader Jeremy Bob waste no more time arguing about what a good man should be B1 Marcus aelius money is only a tool it will take you wherever you wish but it will not replace you as the driver Ein Rand introduction by Steve Forbes publisher of Forbes Magazine and CEO of Forbes Incorporated this short wisdom rich and crisply written Audi book couldn't be more timely even better its insights and recommendations are Timeless investors and more important those who currently are not investing should listen to it and take what it says to heart never have

we had such a long bull market that has been accompanied from the beginning by such caution and outright pessimism about the durability of the rise the stock market never goes in a straight line up or down and every dip it has taken since 2009 has been met with whales of Woe that we are in for another horrific slide a result of this aversion to investing is that tens of millions of people who should be in the market particularly Millennials or not Tony Robbins aptly points out that regarding the accumulation of assets especially for retirement they

are making a very costly long-term Mistake by staying on the sidelines what helps make this volume so credible is that the author is upfront in dealing with the pervasive anxieties about our economic future worries that made the 2016 election cycle so stunning he acknowledges that yes eventually we will experience a real bare Market but the possibility of such an event is no reason for individuals to stay away and simply sit on their hands big downturns in the market happen periodically but the long-term trend of stocks has always been upward by taking to Heart the truth

that emotions are Enemy Number One when it comes to investing individuals can devise strategies that will enable them to outperform the market and most professional managers Robins carefully and thoughtfully shows how you can be the master of your investment fate instead of sitting fearfully on the sidelines or getting whipsawed by reacting to Market volatility in panicky damaging ways what should you do when stocks plummet how can you find opportunity when everyone else sees disaster he provides sensible rules that will keep you from making costly mistakes and even better explains what actions to take such as

recalibrating your allocation of assets that can lay the foundation for fullsome future returns Enemy Number Two is fees expenses come not only from advertised costs but also from a variety of hidden charges thanks to compounding these outlays over time can literally reduce your nest egg by hundreds of thousands of dollars remember that each Dollar in expenses means one less dollar that can grow in coming years this is why you should take a careful look at your 401k to discover what exactions might be eating away at it like termites do with a house even index funds

can hit you with unnecessary charges as for a popular investment instrument annuities their charges can do to your money what Godzilla did to cities and informed investor will be a far richer investor a lot of regulatory changes are Tak taking place in the world of managing moneyy most notably from the US Department of Labor do this audio book helpfully walks you through these finally Robbins makes the point that wealth creation is not an end in and of itself but is a crucial aspect of achieving a purposeful life a truth too often ignored my grandfather BC

Forbes who founded our company just about a century ago observed in the first issue of the magazine that bears his name that the purpose of of business is to produce happiness not to pile up money we can hope only that more people especially the younger ones just starting their working careers will take Robin's investment message to Heart get in he's right Millennials are making the same mistake a previous generation made decades ago a generation that was scarred by the catastrophe of the Great Depression those folks fear of stocks was all too understandable from 1929 to

19 32 the Dow Jones Industrial Average went down what today would be the equivalent of 177,000 points that's a plunge of almost 90% the 1930s was plagued by high unemployment then came World War II no wonder most Americans vowed never to go near a stock yet after World War II the United States entered a great period of prosperity stock prices went up manyfold sadly all too many people stayed out or over invested in seemingly safe bonds they could hardly know that the debt Market was starting what turned out to be a 35-year bare Market investors

lost staggering sums to the inflation that pummeled the bonds principle these people missed out on a fantastic opportunity to enrich their lives so never forget about these two ferocious foes of stock market success fear and fees will this Sage book make Tony Robbins rich no all the proceeds are going to feeding America which provides free meals to those who need them in this Robins exemplifies a basic truth that is often ignored Commerce and philanthropy are not Polar Opposites they are two sides of the same coin in free markets you succeed only by providing a product

or service that others want that is you prosper by meeting the needs and wants of others philanthropy is about meeting the needs of others the skill sets required in each of these spheres May differ but the fundamental objective is the same in fact successful business people often become successful philanthropists Bill Gates is only one example of many Tony Robbins demonstrates that by creating Resources by producing something you gain the means to help others his book will be your invaluable guide to enabling you to do the same and on a scale you may never have thought

possible forward by John C Bogle founder of Vanguard which has more than 3 trillion dollar in assets under management as 2016 began I started my Saturday morning reading the New York Times while eating breakfast after scanning the front page and pulling out the crossword puzzle for later I turned my attention to the business section displayed prominently at the top of section B1 was Ron lieber's your money column which featured essential money management strategies written on index cards by six personal finance experts Ron's point was to show that effective money management does not need to be

complicated with the key points of managing your money fitting on a single index card five out of the six index cards addressed the topic of how to invest your savings and each gave the same simple advice invest in index funds that message is getting through to investors in 1975 I created the world's first index mutual fund and I've been singing its Praises ever since in those early days I was a lone Voice without much of an audience today an enormous choir has developed to help me spread the word investors are hearing our voices loud and

clear and are voting with their feet in other words their dollars since the end of 2007 mutual fund investors have added almost $1.65 trillion to their Holdings of equity index funds while reducing their Holdings of actively managed mutual funds by $750 billion That Swing of $2.4 trillion in investor preferences over the last 9 years is I believe unprecedented in the history of the mutual fund industry over the past seven years Tony Robbins has been on a mission to help the average investor win the game preach the message of index funds and tell investors to stop

overpaying for underperformance in his journey he has spoke spoke into some of the greatest minds and finance although I'm not sure I belong in that category Tony came to my office at Vanguard to get my thoughts on investing let me tell you Tony is a force of nature after spending just a few minutes with Tony I completely understand how he's been able to inspire millions of people all over the world we had such a great time speaking with each other that our scheduled 45-minute interview ended up lasting 4 hours it was one of the most

wide ranging and probing interviews I've done in my 65-year career in the mutual fund industry Tony's energy and passion are contagious and energizing I knew right away his book would have a huge impact on investors but even I underestimated just how big an impact Tony would have his first book on investing money Master the game has sold over 1 million copies and spent seven months at the top of the New York Times business bestsellers list now he returns with unshakable which is sure to add even more value to listeners unshakable presents insights from some of

the most important figures in the investing World such as Warren Buffett and Yale endowment fund manager David Swenson both Warren and David have said time and again that index funds are the best way for investors to maximize their chances of investment success this Audi book will help that message reach even more investors index funds are simple rather than try to time the market or out guess other professional money managers about the prospects of individual stocks index funds simply buy and hold all of the stocks in a broad market index such as the S&P 500 index

funds work by pairing the costs of investing to the Bare Bones minimum they pay no fees to expensive money managers and have minimal trading costs as they follow the ultimate Buy and Hold strategy we can't control what the markets will do but we can control how much we pay for our investments index funds allow you to invest at minimal cost in a portfolio Diversified to the nth degree think about it this way all investors as a group own the market and therefore share the Market's gross return before costs by simply owning the entire market index

funds also earn the Market's return at minimal annual cost as low as 05% of the amount you invest the rest of the market is active with investors and money managers furiously trading back and forth with one another trying to outperform the market yet they too as a group own the entire market and earn the Market's gross return all of that trading is enormously expensive the fund managers demand and receive huge fees while Wall Street takes a cut from all that frenzied trading these and other hidden fees can easily add up to over 2% each year

so Index Fund investors receive the gross Market return minus fees as low as 05% or less while active investors as a group will receive the same gross return minus 2% or more the gross Return of the market minus the cost of investing equals the net return to investors this cost matters hypothesis is all you need to know to understand the benefits of index investing over an investment lifetime this annual difference really adds up most young people just starting their careers will be investing for 60 years or more compounded over that time frame the high costs

of investing can confiscate an astounding 70% of your lifetime Returns the cost differential substantially understates the costs incurred by so many investors especially investors in 403b and 401K retirement plans as Tony points out in chapter 3 this extra layer of fees often largely hidden confiscates an additional staggering proportion of the returns delivered by your funds I'm excited to add my small contribution to this book and support Tony in being a voice for good I'm thrilled to have spent a wonderful afternoon conversing with him I'm humbled to have the opportunity to spread the gospel of indexing

to help the honest to God down toe human beings who are saving for a Secure Retirement or for their children's education with Flare and depth Tony covers the history of investment risks and returns and successful investors should understand this history that said history as the British poet Samuel Taylor CID wrote is but a lantern on the stern which shines only on the waves behind us and not on where we are headed the past is not necessarily prologue to the future we live in an uncertain world and face not only the risks of the known unknowns

but also the unknown unknowns the ones that we don't know we don't know despite these risks if we are to have any chance for meeting our long-term financial goals invest we must otherwise we're certain to fall short but we don't have to put up 100% of the capital and take 100% of the risk only to receive 30% of the reward often far less by buying lowcost broad market index funds and holding them forever you can guarantee that you will receive your fair share of whatever Returns the financial markets provide over the long term section one

wealth the rule book chapter one unshakable power and peace of mind in a world of uncertainty unshakable an unwavering and Undisputed confidence a steadfast commitment to the truth presence peace of mind and a calm amidst the storm what would it feel like to know in your mind in your heart and in the very depth of your soul that you you'll always be prosperous to know with absolute certainty that no matter what happens in the economy the stock market or real estate that you'll have Financial Security for the rest of your life to know that you'll

possess an abundance that'll enable you not only to take care of your family's needs but also to delight and the joy of helping others as well we all dream of achieving that tremendous inner peace that comfort that Independence that freedom in short we all dream of being unshakable but what does it really mean to be unshakable it's not just a matter of money it's a state of mind when you truly are unshakable you have unwavering confidence even amidst the storm it's not that nothing upsets you we all get hooked at times but we just don't

stay there nothing really rattles you for any length of time you don't allow fear to take you over if you're knocked off balance you find your Center quickly and you regain your inner calm when others are afraid you have the presence of mind to take advantage of the turmoil that's swirling all around you this state of mind allows you to be a lead leader not a follower to be the chess player not the chess piece to be one of the few who do not one of the many who merely talk but is it even possible

to become unshakable in these crazy times or is it just a pipe dream do you remember how you felt in 2008 when the financial crisis Savaged the global economy do you remember the fear the anxiety the uncertainty that gripped us all when the world seemed to be falling apart the stock market collaps maybe crushing your 401k the property Market was beaten to a pulp Maybe wrecking the value of your home or that of someone you love big Banks fell over Like Toy Soldiers millions of good hardworking people lost their jobs I can tell you right

now I'll never forget the suffering and the terror that I witnessed all around me I saw people lose their life savings get kicked out of their homes and not have the money to send their kids to college my barber told me that his business was in tatters because people didn't even want to spend money getting their haircut even some of my billionaire clients called me in a panic because their cash was all tied up the credit markets had Frozen and it suddenly looked like they might be in danger of losing everything fear was like a

virus spreading everywhere it began to take over people's lives infecting Millions with a sense of total uncertainty wouldn't it be wonderful if all that uncertainty had ended in 2008 didn't you think the world would be back to normal by now that the global economy would be back on track and growing dynamically again but the truth is we're still living in a crazy world all these years later Central Bankers are still fighting an epic battle to revive the economic growth they're still experimenting with radical policies that we've never seen literally in the entire history of the

global economy you think I'm exaggerating well think again First World countries such as Switzerland Sweden Germany Denmark and Japan now have negative interest rates you know how insane that is the whole purpose of the banking system is for you to make a profit by loaning money to Banks so they can lend it out to others but people around the world now have to pay Banks to accept their hard-earned savings The Wall Street Journal wanted to discover when the world last experienced a period of negative yields so the newspaper called an economic historian and you know

what he told them it's the first time it's happened in the 5,000 years of banking history that's how far we've come from living in a normal World borrowers get paid to borrow and Savers get punished for saving in this upside down environment quote safe Investments such as high quality bonds offer such terrible returns that you wonder if someone's having a laugh at your expense I recently learned the finance arm of Toyota had issued a three-year bond that yields just 0.1% return at that rate it would take you 69,000 300 years to double your money once

if you're struggling to make sense of what all this means for the future of the global economy join the club Howard Marx a legendary investor oversees nearly a hundred billion dollar in asset assets recently told me quote if you're not confused you just don't understand what's going on end quote you know we're living in strange times and even the greatest Financial Minds admit to being confused I mean for me this reality was driven home emphatically last year when I arranged a meeting for my Platinum Partners they're an intimate group of friends and clients who We

Gather once a year to gain Financial Insights from the best of the best in the business we'd already listened to the opinions of seven self-made billionaires but now was time to hear from man who for two decades had wielded more economic power than anyone else alive I was seated in one of two leather Wing back chairs on a stage in a conference room at the Four Seasons Hotel and Whistler British Columbia Canada outside the snow was falling gently the man sitting across from me was none other than Alan Greenspan the former chairman of the US

Federal Reserve he was appointed by President Ronald Reagan in 1987 and ultimately served as the FED Chief to four presidents before retiring in 200 six we could hardly have asked for a more experienced Insider to cut through the confusion and shed light on the future of the economy as our two-hour conversation Drew to a close I had one final question for this man who' seen it all who guided the US economy through thick and thin for 19 years I said to him Allan you've had 90 years on the planet and you've seen incredible changes in

the world economy so in this world of intense volatility and insane Central Banking policies around the globe what is the one thing you would do if you were put back in charge of the FED today Greenspan paused for a while finally he leaned forward towards me looked me in the eye and said resign Tony I'd resign how to find certainty in an uncertain time what are you supposed to do when even an economic icon like Allan Greenspan is tempted to throw up his hands in dismay unable to make sense of what's going on or unable

to even help us guess where it's going to end if he can't figure it out how on the earth can you and I predict what will happen well if you're feeling stressed and confused I want you to know I understand but let me tell you the good news there are a few people who do have the answers a few Brilliant Minds that have figured out how to make money in good times and bad after spending seven years interviewing these masters of the financial game I'm going to bring you their answers their insights their secrets so

you can understand how to win even in these incredibly uncertain times and I'll tell you this one of the greatest lessons I've learned from these money Masters is that you don't have to predict the future to win the game etch that idea into your big beautiful brain because it's so important really important here's what you do have to do you have to focus on what you can control not what you can't you can't control what the econom is headed whether the stock market will sore a plunge but that doesn't matter the winners of the financial

game know they can't control control the future either they know their predictions will often be wrong because the world's just too complex and fast changing for anybody to accurately foresee the future consistently but as you'll learn in the pages to come they focus so intensely on what they can control that they Thrive no matter what happens in the economy or in the financial markets and with the help of their insights you'll Thrive too control what you can control that's the trick and this Audi book will show you exactly how to do it above all you'll

finish this with a strategic plan that provides you with the tools to help you win the financial game once and for all we all know that we're not going to become unshakable through wishful thinking or lying to ourselves or by merely thinking positive or putting photos of exotic cars on your vision board it's not enough to believe you need insights you need the tools the skills the expertise and the specific strategies that'll Empower you to achieve true and Lasting Prosperity you'll need to learn the rules of the financial game who the players are what what

their agendas are where you can get hurt and how you can win this knowledge can set you free the big purpose of this small book really is to provide you with that Essential Knowledge it'll give you a complete playbook for financial success so that you and your family won't ever G have to live in fear and uncertainty but can enjoy the journey with true peace of mind many people just dabble in and out when it comes to their financial lives and they pay an enormous price for it that's not because they don't care it's because

they get swamped by the stresses and strains of their daily lives plus they don't have expertise in this area so it seems intimidating confusing or overwhelming none of us likes to put effort into things that makes us feel unsuccessful or out of our depth and when people are forced to make financial decisions they often act out of fear and any decision made in a state of fear is likely to be wrong but my commitment here is to be your coach to guide you to help you so you can put together an action plan that gets

you from where you are today to where you really want to be maybe you're a baby boomer who worries you can't get to Financial Security because you started too late or maybe you're a millennial who thinks I've got so much debt I'll never be free or perhaps you're a sophisticated investor who looking for an edge so you can build a financial Legacy that benefits generations to come whoever you are whatever stage of life you're at I'm here to show you that there is a way if you commit to stay with me through this audiobook I

promise to provide you with the knowledge and the tools you need to get the job done and once you AB orb this information you can put your plan in place it'll likely take you only an hour or two each year just to keep it on target so this is not a huge commitment once you gather this initial information this is an area of life that requires commitment but if you're committed to understanding and harnessing the insights in this book the rewards can be incredible how much stronger how much more confident will you feel when you

know the rules that govern the financial world when you have the knowledge that Mastery then you can make make smart financial decisions based on real understanding and after all decisions are the ultimate power decisions equal Destiny the decisions you'll be equipped to make after listening this short audiobook can bring you to a whole new level of inner peace fulfillment comfort and Financial Freedom a level that most humans only dream of achieving I know this sounds like hyperbole or exaggeration but you're going to discover it's not this is the real thing the real answers from the

real Financial Masters meet the money Masters my life's obsession is to help people create the life of their dreams my greatest pleasure to show them how to rise from Pain to power I can't bear to see other people suffer because I know how it feels I grew up dirt poor with four different fathers over the years and with a mother who was an alcoholic I often went to bed hungry not knowing if there's going to be any food the next day we had so little money that I bought t-shirts for 25 cents at the thrift

store and went to high school in Levi cords that were about 4 in too short for me I grew very rapidly and we have money to replace the pants so to support myself I worked as a janitor at two banks in the middle of the night and then caught a bus home and slept for roughly four to five hours for dragging myself back to school each morning today I'm blessed with financial success but I can tell you right now I'll never forget what it was like to live in that state of constant anxiety about the

future in those days I was trapped by my circumstances and I was filled with uncertain so when I saw what happened to people during 2008 and 2009 in that financial crisis there was no way I could turn my back on them what drove me most crazy was the fact that much of the economic Mayhem had been caused by The Reckless ways of a small minority of Bad actors on Wall Street yet nobody in a position of real power and privilege seemed to pay any price for the pain they created nobody went to jail nobody addressed

the systemic issues that made the economy so vulnerable in the first place nobody seemed to be looking out for Reg other people who bore the brunt of this financial chaos I saw them getting used and abused every day and I couldn't take it anymore that launched me on a quest to figure out how I could help people gain control over their financial lives so they'd never again be the passive victims of a game they didn't understand I had one key Advantage personal access to many of the Giants of the financial World it helped that I've

coached Paul tutor Jones one of the greatest traders of all time Paul's an extraordinary philanthropist a brilliant thinker and a dear friend he helped open lots of doors for me over 7 years I interviewed more than 50 masters of the financial Universe their names May mean nothing to you right now but in the financial World these guys have the star power and the name recognition of celebrities like LeBron James Robert daero Jay-Z or Beyonce the list of Legends who end up sharing their insights with me includes Ray dalu the most successful hedge fund manager in

history Jack ble the founder of Vanguard and the revered Pioneer of index funds Mary K an Erdos who oversees 2.4 trillion that's right trillion with a te in assets at JP Morgan chasing company tboon Pickins the billionaire oil tycoon Carl icon America's most fornal activist investor David Swinson whose Financial Wizardry transformed Yale into one of the wealthiest universities in history John Paulson a hedge fund manager who personally earned 4.9 billion in 2010 and Warren Buffett of course the most celebrated investor ever to walk the Planet if you don't know these names you're not alone unless

you work in finance you're probably more aware of how your fantasy football team is doing or what's in your Neta Porter shopping cart but you're really going to want to put these Financial Titans on your radar because they can literally change your life the result of all that research was my 670 page Behemoth of a book money Master the game to my delight it skyrocketed a number one on the New York Times bestseller list and sold more than than a million copies in hardback alone the book has also received an extraordinary array of endorsements from

Financial Elite like Carl icon not an easy man to win over he said quote every investor will find this book extremely interesting and eliminating Jack Bogle wrote this book will Enlighten you and reinforce your understanding of how to master the money game and in the long run earn you Financial Freedom Steve Forbes wrote if there were a Pulitzer Prize for investment books this one would win hands down now I'd like to think that this praise was a testament to my literary Brilliance but the success of money Master of the game is really reflected by the

generosity of these Financial Giants who sat down with me for hours on end to share their knowledge anyone takes the time to study and apply what they told me should attain huge financial rewards that can last a lifetime so the question you must be asking is so why bother to write a second book on how to achieve your financial Ambitions after all there are plenty of easy easier and more painless ways to spend my time than writing books like say selling my organs on the black market for example but my goal is to empower you

The Listener while also making a difference for millions of Forgotten people who are in desperate need you know I've donated all my profits from money Master of the game and now for this Audi book unshakable and the hardback of this book to provide free meals for the hungry through my partnership with feeding America they're the nation's most effective charity for feeding the hungry so far between these books and the additional personal donations I've made over the last two years we've provided over 250 million free meals to families in need a quarter of a billion meals

if you can imagine and in the next eight years I plan to bring that to a billion Meals by the way if you're listening to this audiobook I want you to know you've contributed to that cause thank you and feel free to buy copies for all your friends and family because all of this is going to a beautiful cause 100% of the profits now beyond that mission I have three urg urgent reasons for writing unshakable first I want to reach as many people as possible by writing a short book that you could listen to in

a few evenings or a weekend if you want to go deeper I hope you'll read money Master the game but I understand that this big monster can seem intimidating so in shakeable designed to be a concise companion to that book that contains all the essential facts on its own the core strategies that you need to transform your financial life in writing a short book that's quicker to listen to I'm looking to increase the life likelihood that you'll not only Master this material but also act on it people love to say that knowledge is power but

the truth is that knowledge is only potential power you and I both know that it's useless if you don't act on it this audio program gives you a power-packed action plan that you can put in effect immediately because we all know execution trumps knowledge every day of the week my second reason for writing unshakeable is that I see so much fear around me today how are you and I going to make smart rational Financial decisions if we're full of fear even if you know what to do fear keeps you from doing it I'm concerned you

might make the wrong moves if you're fearful damaging yourself and your family in ways that I believe are entirely avoidable step by step this book will enable you to systematically free yourself from that fear BBE it's cold outside as I write this the stock market has risen for 7 and a half years in a row making this the second long longest bull market in the United States history there's a widespread sense that we're due for a fall and that what goes up must come down that winter is coming by the time you listen to this

the market may have already tumbled but as we'll discuss in the next chapter the truth is that nobody I repeat nobody can accurately predict with any consistency where the financial markets are headed that includes all those smooth talking TV pundits those Wall Street economists and penstripe suits and all those highly paid purveyors of snake oil we all know that Winter's coming that the stock market will fall again but none of us knows when winter is coming or how severe it'll be does that mean we're powerless not at all unshakable will show you how the masters

of the financial World prepare themselves and how they profit by anticipating winter instead of just reacting to it as a result you'll be able to benefit from the very thing that harms those that are unprepared in fact ask yourself this when an ice storm comes do you want to be the one stuck outside freezing in the bitter cold or do you want to be the one who's wrapped up warmly by the fire with those you love toasting marshmallows let me give you a recent example of how it pays to be prepared in January of 2016

the stock market plummeted in a matter of days $2.3 trillion doll went up in smoke for investors it was the worst 10day start to a year in history the world was freaking out convinced the big one was finally here but Ray doio the most successful hedge fund manager of all time had done something Priceless in money Master the game he actually shared with me his unique Investment Portfolio that can prosper in what he calls all seasons in the middle of the stock market nose dive Rave was in davo Switzerland where the global leite gather each

year to discuss the state of the world he went on TV appearing against the backdrop of snow covered Mountain to explain how people could protect themselves from this terrifying turmoil his advice they should pick up a copy of my book money Master the game quote Tony did the Layman's version of this all- weather portfolio he explained that might be helpful for people end quote so what would happen if you'd followed Ray's advice and built the all- weather portfolio described in money Master the game well the standard and por is the S&P 500 stock index which

is just a list of the top 500 companies in the United States dropped 10% in the first few days of 2016 by contrast you would have actually made a small Profit just under 1% during that same time this portfolio he describes by the way is not meant to be one siiz fits-all nor is it intended to be the greatest performer of all time it's meant to provide a smoother ride for those unable to stomach the volatility of a portfolio with higher percentage of stocks which can also lead to higher returns but what's really amazing is

that this portfolio for All Seasons would have made money 85% of the time for the last 75 years that's the power of having the right strategy a strategy that comes directly from one of the best in the world avoid the Sharks my third reason for writing this book is that I want to show you how to avoid getting eaten by sharks and as we'll discuss later one of the biggest obstacles to achieving financial success is the difficulty of figuring out who you can and cannot trust there are plenty of Fant fantastic human beings working in

the financial field people who always remember their mom's birthday who are kind to dogs and who have impeccable personal hygiene but they're not necessarily looking out for your best interests most people who you think are providing unbiased Financial advice are actually Brokers even if they do prefer to go by other titles they make Hefty commissions by selling products whether it's stocks bonds mutual funds retirement accounts insurance or whatever else may pay for their next trip to the Bahamas and as you'll soon learn only a tiny subset of those advisers is legally required to put your

best interest ahead of their own after writing money match to the game I saw once again how easy it is to get fooled by Wall Street Peter maluk a certified financial planner and an attorney who I respect immensely reached out to me to arrange a meeting to share what he cryptically described as quote some crucial information now if you want to know about Peter check this out the investment magazine Baron created Peter and his company created planning the number one independent financial adviser in America for 2013 2014 and 2015 no one else has done that

in history three years in a row Forbes named the top investment adviser in the United States for 2016 based on 10-year growth and check this out CNBC ranked him as the number one US wealth manager firm for 2014 and 2015 when someone with Peter's expertise and his reputation reaches out to me I know that I'm going to learn something of real value so Peter flew especially from his home in Kansas to meet me in Los Angeles where I was conducting an Unleash the Power Within event for 10,000 people it was then that he grabbed me

pulled me aside and dropped the bomb he explained how Financial quote advisors who Market themselves as straight shooters were actually exploiting a gray area in the law to sell products that benefited themselves and not their clients they claim to be fiduciaries it's a big word but it's just a small minority of advisers who are legally o obligated to put their clients interests first in reality they were unscrupulous salespeople who are profiting by misrepresenting themselves unshakable will give you all the information you need to protect yourself from wolves and sheep's clothing equally important will give you

the tools and criteria to help you identify honest Conflict Free advisers who will truly look out for your best interests that meeting was the Genesis that formed the basis of a close friendship with Peter and led to him to become the co-author of this book you couldn't ask for a more knowledgeable honest or straight talking guide for this journey Peter tells it like it is and he knows where the bodies are buried Peter's firm which manages $22 billion doll in assets is truly unique you know many billionaires have something called a family office it's an

in-house team that provides them with sophisticated advice on everything from investing in Insurance to tax preparation and estate planning Peter offers the same level of comprehensive advice to clients with assets of as little as a half a million dollars or more doctors dentists lawyers small business owners they're the heartbeat of the American economy and Peter believes they deserve no less care and attention than the ultra rich I was so impressed with Peter's vision for creating a family office for everyone that I decided to join the board of creative planning and become its chief of investor

psychology and I engaged The Firm to manage my own Investments for financial planning I then approached Peter with a radical idea idea would he be willing to create a division that would provide the same kind of comprehensive service that family office for clients who are early in the wealth building process people who are at the beginning of that Journey with as little as $100,000 in total assets after months of discussion pedu shares my commitment to helping as many people as possible has now done exactly that I'm happy to tell you his company will provide a

review of your current situation and goals at no cost and help you create a customized financial plan you may decide that you'd prefer to handle your finances alone but if you ever decide it might be helpful to get a second opinion from the number one ranked firm in the country you're welcome to reach out to creative planning you can reach them at wwwg getasecondopinion.com that's getc opinion.com the road ahead before we go any further I want to quickly show you a map of the road ahead so you can see for yourself how the chapters that

follow will really help you unshakable is divided into three sections the first is your rulebook for wealth and financial success now why start with a rule book because if you don't know the rules of the game how can you expect to win I mean what holds many of us back is a feeling that we're in over our heads it doesn't help that the financial world seems to be overwhelmingly complex and they kind of want to make it that way there are more than 40,000 stocks to choose from on the world today including 3700 on various

us stock exchanges by the end of 2015 there were more than 9,500 mutual funds in America alone which means there's far more funds than there are stocks I mean how ridiculous is that add to that the nearly 1,600 exchange traded funds and you're face with so many different investment choices that your head starts to spin can you imagine standing in ice cream counter and having to choose from 50,000 different flavors clearly you and I need some robust rules so that we can bring order to this chaos and as you'll discover in chapter 3 one of

the simplest yet most important rules is this fees matter the vast majority of mutual funds are actively managed which means they're run by people who attempt to pick the best investments at the best time their goal is to quote beat the market for example you'll attempt to outperform an unmanaged basket of leading stocks such as the S&P 500 Index which is one of the many different indexes that track specific markets throughout the world and by the way I'll clarify what this language means means if you're unfamiliar with some of these financial terms along the way

but the difference is this actively managed mutual funds charge fat fees in return for this service sounds fair enough right the problem is most funds do a terrific job of charging High fees but a terrible job of picking successful investments in fact one of the most important studies showed that 96% of mutual funds failed to beat the market over any 15-year period of time the result you overpay for underperformance it's like paying for a Ferrari and driving home from the dealership and a beaten up tractor splattered with mud hedge funds versus mutual funds versus index

funds for those unfamiliar a hedge fund is just a private fund available only to high net worth investors the managers have complete flexibility of bet in both directions of the market up or down they charge Hefty management fees usually 2% and they share in your profits as well typically 20% of the profits go to the manager a mutual fund by contrast is a public fund available to anyone in most cases they're actively managed by a team who assembles a portfolio of stocks bonds or other assets and they continually trade their Holdings in hopes to beat

the market an index fund by contrast is also a public fund but requires no active manager the fund simply owns all the stocks in the index for example they would own all 500 stocks in the S&P 500 Index hopefully this clarifies hedge funds versus mutual funds versus index funds for you and it'll become even more clear as we continue speaking what you have to remember is this these fees add up massively over time they compound If You overpay by 1% a year it'll cost you 10 years worth of retirement income now once we've shown you

how to avoid funds that overcharge and underperform you could easily save yourself as much as 20 years of retirement income if that's all you learn from the first section of this book it would transform your future but there's so much more as we mentioned earlier we'll also show you how to avoid salespeople provide self-serving advice that's hazardous to your financial health and how to find sophisticated advisers who aren't conflicted as the same goes when a person with experience meets a person with money the person with experience ends up with the money and the person with

the money ends up with the experience we're going to show you how to navigate this game so you'll never be taken advantage of again the second section of unshakable is a financial Playbook it'll show you exactly what to do so you can put your action plan in place right now most importantly you'll learn what I call the core four a set of simple yet powerful principles that were derived from my interviews with more than 50 of the world's greatest investors though they may have different ways of making money I've observed that that they all share

these fundamental decision-making principles I found the core for transformation on my own Financial life and I'm really excited to make this knowledge available to you too next you'll learn to slay the Bear in other words to build a diversified portfolio so your nest egg won't be destroyed when a bare Market funny comes in fact you'll learn to profit massively from the opportunities that fear and turmoil create what most people don't realize is that the investment success is largely a matter of smart asset allocation in other words of knowing precisely how much of your money to

put in different asset classes like stocks or bonds or real estate or gold or cash the great news is you'll learn to do this from money Masters like Ray doio David Swinson and our very own peter maluke if you already know a bit about investing you may be wondering As One Financial journalist asked me recently isn't it just a simple matter of buying and holding the index funds well diio swensson Warren Buffett and Jack Bogle all told me that indexing is is the smartest strategy for regular people like you and me one reason why is

that the index funds are designed to match the returns of the market unless you're a superstar like Warren or Ray you're better off capturing market returns instead of trying and almost certainly failing to beat the market even better index funds charge minuscule fees saving you a fortune over the long run I wish it was as simple as just invest in the index as a lifelong student of human behavior I can tell you this most people find really hard to sit tight and stay in the market when everything's going haywire Buy and Hold tends to go

out the window in those days if you have nerves of Steel like Buffett or Bogle that's great but if you want to know how the majority of people behave under stress just check out a study by dalbar one of the financial industry's leading research firms dalbar revealed the gigantic discrepancy between what the Market's returns are what the index would provide and the returns that people actually achieve for instance the S&P 500 returned an average of 10.28% a year from 1985 to 2015 at this rate your money doubles every 7even years thanks to the power of

compounding you've made a killing by owning an index fund that tracked the S&P 500 for over 30 years let's say you invested $50,000 in 1985 how much would that be worth by 2015 if you never added another dime the answer is 941,618 that's right almost a million bucks but while the market returned 10.28% per year doar found that the average investor made only 3.66% a year over those three decades at that rate your money doubles every 20 years the result instead of a million dooll windfall you ended up with $146,900 excessive management fees of outrageous

brokerage commissions and the other hidden costs that we'll discuss in chapter 3 these expenses are a constant drain on your Returns the equivalent of a merciless vampire sucking your blood each night while you're asleep but there's another culprit too and that's human nature as you and I know we're emotional creatures with a gift for doing crazy stuff under the influence of emotions such as fear and greed as the legendary Princeton University Economist Burton alul told Mee emotions get a hold of us and we as investors tend to do very stupid things unquote for example quote

we tend to put money in the market and take it out at exactly the wrong time he says you probably know people who got carried away during the bull market and took Reckless risks with money they couldn't afford to lose you might also know people who got scared and sold out of all their stocks in 2008 only to miss out on the huge gains when the market rebounded in 2009 I've spent almost four decades teaching the psychology of wealth so in the third section of unshakable I'm going to show you how to adjust your behavior

and avoid the common mistakes that are driven by emotion why is this so important because you can't apply the winning strategies in this book unless you learn quote how to silence the Enemy Within then together we'll answer what may be the most important question of all what are you really after how do you achieve the ultimate level of happiness you really desire in your life is it really money you're chasing or is it the feelings that you think money can create most of us believe or fantasize the money will bring us to a point where

we finally feel free secure excited empowered alive and joyful but the truth is you can achieve that beautiful state right now regardless of your level of material wealth so why wait to be happy finally in the appendix we've included an invaluable road map to use with your financial advisers Andor your attorneys these four little checklist will guide you in protecting your assets building your financial Legacy and assuring against the unknown plus you'll discover even more ways to save on taxes which we all love the snake and the Rope but first I want to tell you

about the very next chapter because I'm convinced that it'll change your financial life in fact even if you listened to only chapter 2 and you ignored everything else in this book you'd be getting on track to reap amazing rewards as I mentioned earlier this is a time of tremendous uncertainty for most people the global economy is still limping along after all these years middle class salaries have stagnated for decades technology is disrupting so many industries that we don't even know what jobs will exist in the future and then there's that nagging feeling that a bare

Market is overdue after years of strong returns I don't know about you but all this uncertainty is making many people fearful and this prevents them from Building Wealth by investing in financial markets and becoming long-term owners of the economy not just consumers the next chapter is the antidote to that fear we'll walk you through seven specific facts that'll transform your understanding of how markets work and of the economic and emotional patterns that drive it you'll learn that Corrections and crashes occur with surprising regularity but they never last the best investors prepare for this volatility these

dramatic ups and downs and they turn it to their advantage once you understand these patterns you can act without fear not because you're in denial but because you have the knowledge and Clarity of mind to make the right decisions this reminds me of an old story that you may remember about a Buddhist monk traveling home one night on a rural path he catches sight of a poisonous snake blocking his way panics and runs for dear life in the opposite direction the next morning he returns to the scene of the terror but now in the brightness

of day he realizes this coiled snake on his path was just a harmless pie piece of rope chapter 2 is going to show you that your own anxiety is equally unfounded that the snake you fear is really just a rope why does this matter so much because you can't win the game unless you have the emotional fortitude to get in and stay in for the long term once you realize there's no snake blocking your way you can walk calmly and confidently on the path to Financial Freedom are you ready to become your own Financial Master

then let's begin the mobile app and podcast before we go to chapter two I'd love to give you just two other pieces of advice we've created a couple of additional resources to accelerate your journey first I created a mobile app that contains videos planning tools and even a personalized calculator that'll help you discover how much money you'll need to accumulate in order to achieve the different levels of Financial Security or Freedom you may be after second we've also created an unshakable podcast cast Peter Muk and I recorded a series of brief conversations around the core

principles of becoming unshakable and it's all free it's an unshakable docomo this now to Jeremy Bob who's going to read you chapter two and I'm going to join you for the last chapter and Peter's going to join you for the chapter on slay the bear since he wrote most of that chapter and can guide you through how to protect yourself and how to also take advantage of the worst times when the bear comes when the correction comes you'll be ready let's go for chapter two chapter two winter is coming but when these seven facts will

free you from the fear of Corrections and crashes the key to making money in equities is not to get scared out of them Peter Lynch should return 29% a year as a famed fund manager at Fidelity Investments power the ability to shape and influence life's circumstances the fuel to produce extraordinary results where does it come from what makes a person powerful what creates power in your own life when humans lived as hunter gatherers we had no power we were at the mercy of nature we could be ripped apart by vicious Predators or destroyed by brutal

weather whenever we ventured into the wild to hunt or scavenge for food and food wasn't always there but gradually over many thousands of years we developed an invaluable skill we learned to recognize and utilize patterns most important we observed the patterns of the seasons and we learned to take advantage of them by planting crops at the right time this capability moved us from scarcity to abundance to a way of life in which communities and eventually cities and civilizations could flourish our gift for pattern recognition literally changed the course of human history along the way we

also learned a vitally important lesson we're not rewarded when we do the right thing at the wrong time if you plant in winter you'll get nothing but pain no matter how hard you work to survive and thrive you and I have to do the right thing at the right time our capacity for pattern recognition is also the number one skill that can Empower us to achieve financial prosperity once you recognize the patterns in the financial markets you can adapt to them utilize them and profit from them this chapter will give you that power the majority

of investors fail to take full advantage of the incredible power of compounding the multiplying power of growth times growth Burton malul before we get to the heart of this chapter let's just take two minutes to discuss a fundamental concept that I'm sure you already know but one that we need to utilize and maximize in order to build lasting wealth the first pattern we need to recognize is that there's a miraculously powerful way to build wealth that's available to all of us one that Warren Buffett has harnessed to a mass of Fortune that now stands at

$65 billion what's his secret it's simple says Buffett my wealth has come from a combination of Living in America some Lucky jeans and compound interest I can't vouch for your jeans though I'm guessing they're pretty good what I do know for sure is that compounding is a force that can catapult you to a life of total Financial Freedom of course we all know about compounding but it's worth reminding ourselves just how impactful it can be when we truly understand how to make it work for us in fact our ability to recognize and utilize the power

of compounding is the life-changing equivalent of our ancestors discovery that they could produce Bountiful harvests by planting crops at the right time let's illustrate the tremendous impact of compounding ING with just one simple but mind-blowing example two friends Joe and Bob decide to invest $300 a month Joe gets started at age 19 keeps going for 8 years and then stops adding to his pot at age 27 in all he saved a total of $28,800 Joe's money then compounds at a rate of 10% a year which is roughly the historic Return of the US Stock Market

over the last century by the time he retires at 65 how much does he have the answer $1,863 287 in other words that modest investment of $28,800 has grown to nearly 2 million bucks pretty stunning huh his friend Bob gets off to a slower start he begins investing exactly the same amount $300 a month but doesn't get started until age 27 still he's a disciplined guy and he keeps investing $300 a month until he's 65 a period perod of 39 years his money also compounds at 10% a year the result when he retires at 65

he's sitting on a nest egg of 1,589 733 let's think about this for a moment Bob invested a total of $140,000 almost five times more than the 28,800 that Joe invested yet Joe has ended up with an extra $273,500 that's right Joe ends up richer than Bob despite the fact that he never invested a dime after the age of 27 what explains Joe's incredible success simple by starting earlier the compounded interest he earns on his investment adds more value to his account than he could ever add on his own by the time he reaches age

53 the compound interest on his account adds over $60,000 per year to his balance by the time he 60 his account is growing by more than $100,000 per year all without adding another dime Bob's total return on the money he invested is 132% whereas Joe's return is a spectacular 6,370 per. now let's imagine for a moment that Joe didn't stop investing at age 27 instead like Bob he kept adding $300 a month until he was 65 the result he ends up with a nest a of $3,453 120 in other words he has $1.86 million more

than Bob because he started investing 8 years earlier that's the awesome power of compounding over time this force can turn a modest sum of money into a massive Fortune but you know what's amazing most people never take full advantage of this secret that's lying in full view this wealth building Miracle that's sitting right there in front of their eyes instead they continue to believe that they can earn their way to riches it's a common misperception this belief that if your earned income is big enough you'll become financially free the truth is it's not that simple

we've all read stories about movie stars musicians and athletes who earned more money than God yet ended up broke because they didn't know how to invest that income after a series of lousy Investments the rapper 50 Cent recently declared bankruptcy despite having had a net worth estimated at $155 million actress Kim Basinger at the height of her popularity was pulling in more than $10 million per film and yet she also ended up bankrupt even the King of Pop Michael Jackson Who reportedly signed a recording contract worth almost $1 billion and sold more than 750 million

records supposedly owed more than $300 million upon his death in 2009 the less lesson you're never going to earn your way to Financial Freedom the real route to riches is to set aside a portion of your money and invest it so that it compounds over many years that's how you become wealthy while you sleep that's how you make money your slave instead of being a slave to money that's how you achieve true Financial Freedom by now you're probably thinking to yourself yeah but how much money do I have to set aside in order to reach

my financial goals that's a great question as mentioned to help you answer it we've developed a mobile app that you can use to figure out exactly what you'll need to save and invest it's available at www. unshakable tocom everyone's situation is unique so I'd recommend sitting down with a financial adviser to discuss your specific goals and how to reach them but I want to warn you most advisers grossly underestimate how much money you're likely to need to be financially secure independ dependent or free some say you should have a nest egg that's 10 times what

you earn currently others who are a bit more realistic say you'll need 15 times in other words if you're making $100,000 you'll need $1.5 million if you're making $200,000 you'll need $3 million you get the idea in reality the number you should really aim for is 20 times your income so if you currently earn $100,000 you'll need $2 million it may sound like a lot but remember that our friend Joe got there with a mere $28,000 and my bet is you'll have much more than this to invest over the coming years you can hear about

this in Greater detail in money Master the game which has an entire section on this subject as I explained there it's easy to get overwhelmed when thinking about a huge number like this but it's less intimidating when you start with an easier Target for example maybe your first goal is Financial Security not total Independence how would you feel if you could cover the cost of your mortgage food utilities transportation and insurance all without ever working again pretty great right the good news is this number is usually 40% less than ultimate Financial Independence where everything you

need is paid for and thus you can hit it quicker once you hit that Target you'll have build up so much momentum that the bigger number won't feel like such a stretch but how are you going to get there first you've got to save and invest become an owner not just a consumer pay yourself first by taking a percentage of your income and having it deducted automatically from your paycheck or bank account this will build your freedom fund the source of Lifetime income that will allow you to never have to work again my guess is

you're already doing this but maybe it's time to give yourself a raise increase what you save from 10% of your income to 15% or from 15% to 20% for some people 10% may seem impossible right now maybe you're at a stage in your life when you have student loans or major obligations to your family or a business no matter what your situation you have to take the first step and get underway there's a proven method called save more tomorrow which I describe in detail in chapter 1.3 of money Master the game you start by Saving

just 3% and gradually raise this to 15% or 20% over time now that you've saved it where are you going to invest for maximum returns so that you reach your target faster the single best place to compound money over many years is in the stock market in chapter six we'll discuss the importance of putting together a diversified portfolio that includes other assets but for now we're going to focus on the stock market why because this is incredibly fertile land like our ancestors we need to plant our seeds where we can reap the greatest Harvest where

should I put my money as you and I both know the stock market has made millions of people Rich over the last 200 years despite many ups and downs it's been the best place for the long-term investor to build wealth but you need to understand the Market's patterns you need to understand its Seasons that's what this chapter is all about what's the biggest Financial question on all of our minds today in my experience we're all searching for answers to pretty much the same question where should I put my money this question has become more urgent

lately because all of the answers seem unappealing in an era of compressed interest rates you earn nothing when you keep your cash in a savings account if you buy a highquality bond for example if you lend money to the Swiss or Japanese governments you'll earn less than nothing there's a joke going around that traditionally safe Investments like these now offer return-free risks instead of risk-free returns what about stocks hundreds of billions of dollars from all over the globe have poured into the US Stock Market which many people regard as a relatively Safe Haven in an

uncertain world but that's created even greater uncertainty because us stock prices and valuations have soared over the past 7 and a half years fueling fears that the market is bound to plunge even people who've done well in this rising market are worried that the whole thing could fold that there's nothing propping it up except the central banks and their crazy policies so what should you do prepare for a stock market Meltdown by selling everything and running to the hills keep all of your money in cash earning zilch and wait till the market plummets so you

can buy in at lower prices but how long can you wait what about all those Unfortunate Souls who've already waited for years missing the entire bull market or should you stay in the market sit tight close your eyes and assume the brace position as you prepare for impact I told you none of these options sound that enticing as you know humans have a tough time handling uncertainty so how are we supposed to make Intelligent Decisions in this environment where everything seems uncertain what can we do if we have no idea when the market will plunge

when the financial equivalent of winter will finally arrive but I've got news for you we do know when winter will arrive how because when we look back at the stock market over an entire Century we discover this extraordinary fact Financial winter comes on average every year once you start to recognize long-term patterns like this you can utilize them even better your fear of uncertainty melts away because you see that important aspects of the financial markets are much more predictable than you ever realized so we're going to walk you through seven facts that will show you

how the markets work you'll learn that certain patterns repeat again and again and you'll learn to base your decisions on an understanding of those proven patterns just like our ancestors who discovered that planting seeds in Spring was a winning strategy of course nothing is ever entirely certain in farming financial markets or life some Winters arrive sooner some later some are severe some mild but when you stick with an effective approach over many years your probability of success increases massively what separates the money masters from the crowd is this ability to find a winning strategy and

stick with it so the odds are always strongly in their favor once you understand the seven indisputable facts we're about to explain you'll know how the financial Seasons work you'll know the rules of the game the principles on which it's based this will give you an enormous Edge since even many experienced and sophisticated investors don't know these facts armed with this knowledge you can get in the game stay in it and win best of all these facts will free you from all of the fear and anxiety that dominate most people's Financial lives that's why we

call them Freedom facts and let me tell you the ability to invest without fear is critically important why because so many people are so paralyzed by fear that they can barely bring themselves to dip their toes in the water they're terrified that the stock market will crash and wash away all of their hard-earned savings they're terrified that stocks will nose dive right after they invest they're terrified that they'll get hurt because they don't know what they're doing but as you'll soon discover all those fears will quickly fall away once you understand the pattern of facts

that we're going to reveal over the next few pages but before we get started let me quickly explain some investment jargon when any Market Falls by at least 10% from its peak it's called a correction A peculiar ly Bland and neutral term for an experience that most people relish about as much as dental surgery when a market Falls by at least 20% from its peak it's called a bare Market we'll Begin by sharing some surprising Freedom facts about corrections then we'll turn our attention to Bare markets finally we'll explain the most important fact of all

the biggest danger isn't a correction or a bare Market it's being out of the market Freedom Fact one on average Corrections have occurred about once a year since 1900 have you ever listened to the pundits on CNBC or MSNBC talking about the stock market isn't it amazing how dramatic they can make it sound they love talking about volatility and turmoil because fear draws you into their programming they're constantly analyzing many crises that prognosticators predict could trigger Market Mayhem the crisis in question might be unrest in the Middle East slumping oil prices the downgrading of US

debt a fiscal cliff a budget standoff brexit a China slowdown or whatever else they can milk for excitement and by the way if you don't understand these things don't worry most of these experts don't either I don't blame them for pedaling drama it's their job but between you and me none of this is really that exciting a lot of it is just hyped up to stop you from reaching for your remote control the trouble is all this Babble all this drama all this emotion can make it hard for us to think clearly when we hear

these experts speaking in grave voices about the possibility of a correction or a crash or a crisis it's easy to become anxious because it sounds like the sky is about to fall it might make for good TV but the last thing you and I want is to make fear-based financial decisions so we have to remove as much emotion as possible from this game instead of of getting distracted by all this noise it helps to focus on a few key facts that truly matter for example on average there's been a market correction every year since 1900

when I first heard this I was floored just think about it if you're 50 years old today and have a life expectancy of 85 you can expect to live through another 35 corrections to put it another way you'll experience the same number of corrections as birthdays why does this matter because it shows you that Corrections are just a routine part of the game instead of living in fear of them you and I have to accept them as regular occurrences like spring summer fall and winter and you know what else historically the average correction has lasted

only 54 days less than 2 months in other words most Corrections are over almost before you know it not that scary right still when you're in the midst of a correction you might find yourself becoming emotional and wanting to say sell because you're anxious to avert the possibility of more pain you're certainly not alone these widespread emotions create a crisis mentality but it's important to note that in the average correction over the last 100 years the market has fallen only 13.5% from 1980 through the end of 2015 the average drop was 14.2% it can feel

pretty uncomfortable when your assets are taking that kind of hit and the uncertainty leads many people to make big mistakes but here's what you have to remember if you hold tight it's highly likely that the storm will soon pass Freedom fact 2 less than 20% of all Corrections turn into a bare Market when the market starts tumbling especially when it's down more than 10% many people hit their pain threshold and start to sell because they're scared that this drop could turn into a death spiral aren't they just being sensible and prudent actually not so much

it turns out that fewer than one in five Corrections escalate to the point where they become a bare Market to put it another way 80% of Corrections don't turn into bare markets if you panic and move into Cash during a correction you may well be doing so right before the market rebounds once you understand the vast majority of Corrections aren't that bad it's easier to keep calm and resist the temptation to hit the eject button at the first sign of turbulence Freedom fact three nobody can predict consistently whether the market will rise or fall the

media perpetuates a myth that if you're smart enough you can predict the Market's moves and avoid its downdrafts the financial industry sells the same fantasy economists and Market strategists from Big investment Banks confidently predict where the S&P 500 will stand at the end of the year as if they have a crystal ball or equally unlik likely Superior Insight newsletter writers also love to act like Nostradamus and warn you of the coming crash hoping you'll feel compelled to subscribe to their services so you can avoid this fate many of them make the same dire predictions every

year until they're occasionally right as anyone would be after all even a man with a broken watch can tell you the correct time twice a day these self-proclaimed seers then use that accurate prediction to Market themselves as the next great Market timer unless you're wise to this trick it's easy to fall for it some of these folks may actually believe in their own powers of prediction others are just slick salesmen so take your pick are they idiots or Liars I couldn't possibly say but I'll tell you this if you're ever tempted to take them seriously

just remind yourself of this classic remark from the physicist Neil's bour prediction is very difficult especially about the future I'm not sure how you feel about the tooth fairy or the Easter Bunny but when it comes to our finances it's best to face facts and the fact is nobody can consistently predict whether markets will rise or fall it's delusional to think that you or I could successfully time the market by jumping in and out at the right moments if you're not convinced here's what two of the wisest masters of the financial World think of Market

timing and the challenge of predicting Market movements Jack Bogle the founder of Vanguard which has more than $3 trillion in assets under management has said sure it would be great to get out of the stock market at the high and back in at the low but in 65 years in the business I not only have never met anybody that knew how to do it I've never met anybody who had met anybody that knew how to do it and Warren Buffett has said the only value of stock forecasters is to make fortune tellers look good still

I have to confess it's fun to watch all these Market pundits commentators and economists make fools of themselves by trying to pinpoint a correction one of my favorite examples is Economist Dr noral rubini who predicted wrongly that there'd be a significant stock market correction in 2013 rubini one of the best known forecasters of our time was nicknamed Dr Doom because of his many Prophecies of disaster he successfully predicted the 2008 Market meltdown unfortunately he also warned of a recession in 2004 wrongly 2005 wrongly 2006 wrongly and 2007 wrongly in my experience market seers like rubini

are clever and articulate and their arguments are often compelling but they Thrive by scaring The Living Daylights out of you and they've been wrong again and again and again sometimes they get it right but if you listen to all of their scary warnings you'll end up hiding under your bed clutching a tin box containing your life savings and let me tell you a secret historically that's not been a winning strategy for long-term financial success Freedom fact 4 the stock market Rises over time despite many short-term setbacks the S&P 500 Index experienced an average intra-year decline

of 14.2% from 1980 through the end of 2015 in other words these Market drops were remarkably regular occurrences over 6 years once again nothing to be scared of just a matter of winter putting in its usual seasonal appearance but you know what really blows my mind the market ended up achieving a positive return in 27 of those 36 years that's 75% of the time happy endings despite a 14.2% average drop within each year the US market ended up with a positive return in 27 of the last 36 years why is this so important because it

reminds us that the market generally Rises over the long run even though we hit a huge number of potholes along the way you know as well as I do that the world had its fair share of problems over those 36 years including two Gulf Wars 9/11 the conflicts in Iraq and Afghanistan and the worst financial crisis since the Great Depression even so the market ultimately Rose in all but nine of those years what does this mean in practice terms it means that you and I should always remember that the long-term trajectory is likely to be

good even when the short-term news is dismal and the market is getting smacked we don't need to get bogged down an economic theory here but it's worth mentioning that the US Stock Market typically Rises over time because the economy expands as American companies become more profitable as American workers become more efficient and productive as the population grows and as technology drives new innovation I'm not saying that every company or every individual stock will do well over time as you and I both know the business world is a darwinian jungle some companies will die and some

stocks will fall to zero but one big advantage of owning an index fund that tracks a basket of stocks such as the S&P 500 is that the weaker companies intermittently get called and replaced by stronger ones it's survival of the fittest in action the great thing is that you benefit from these upgrades in the quality of the companies in the index how well as a shareholder of an index fund you own part of the future cash flows of the companies in that Index this means that the American economy is making you money even while you

sleep but what if America's economic future is lousy it's a fair question we all know there are serious challenges whether it's the threat of terrorism global warming or Social Security liabilities even so this is an incredibly Dynamic and resilient economy with some powerful Trends driving its future growth in his 2015 annual report Warren Buffett addressed this subject at length explaining how population growth and extraordinary gains in productivity will create an enormous increase in wealth for the next generation of Americans this all powerful trend is certain to continue America's economic magic remains alive and well he

wrote for 240 years it's been a terrible mistake to bet against America and now is no time to start Freedom fact 5 historically bare markets have happened every 3 to 5 years I hope you're starting to see why it's a good idea to be a long-term investor in the stock market and not merely a shortterm Trader and I hope it's now equally obvious that you don't need to live in fear of Corrections just to recap for a moment you know now that Corrections happen regularly that nobody can predict when they'll happen and that the market

usually Reb bounds quickly resuming its General upward trajectory any fear you once felt should turn to Power believe me these facts hit me like a revelation once I understood them all of my concerns about corrections melted away here was factual proof that the snake was nothing but an inert rope but what about bare markets shouldn't we be terrified of them actually no here again we need to understand a few key facts so we can act on the basis of knowledge not emotion the first fact you need to know is that there were 34 bare markets

in the 115 years between 1900 and 2015 in other words on average they happened nearly once every 3 years more recently bare markets have occurred slightly less often in the 70 years since 1946 there have been 14 of them that's a rate of one bare Market every 5 years so depending on when we start counting it's fair to say that bare markets have historic Al happened every 3 to 5 years at that rate if you're 50 years old you could easily live through another eight or 10 bare markets you and I both know that the

future will not be an exact replica of the past still it's useful to study the past to gain a broad sense of these recurring patterns as the saying goes history doesn't repeat itself but it Rhymes so what do we learn from More Than A Century of financial history we learn that bare markets are likely to continue continue happening every few years whether we like it or not as I said before winter is coming so we'd better get used to it and prepare how bad does it get when the market really crashes well historically the S&P

500 is dropped by an average of 33% during bare markets in more than a third of bare markets the index plunged by more than 40% I'm not going to sugarcoat this if you're someone who panics sells everything in the midst of this Mayhem and locks in a loss of of more than 40% you're going to feel like a grizzly bear mauled you for real even if you have the knowledge and fortitude not to sell you're likely to find that bare markets are a gut-wrenching experience even an old war horse like my buddy Jack Bogle admits

that they're no walk in the park how do I feel when the market goes down 50% he asked rhetorically honestly I feel miserable I get knots in my stomach so what do I do I get out a couple of my books on staying the course and reread them sadly many advisers fall victim to the same fear and hide under their desks during these tumultuous times Peter maluk told me that the ongoing communication during these storms is what sets creative planning apart his company is the proverbial Lighthouse broadcasting the message stay the course but here's what

you need to know bare markets don't last over the last 70 years the US has experienced 14 bare markets they varied widely in duration from a month and a half to nearly 2 years for example in 1998 the S&P was down 19.3% for 45 days and for 694 days in 1973 and 1974 the S&P was down 45.1% in 1966 the market was down 25.2% for 240 days on average bare markets lasted about a year when you're in the midst of a bare Market you'll notice that most of the people around you become consumed with PES

IM ISM they start to believe that the market will never rise again that their losses will only deepen that winter will last forever but remember winter never lasts spring always follows the most successful investors take advantage of all that fear and Gloom using these tumultuous periods to invest more money at bargain prices Sir John Templeton one of the greatest investors of the last century talked to me at length about this in several interviews I did with him before he passed away in 2008 Templeton who made a fortune buying cheap stocks in the midst of World

War II explained the best opportunities come in times of Maximum pessimism Freedom fact 6 bare markets become bull markets and pessimism becomes optimism do you remember how fragile the world seemed in 2008 when Banks were collapsing and the stock market was in freef Fall when you pictured the future did it seem dark and dangerous or did it seem like the good times were just around the corner and the party was about to begin for example the market finally hit rock bottom on March 9th 2009 and do you know what happened next the S&P 500 Index

surged by 69.5% over the next 12 months that's a spectacular return one moment the market was reeling the next moment we began one of the greatest bull markets in history back in 1946 to 1947 the S&P 500 was down 23 3.2% but by June 1949 it was up 42.7% from 1968 to 1970 the market was down 35.9% but by May 1970 it was up almost 44% in 20201 the S&P was down 36.8% but rebounded near the end of 2001 to almost 34% and these are only a few times bare markets were followed by bull markets

as I write this in late 2016 the S&P 500 has risen by an astonishing 266 since its low point in March 2009 you might think this was a freak occurrence but the pattern of bare Market suddenly giving way to Bull markets has repeated itself again and again in America over the last 75 years now can you see why Warren Buffett says he likes to be greedy when others are fearful he knows how quickly the mood can switch from fear and despondency to exu optimism in fact when the mood in the market is overwhelmingly Bleak super

investors such as Buffett tend to view it as a positive sign that better times lie ahead you see a similar pattern when it comes to consumer confidence which is a measure of how optimistic or pessimistic consumers feel about the future during a bare Market commentators often remark that consumer spending has fallen because people are so nervous about the future it's a vicious cycle consumers spend less money so companies make less money and if companies make less doesn't that mean the stock market won't be able to recover you might think so but these periods of consumer

pessimism are often the ideal time to invest historically bull markets have begun when consumer confidence was at a low Point why because the stock market isn't looking at today the market always looks to tomorrow what matters most isn't where the economy is right now but where it's headed and when everything seems terrible the pendulum eventually swings in the other direction in fact every single bare Market in US history has been followed by a bull market without exception this record of incredible resilience has made life relatively easy for long-term investors in the US market again and

again bad times have eventually been followed by good times but what about other countries have they seen a similar pattern of bare markets being followed by bull markets broadly speaking yes but Japan has had a much tougher experience remember the 1980s when Japanese companies seemed poised to rule the world Japan stock index the Nik 225 Rose sixfold during those years of giddy optimism hitting a high of 38,9 57 in 1989 then the market got blown to bits by March 2009 the Nik had sunk to a low of 7,055 that's an 82% loss over 20 years

in recent years though it has staged a strong comeback recovering to a high of 17,7 even so the Japanese Market is still way below its peak after nearly three decades as we'll discuss later you can protect yourself against this sort of Disaster by building a portfolio that's broadly Diversified globally and also among different types of assets the stock market is a device for transferring money from the impatient to the patient Warren Buffett did you ever listen to the news and hear the announcer mention that the stock market just hit an all-time high maybe you got

that queasy feeling that we were flying too close to the Sun that gravity was about to do its thing that the market would inevitably fall back to Earth as I wrote these words the S&P 500 stood just a few points below its all-time high in recent weeks it hit new highs on multiple occasions and as you know this bull market is more than 7 years old so the possibility that we may be due for a fall has probably been on your mind as well as mine it certainly makes sense not to take Carefree risks when

stocks have soared for years if there's one lesson from Japan's experience it's that we humans have a natural tendency to get carried away and lose sight of danger when stock prices have been surging but the fact that a market is close to its all-time high doesn't necessarily mean that there's trouble ahead as we discussed ear the US market has a general upward bias it rises over the long term because the economy continues to grow in fact the US market hits an all-time high on approximately 5% of all trading days on average that's once a month

remember real life is not an absolute average you tend to have streaks of up days and also down days but it's good to know the average thanks to inflation the price of almost everything is at an all-time high almost all the time if you you don't believe me check the price of your Big Mac your cafe latte your candy bar your Thanksgiving turkey or your new car chances are they're all priced at an all-time high too Freedom fact s the greatest danger is being out of the market I hope you agree with me by now

that it's not possible to jump in and out of the market successfully it's just too difficult for regular Mortals like you and me to predict the Market's movements as Jack Bogle once said the idea that a bell rings to Signal when investors should get into or out of the stock market is simply not credible even so the fact that the market is hovering close to an all-time high might tempt you to play it safe by waiting on the sidelines in cash until stock prices have fallen you miss 100% of the shots you don't take Hockey

Hall of Famer Wayne Gretzky the trouble is sitting on the sidelines even for short periods of of time may be the costliest mistake of all I know this sounds counterintuitive but it has a devastating impact on your returns when you miss even a few of the Market's best trading days from 1996 through 2015 the S&P 500 returned an average of 88.2% a year but if you missed out on the top 10 trading days during those 20 years your returns dwindled to just 4.5% a year can you believe it your returns would have been cut almost

in half just by missing the 10 best trading days in 20 years it gets worse if you missed out on the top 20 trading days your returns dropped from 8.2% a year to a poultry 2.1% and if you missed out on the top 30 trading days your returns vanished Into Thin Air falling all the way to zero meanwhile a study by JP Morgan found that six of the 10 best days in the market over the last 20 years occurred within 2 weeks of the 10 worst days the the moral if you got spooked and sold

at the wrong time you missed out on the fabulous days that followed which is when patient investors made almost all of their profits in other words Market turmoil isn't something to fear it's the greatest opportunity for you to Leap Frog to Financial Freedom you can't win by sitting on the bench you have to be in the game to put it another way fear isn't rewarded courage is the message is clear the greatest danger to your Financial Health isn't a market crash it's being out of the market in fact one of the most fundamental rules for

achieving long-term financial success is that you need to get in the market and stay in it so you can capture all of its gains Jack Bogle puts it perfectly don't do something just stand there hell is truth seen too late Thomas Hobbs 17th century British philosopher but what if you get into the market at at exactly the wrong time what if you get unlucky and you're hit immediately by a correction or a crash the Schwab Center for financial research has studied the impact of timing on the returns of five hypothetical investors who had $2,000 in

cash to invest once a year for 20 years starting in 1993 the most successful of these five investors let's call her M perfect invested her money on the best possible day each year the day when the market hit its exact low point for that year this mythical investor who perfectly timed the market for 20 years running ended up with $87,400 Mr haplas still made a substantial profit the lesson if you stay in the market long enough compounding Works its magic and you end up with a healthy return even if your timing was hopelessly unlucky and

you know what the worst performing investor wasn't The Unlucky One but the one who stayed on the bench the one in cash he ended up with only $ 51,2 N1 free at last in this chapter you've learned seven facts that show you how the market Works based on More Than A Century of financial history You Now understand that Corrections bare markets and recoveries follow similar patterns again and again now that you have the power to recognize these long-term patterns you will also have the power to utilize them later in this audio book we'll explain in-

depth the specific strategies you can use to take advantage of these seasonal patterns for example we'll show you what to look for when creating your ideal asset allocation strategy so you can minimize your losses in a bare market and maximize your gains when the market rebounds but for now you should have a big smile on your face you know the facts you know the rules of the game you know that Corrections and bears are to be expected and you'll soon learn how to take advantage of them you're one step closer to being truly unshakable best

of all you're taking control of your financial life you're taking responsibility because you know what most most people never take responsibility they prefer to blame the market for whatever happens to them but the market never took a dime from anyone if you lose money in the market it's because of a decision you made if you make money in the market it's because of a decision you made the market is going to do whatever it's going to do but you determine whether you'll win or lose you're in charge this chapter has taught you that Financial winter

is always followed by Spring a lesson that will allow you to proceed without fear or at the very least a lot less of it knowledge brings understanding and understanding brings resolve you won't be the person who pulls your money out of stocks when the market is getting slammed you'll be the person who stays in the game for the Long Haul planting the right seeds nurturing them patiently and then reaping the Harvest but in the next chapter you'll discover that there's one thing that it's actually healthy to fear Financial firms that charge clients like you and

me outrageous fees for lousy performance as you'll see there's no more powerful way to take control of your finances than to cut out these excessive and often hidden fees how will you benefit you'll save at least 10 years of income how's that for taking charge keep listening and let's expose those hidden fees and half truths chapter three hidden fees and half truths how Wall Street fools you into overpaying for underperformance the name of the game moving the money from the client's pocket to your pocket Matthew MCC to Leonardo DiCaprio in The Wolf of Wall Street

I often ask people what are you investing for I get a variety of answers from high returns to Financial Security to retirement to a beach house in Hawai ha but before long nearly everyone's answers begin to rhyme what most people really want regardless of how much money they have today is freedom freedom to do more of what they want whenever they want with whomever they want it's a beautiful dream and an achievable one but how can you sail off into the sunset if your boat has a hole in it what if it's slowly but surely

taking on so much water that it'll sink long before it reaches its destination I hate to tell you this but most people are in exactly this position they don't realize that they're doomed to disappointment because of the gradual but ultimately devastating impact of excessive fees on their financial well-being what kills me is that they have no idea this is even happening to them they have no idea that they are victims of a financial industry that is surreptitiously but systematically overcharging them don't just take my word for it the nonprofit organization AARP published a report in

which it found that 71% of Americans believe that they pay no fees at all to have a 401k plan that's right 7even out of 10 people are entirely unaware that they're even being charged a fee this is the equivalent of believing that fast food contains no calories meanwhile 92% admit that they have no idea how much they're actually paying in other words they're blindly trusting the financial industry to look out for their best interests yep that's the very same industry that brought about the Global financial crisis you might as well just hand over your wallet

and the password to your debit card you know the old saying ignorance is bliss well let me tell you when it comes to your finances ignorance is not Bliss ignorance is pain and poverty ignorance is disaster for you and your family and Bliss for the financial firms that are exploiting your inattention this chapter will shine a bright light on the subject of fees so you know exactly what's going on the good news once you know precisely what's happening you can put a permanent life-changing stop to it why does this matter so much because excessive fees

can destroy 2third of your nest egg Jack Bogle spelled it out to me quite simply let's assume the stock market gives a 7% return over 50 years he began at that rate because of the power of compounding each dollar goes up to $30 but the average fund charges you about 2% per year in costs which drops your average annual return to 5% at that rate you'll get $10 so $10 versus $30 you put up 100% of the capital you took 100% of the risk and you got 33% of the return did you get that you

forfeited 2/3 of your nest egg to line the pockets of money managers who took no risk put up none of the capital and often delivered mediocre performance now who do you think will end up with the beach house and Hawaii once you've listened to this chapter you'll know how to Take Back Control by minimizing fees you'll save years or more likely Decades of retirement income this one move will dramatically accelerate your journey to Financial Freedom but that's not all you'll also learn how to slash the taxes you pay on your Investments that's crucial because excessive

taxes like fees are a destructive force that can overwhelm all the positive steps you've taken how do you think think you'll feel when you've not only identified these two enemies but also defeated them you'll feel truly unshakable the Wolves of Wall Street if you're looking to Achieve Financial Security the obvious route is to invest in mutual funds maybe your brother-in-law was lucky enough to buy shares in Amazon Google and apple before they skyrocketed but for the rest of us picking individual stocks is a losing game there are just too many things we don't know too

many variables too much that can go wrong mutual funds offer a simple and logical alternative for a start they provide you with the benefit of broad diversification which helps to reduce your overall risk but how do you pick the right funds there's certainly enough to choose from as we mentioned earlier there are about 9,500 mutual funds in America more than double the number of publicly traded us companies so it's safe to say the mutual fund Market is a tad saturated why do so many companies want to be in this business yep you got it because

it's fabulously lucrative the trouble is it tends to be much more lucrative for Wall Street than for actual customers like you and me don't get me wrong I'm not suggesting that the industry is consciously out to screw us I'm not suggesting that this is a business full of crooks or charlatans on the contrary the majority of financial professionals are intelligent hardworking and thoughtful but Wall Street has evolved into an ecosystem that exists first and foremost to make money for itself it's not an evil industry made up of evil individuals it's made up of Corporations whose

purpose is to maximize profits for their shareholders that's their job even the best intentioned employees are working within the confines of this system they're under intense pressure to grow profits and they're rewarded for doing so if you the client happen to do well too that's great but don't kid yourself you're not the priority when I met David Swinson the chief investment officer for Yale University he helped me to understand just how badly the mutual fund industry serves the majority of its clients Swenson is the rockar of institutional investing famous for having turned a billion doll

portfolio into $25.4 billion but he's also one of the most caring and sincere people I've ever met he could easily have left Yale and become a billionaire by starting his own hedge fund but he's Guided by a deep sense of Duty and service to his alma mater so I wasn't surprised to hear his dismay at the way many fund companies mistreat their clients as he put it overwhelmingly mutual funds extract enormous sums from investors and exchange for providing a shocking disservice what service is it that funds are supposed to provide well when you buy an

actively managed fund you're essentially paying for the manager to generate Market beating returns otherwise wouldn't you be better off just sticking your money in a lowcost Index Fund which attempts to replicate the returns of the market as you can imagine the people who run actively managed funds are no fools they aced their math tests in high school studied economics and accounting and earned mbas from the world's best graduate schools many of them even wear suits and ties and they're dedicated to researching and selecting the very best stocks for their funds to own so what could

possibly go wrong pretty much everything the human factor fund managers try to add value by predicting which companies will perform best in the weeks months or years to come they can avoid or underweight particular sectors or countries that they believe have unattractive prospects they can build up cash if they can't find stocks worth buying or they can invest more aggressively when they're feeling bullish but it turns out that the professionals aren't really any better at predicting the future than the rest of us the truth is humans are generally pretty lousy at making predictions perhaps that's

why you never see a newspaper headline that says psychic wins the lottery when active fund managers trade in and out of stocks there are plenty of opportunities to make mistakes for example they don't just have to decide which stocks to buy or sell but when to buy or sell them and every decision obliges them to make another decision the more decisions they face the more chances they have to mess up to make matters worse all trading gets expensive every time a fund trades in or out of a stock a brokerage firm charges a commission to

execute the transaction it's a bit like gambling at a casino the house gets paid no matter what so the house always wins in the end in this case the house is a brokerage firm like the Swiss financial company UBS or Meo Lynch the wealth management division of Bank of America the charges a toll every time the fund manager makes a move over time those tolls add up up as it happens I'm working on this chapter while staying at a hotel in Las Vegas run by my buddy Steve win who became a billionaire by creating some

of the world's most popular casinos as Steve will tell you it's much better to be the one who collects the tolls than the one who pays them like poker investing is a zero sum game there are only so many chips on the table so when people trade a stock one must win and one must lose if the stock goes up after you buy you win but you've got to win by a big enough margin to cover those transaction costs and wait it gets worse if your stock goes up you'll also have to pay taxes on

your profits when you sell the stock for investors in an actively managed fund this combination of Hefty transaction costs and taxes is a silent killer quietly eating away at the funds returns to add value after taxes and fees the fund manager has to win by a really big margin and as you'll soon see that ain't easy do your eyes glaze over when we start talking about taxes I know I know this isn't the sexiest topic but it should be because the largest expense in your life is taxes and paying more than you need to pay

is insane especially when it's absolutely avoidable if you're not careful taxes can have a catastrophic impact on your returns here's an extreme yet surprisingly common example let's say you invest in a Fund in December then the next day the manager sells a stock that shot up over the past 10 months since you're now an owner of the fund you'll be getting a tax bill for those gains even though you didn't benefit one bit from the Stock's meteoric rise it's called capital gains tax and you get hit by it even though you didn't earn those capital

gains owning a fund for a long period of time doesn't necessarily ensure long-term capital gains quite the opposite owning an active fund means you will get tax bills each year due to profit taking by the fund manager and those profits are typically taxed at ordinary income tax rates nobody said the tax code was fair another common problem has to do with how long actively managed funds hold their Investments most are trading constantly they sell many of their investments in less than a year that means you no longer benefit from the lower capital gains tax rate

so regardless of how long you hold the fund you'll be taxed at your higher ordinary income tax rate and why should you care because your profits could be slashed by 30% or more unless you're holding the fund inside a tax deferred account such as an IRA individual retirement account or a 401k plan not surprisingly fund companies don't like to dwell on these tax issues preferring to tout their pre-tax returns imagine that over time you're losing 2/3 of your potential Nest Egg to fees and you're giving up another 30% an unnecessary taxes how much will really

be left for your family's future so what's the antidote index funds take a passive approach that eliminates almost all trading activity instead of trading in and out of the market they simply Buy and Hold every stock in an index such as the S&P 500 this includes companies like Apple alphabet Microsoft Exxon Mobile in Johnson and Johnson currently the five biggest stocks in the S&P 500 Index funds are almost entirely on autopilot they make very few trades so their transaction costs and tax bills are incredibly low they also save a fortune on other expenses for one

thing they don't have to pay enormous salaries to all those active fund managers and their teams of analysts with IV League degrees when you own an index fund you're also protected against all the downright dumb mildly misguided or merely unlucky decisions that active fund managers are liable to make for example an active manager is likely to keep a portion of the fund's assets and cash ready to invest if an enticing opportunity arises or ready to meet Redemption requests if lots of investors decide to sell their shares in the fund keeping some cash on hand isn't

a bad idea and it's handy when the market Falls but cash doesn't earn a return so it will underperform stocks over time assuming that the market continues its General upward trajectory ultimately the resulting cash drag tends to have a negative impact on the returns of actively managed funds what about index funds instead of sitting on cash they remain almost fully invested at all times if you're feeling pissed off right now I'm with you you're probably asking yourself what the hell am I really getting when I invest in an actively managed fund well most likely you're

buying this toxic brew of human error High fees and nasty tax bills no wonder David Swenson is so skeptical about your chances of achieving Financial Freedom through active funds he warns when you look at the results on an after fee after tax basis over reasonably long periods of time there's almost no chance that you end up beating the index fund good luck with that why is it so difficult to time the market successfully moving in and out of stocks at just the right moment so that you can benefit from the Market's upturns and avoid the

pain of its downturns many people mistakenly assume that you just need to be right a little more than 50% of the time for this approach to pay off but an exhaustive study by Nobel laurate Economist William sharp showed that a market timing investor must be right 69% to 91% of the time an impossibly high hurdle in another landmark study researchers Richard Bower and Julie delist examined more than a million Market timing sequences from 1926 to 1999 their conclusion just holding the market via an index fund outperformed more than 80% of Market timing strategies you get

what you pay for except when you don't the mutual fund industry is now the world's largest skimming operation a 7 trillion doll 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 Senator Peter Fitzgerald of Illinois co-sponsor of the mutual fund Reform Act of 2004 which was killed by the Senate Banking Committee when I was a teenager I'd sometimes take a girl out to Denny's on a date I had so little money that I'd order an ice tea and pretend I'd already

eaten the truth was I couldn't afford for both of us to eat the experience of growing up poor left me with a keen awareness of what things should cost versus what they actually cost if you go out for fantastic meal in a great restaurant you expect it to be expensive that's fine but would you pay $20 for a $2 taco no way let me tell you that's what most people are doing when they invest in actively managed mutual funds have you ever tried to figure out the actual fees you pay for the funds you own

if so you probably zeroed in on the expense ratio which covers the fund company's investment advisory fee its administrative costs for Stuff such as Postage and record keeping plus critical office expenses like free sodas and cappuccinos a typical fund that invests in stocks might have an expense ratio of 1% to 1.5% what you probably didn't realize is that this is just the start of its fee Bonanza a few years ago Forbes published a fascinating article entitled the real cost of owning a mutual fund which reveal just how expensive funds can truly be as the writer

pointed out you're not only on the hook for for the expense ratio which the magazine estimated conservatively at just less than 1% .9% a year you're also liable to pay through the nose for transaction costs all those commissions your fund pays whenever it buys or sells stocks which Forbes estimated at 1.44% a year then there's the cash drag which it estimated at 83% a year and then there's the tax cost estimated at 1% a year if the fund is in a taxable account the grand total if the fund is held in a non-t taxable account

like a 401k you're looking at total costs of 3.17% a year if you're in a taxable account the total costs amount to a staggering 4.17% a year by comparison that $20 Taco is starting to look like a real bargain you've got to look very carefully at the small print I don't like things that require small print by the way Jack Bogle I hope you're paying really close attention right now because the knowledge about all these hidden fees will save you a fortune but what if you're hearing this and thinking yeah but we're only talking about

3% or 4% a year what's a few percentage points between friends let's add them up in a non-t taxable account the expense ratio is .9% transaction costs are 1.44% with a cash drag of 84% bringing total cost to 3.17% in a taxable account the expense ratio is also .9% transaction costs are also 1.44% with a cash drag of 83% plus a tax cost of 1% bringing total costs to 4.17% it's true that the numbers seem small at first but when you calculate the impact of excessive costs multiplied over many years it takes your breath away

here's another way to put this in perspective an actively managed fund that charges you 3% a year is 60 times more expensive than an index fund that charges you 05% imagine going to Starbucks with a friend she orders a ventti cafe latte and pays $45 but you decide that you're happy to pay 60 times more your price $249 I'm guessing you'd think twice before doing that in case you think I'm being too extreme let's consider the example of two neighbors Joe and David both are 35 years old and each has saved $100,000 which they each

decide to invest over the next 30 Years the universe Smiles on them and each achieves a gross return of 8% a Year Joe does it by investing in a portfolio of index funds that cost him .5% a year in fees David does it by owning actively managed funds that cost him 2% a year I'm being generous here by assuming that the active funds match the performance of index index funds by the age of 65 Joe has seen his nest egg grow from $100,000 to approximately $865,000 as for David his $100,000 has grown to only $548,000

they both achieved the same rate of return but they paid different fees the outcome Joe has 58% more money and additional $317,000 for retirement these two neighbors then start to with draw $60,000 a year to support themselves in retirement David runs out of money by the age of 79 but Joe has an entirely different life experience he's able to withdraw $80,000 a year 33% more and his money lasts until he's 88 hopefully Joe lets David live in his basement for free now do you understand why you need to pay such close attention to the fees

you're being charged this one crucial Factor might make all the difference between poverty and comfort misery and joy overpaying for underperformance the five-star trap here's a question you probably never thought to ask how do you find an active fund manager who will not only charge you those outrageous fees but also provide you with mediocre returns and exchange don't worry the financial services industry has you covered if there's one thing in plentiful Supply it's active management who will overcharge you for underperformance that's the incredible thing it's not just that actively managed funds are overcharging their customers

it's that their long-term performance is appalling it's like a double insult imagine that you just bought that cafe latte for $249 took a sip and discovered that the milk had gone bad one of the most shocking studies I've seen on this topic of mutual fund performance was by an industry expert named Robert arnau the founder of research search Affiliates he studied all 203 actively managed mutual funds with at least $100 million in assets tracking their returns for the 15 years from 1984 through 1998 and do you know what he found only eight of these 2003

funds actually beat the S&P 500 Index that's less than 4% to put it another way 96% of these actively managed funds failed to add any value at all over 15 years if you insist on buying an actively managed fund what you're really betting on is your ability to pick one of the 4% that outperform the market this reminds me of a gambling analogy that appeared in a fast company magazine article entitled The Myth of mutual funds its authors chip and Dan Heath highlight the absurdity of expecting to pick a fund from that 4% Group by

comparison if you get dealt two face cards in blackjack each face card is worth 10 so now your total is 20 and your inner idiot shouts hit me you have about an 8% chance of winning I don't know about you but I prefer not to let my inner idiot run the show so why would I bet on my ability to identify the tiny minority of fund managers who outperform over many years you might be a hardcore researcher who loves to read The Wall Street Journal and Morning Star searching for the illustrious five-star fund the outperformer

but there's another problem that you anticipate today's winners are almost always tomorrow's losers The Wall Street Journal wrote about one study that went all the way back to 1999 and looked at what happened over the next 10 years to all of the top performing funds that had received a five-star rating from Morning Star what did the researchers discover of the 248 Mutual stock funds with five-star ratings at the start of the period just four still kept that rank after 10 years the fancy term for this this process is reversion to the meme a polite way

of saying that most High Flyers will eventually fall reverting back to mediocrity unfortunately many people pick toprated funds without realizing that they're falling into the Trap of buying what's hot usually right before it turns cold David Swenson explains nobody wants to say I own a bunch of one and two star funds they want to own fourstar funds and five-star funds and brag about it at the office but the four and five star funds are the ones that have performed well not the ones that will perform well if you systematically buy the ones that have performed

well and sell the ones that have performed poorly you're going to end up underperforming mutual fund companies are notorious for opening lots of funds in hopes that a few of them might outperform they can then quietly close all the funds that did badly and heavily Market the few that did well after all they can't sell shoddy past performance no matter matter how glossy the brochure Jack Bogle explains a firm will go out and start five incubation funds and they will try to shoot the lights out with all five of them and of course they don't

with four of them but they do with one so they drop the other four and take public the one that did very well with a great track record and sell that track record Bogle adds statistically you're bound to have a few outperformers if you create enough funds Tony if you pack 1,24 gorillas into a gymnasium and teach them each to flip a coin one of them will flip heads 10 times in a row most would call that luck but when that happens in the fund business we call him a genius does all of this mean

it's impossible to beat the market over long periods of time actually no it's extremely hard but there are a few unicorns out there who have outperformed the market by a mile over several decades these are superstars such as Warren Buffett Ray Delio Carl icon and Paul tutor Jones who not only are brilliantly clever but also have ideal temperaments enabling them to remain calm and rational even when markets are imploding and most people are losing their minds one reason why they win is that they base every investment decision on a deep understanding of probabilities not on

emotion or desire or luck but most of these unicorns run enormous hedge funds that are closed to new investors for example Ray Delio used to accept money from investors who had a net worth of at least $5 billion and who entrusted him with a minimum of $100 million nowadays he won't accept any new investors regardless of how many billions you've got hidden under your mattress when I asked Ry how hard it is to beat the market over the long run he didn't pull his punches you're not going to beat the market he told me competing

in the markets is more difficult than winning in the Olympics there are more people who are trying to do it and much bigger rewards if you succeed like competing in the the Olympics only an infinitesimal percentage succeed but unlike winning in the Olympics most people think they can do it before you try to beat the market recognize that your likelihood of being successful is extremely small and ask yourself if you spent the time to train and prepare to be one of the few who actually wins you can't ignore it when one of the Giants who

has actually beaten the market over decades tells you that you shouldn't even bother trying but should stick instead with index funds Warren Buffett who has outpaced the market by a huge margin also advises regular people to invest in index funds so they can avoid the drain of excessive fees to prove his point that almost all active managers underperform index funds over the long run he made a $1 million bed in 2008 with a new york-based firm called prot partners he challenged prot to select five top hedge fund managers who could collectively beat the S&P 500

over a 10-year period so what happened after 8 years Fortune reported that these hedge funds were up only 21.87% versus 65.6 7% for the S&P 500 the race isn't over yet but as it stands these active managers look like contestants in a three-legged race trying to catch Usain Bolt the world's fastest man meanwhile Buffett says he's left instructions that after his death the money he leaves in trust for his wife should be invested in lowcost index funds his explanation 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 even from his grave Buffett is absolutely determined to avoid the corrosive effects of high fees brilliant guidance from the Oracle of Omaha himself do you remember when I told you earlier that knowledge is merely potential power it's only when you take your knowledge and act on it that you possess true power in this chapter you've learned what an astounding impact fees can have on your financial future but what will you do with that knowledge how will you act on it and benefit from it

imagine for a moment that you stop buying actively managed funds that charge exorbitant fees instead from now on you invest only in lowcost index funds what's the result at the very least I would estimate that you can cut your fund expenses by 1% a year but as you know that's not the only benefit of switching to index funds hypothetically let's imagine that your index funds outperform those actively managed funds by 1% annually in total you've just added 2% a year to your returns this alone can give you 20 years of extra retirement income now do

you see how much power you possess to take charge of your financial future take that power and use it to dramatically drive down your costs this will help you immeasurably to become unshakable meanwhile let's take a breath then let's step into another area where you can save yourself a fortune your 401k keep listening we're about to embark on a mission to rescue your retirement account chapter 4 rescuing our retirement plans what your 401k provider doesn't want you to know the 401K plan was a beautiful invention created in 1984 it gave regular people like you and

me a chance to build wealth by making tax deductible contributions to a retirement account directly from our paychecks what a great concept you and I were given this opportunity to own a piece of the American dream to invest in our own Futures to take full responsibility for achieving our own Financial Freedom now nearly 90 million Americans participate in 401K plans to put that in perspective only 75 million Americans own a home with more than6 trillion dollar currently invested in 401ks this is the single most important vehicle for the Financial Security of the US population but

you know what happened somewhere along the line the dream got derailed with trillions of dollars up for grabs Financial firms dreamed up countless ways to dip all of their fingers thumbs and toes into the pie this is the uglier side of our nation's gift for innovation and it places us under enormous pressure to learn how to protect ourselves from these money grubbers you might not believe this but for almost three decades the company's providing 401K plans were not even required by law to disclose how much they were charging their customers only in 2012 did the

government finally Force these firms to make detailed disclosures of how much they were extracting from your savings in what other industry would customers tolerate this trust me style of of doing business can you imagine a clothing store with no price tags can you imagine booking a vacation and leaving it up to the airline in the hotel to decide how much to drain from your bank account without informing you needless to say the financial firms resisted the temptation to take advantage of this lack of disclosure since they understood that handling our retirement money is a sacred

trust just kidding of course they took advantage now that the law has changed would you guess that the problem has been fixed hardly the whole 401K system is still a black box today Financial firms provide disclosure documents that are often 30 to 50 pages long and filled with impenetrable language surprise surprise not that many people devote their weekends to reading these Ultra complicated documents instead of digging through the fine print most plan participants simply trust that their employers are looking out for them and most employers are trusting the broker who who sold them the plan

over a round of Gulf remember 71% of people enrolled in 401ks think there are no fees and 92% admit that they have no clue what they are but the truth is the vast majority of plans are characterized by huge broker commissions expensive actively managed funds and layer after layer of additional and often hidden charges Robert Hilton Smith a senior policy Analyst at a think tank called deos took the trouble to study and decipher the prospectuses of 20 funds in his 401k plan he hacked his way through the forest of bewildering legal e and confusing acronyms

and then wrote a report entitled the retirement savings drain the hidden and excessive costs of 401ks what did he find customers like him and you and me were hit with 17 different fees and additional costs just to be clear we're not referring here to the absurdly high fees that you're being charged by the mutual funds in your 401k plan it's not enough for you to pay for all those actively managed funds the ones that forb says could be costing you 3.17% a year no these are the additional fees that you're also being charged by the

plan provider that's administering your 401k these providers are typically insurance or payroll companies but you might want to think of them as another set of exceptionally well-paid toll collectors you've got to hand it to these providers they're truly ingenious when it comes to Dreaming up different ways to siphon off the money in your 401k here's a short sample of the many categories of fees they've invented investment expenses communication expenses bookkeeping expenses administrative expenses trustee expenses legal expenses transactional expenses and stewardship expenses why not just add a category called expense expenses I'm always amazed by what

you can find buried in the fine print of provids disclosure documents the vague terminology that obscures exactly what's being done to you for example you'll often see intentionally meaningless terms such as net asset charge Asset Management charge contract asset charge AMC charge or CAC charge one provider a leading insurance company was so Brazen as to add a line item called required Revenue required by who what for to pay for the CEO to buy a yacht how much does all of this cost you Hilton Smith calculated the impact of these additional 401K fees on an average

worker who earns about $30,000 a year and saves 5% of his or her annual income over a lifetime this worker would lose $154,700 in fees that's more than 5 years of income a worker who earns about $90,000 a year would lose $277,000 in 401K fees you know as well as I do how hard it is for most people to save money for retirement it requires real sacrifices but excessive expenses can easily destroy the benefits of all that effort some plans take the excessive fees to a whole other level certain providers not content with their typical

take charge a frontend sales load on all initial deposits one of the worst we have seen takes a whopping five . 75% of every single dollar You sock away it's like a tithe to the corporate Gods running these companies add that to the 2% in Annual fees they charge and you're down 7.75% before you're out of the gate sadly teachers nurses and nonprofit employees are most vulnerable to this huge skimming operation this is because their 403b plans they are equivalent of a 401k aren't covered under the same Employee Retirement income Security Act of 1974 laws

that are at least in theory designed to protect employees it makes me sick to think that those who sacrifice the most to make our society better are being screwed by brokers who somehow manage to sleep at night probably on 2,000 thread count sheets in a New York Times article titled think your retirement plan is bad talk to a teacher reporter Tara seagull Bernard does a brilliant job exposing how these poor folks are mugged in one of the most ghastly scenarios imaginable the teachers were each charged a fee of at least 2% of their savings to

manage the money in addition to sales charges of up to 6% each time they made a deposit moreover the calculations didn't include the expenses of the dozens of mutual funds they were invested in some of which exceeded 1% that's 9% in firste expenses alone that's not a hole in your boat that's the whole back of the boat ripped off and dragging in the water this is why it's so important to be aware of how the financial industry Stacks the odds against you knowledge is your first defense after all how can you protect yourself from a

threat to your financial well-being unless you know that this threat exists one person who shares my outrage about 401K expenses is the comedian John Oliver who investigated the subject for his HBO show Last Week Tonight with John Oliver when the members of his research team dissected their own 401k plan they discovered that their provids fees amounted to 1.69% a year excluding the exorbitant fees they were also being charged to invest in the actively managed funds in their plan Oliver explains how seemingly tiny fees can mount up until you've lost almost 2third of what you would

have had he warns think of fees like termites they're tiny they're barely noticeable and they can eat away your effing future heads I win tails you lose what makes all of this so upsetting is that a 401k should be and can be a powerful tool for Building Wealth if it's used correctly instead the vast majority of plans are riddled with opaque fee arrangements and conflicts of interest in 2015 the Obama Administration announced that hidden fees and backdoor payments were costing Americans more than 17 bill million dollar per year and Secretary of Labor Thomas E Perez

has said the corrosive power of fine print and buried fees can eat away like a chronic illness at a person's Savings in early 2016 Congress passed new laws designed to force 401K providers to act in their clients best interests sadly by the time lobbyists had done their worst these regulations had lost their teeth for example 401K Brokers can still charge commissions sell you their own over overpriced name brand funds and whack you with front-loaded sales charges business as usual if you ask me one of the worst abuses is that nearly all of the bigname providers

routinely accept payments from the mutual funds they offer in 401K plans this legal but grubby Arrangement is called Revenue sharing or payto playay it's the equivalent of buying shelf space in a store to ensure that it will stock a crappy product that Shoppers really ought to avoid what's the result many of the funds you get to choose from in your 401k plan are on the list only because the fund company paid the provider to include them These funds tend to be actively managed so they're expensive and they're rarely the best performers in some cases they

even charge a front-end load a fee that often amounts to 3% of your assets just to buy the fund in the first place so why not just pick lowcost index funds when you're investing in your 401K plan plan a great question the trouble is most providers make index funds available only if the plan has a high level of assets why because index funds aren't sufficiently lucrative for the provider so they prefer to exclude them from the menu if they can get away with it if you work for a smaller company chances are that you'll be

forced to invest in funds with higher fees in fact 93% of 401K plans have less than $5 million in total plan assets these are small and midsized companies that don't have the buying power to demand better investment options for their employees yet it's entirely unfair to penalize people for working at smaller companies some 401K providers do offer index funds to smaller plans but they typically charge a significant markup one major insurance company is offering an S&P 500 Index Fund for 1.68% annually when the actual cost is just 05% that's a 3,000 260% markup think of

it this way your friend buys a Honda Accord for the regular retail price of $22,000 but you're forced to pay a$ 3,260 per markup your cost for the exact same car $77,200 welcome to the world of High Finance another well-known insurance company charges a 3% sales load to buy a Vanguard index fund and then charges 65% a year and fees for the fund a steal at a mere 1,300% markup this is the white collar equivalent of Ruthless Mobsters coming around to your small business and hitting you up for protection money the only justification is that

you have money and they want it meanwhile some providers will allow you to open your own self-directed 401k account if you want access to lowcost index funds or want to manage your own Investments sounds like a good option right one friend of mine thought so he opened a self-directed account bought some index funds and congratulated himself on bypassing all the ridiculously expensive funds in his plan then he found out that the provider was charging him an additional 1.9% a year for the privilege of using a self-directed account in other words heads you lose Tails I

win these tricks of the trade are at last coming back to haunt many 401K providers as I write this at least 10 major provid ERS have been sued by their employees for charging excessive fees in their own 401K plans one of the biggest 401K providers settled two class action lawsuits for $12 million after accusations by its own employees that its 401K fees were too high imagine going to a restaurant and discovering that the waiters and kitchen staff refuse to eat the chef's food when the Insiders don't like what their company is selling should you and

I just smile politely and accept that it's good enough for the likes of us one reason why I feel so passionate about this is that I've experienced firsthand how easy it is to get exploited by unscrupulous 401K providers when I began to see these widespread abuses at companies Across America I called the head of human resources at one of my companies to learn more about the plan we were providing for our employees I think of them as family and I wanted to make sure we were treating them with all the Care they deserve to my

horror I discovered that our name brand 401k plan administered by a major insurance company was loaded with expensive mutual funds excessive administrative expenses and fat commissions that we paid to the broker Who Sold us the plan it turned out that the total expenses in our 401k plan amounted to 2.17% a year over time these fees would erode much of the money that our employees were saving scrupulously for their future I was beside myself so I began to look around for a solution after much invest instigation I was introduced by a friend to Tom Zager CEO

of a company called America's Best 401k ABK as you'd imagine I was more than a little skeptical why should I believe that his firm would live up to its less than modest name but it didn't take long to realize that he's a truth teller who's determined to challenge his industry's unseemly practices as Tom told me the 401K business is the largest dark pool of assets where nobody really knows how or whose hands are getting freed by contrast ABK is entirely transparent for example he has no interest in the sorted payto playay game instead of accepting

kickbacks from mutual fund companies that want him to sell their overpriced funds he offers only inexpensive index funds from firms such as Vanguard and dimensional fund advisors Tom's company charges one fee with no markups or hidden costs it's a fully bundled solution that eliminates Brokers commissions and high- paid middlemen I'm delighted to tell you that I quickly and easily moved my company's old plan into a new plan administered by America's Best 401k the total costs for our new 401k plan including investment expenses Investment Management Services and recordkeeping fees add up to a grand total of

just 65% a year that's a savings of about 70% in our annual expenses over the years this should put as much as $5 million back into the pockets of my employees and Tom charges nothing for companies to make the switch I was so impressed that I referred many other friends to ABK to my delight they were all thrilled and no wonder Tom's firm saves his average client more than 57% in fees I got excited and decided to partner with Tom on his mission to rescue the retirement plans of millions of people it's time to break

the ruthless Chokehold this industry has on our family's Financial Futures whether you are a business owner or an employee you can see how your company's 401k plan Stacks up by using his free online fee Checker tool at www.show meth fees.com it will analyze your plan and calculate within seconds how much you're being charged in fees business owners can go one step further and provide a copy of their fee disclosure for a more detailed look under the hood most important this quick process can also show you how much you can save over time by switching to

a better plan I won't be surprised if you save yourself hundreds of thousands of dollars over the years I was chatting about this with my dentist and friend Dr Craig spodak he has more than 40 employees and he wanted to make sure they weren't being ripped off I don't want to name specific names here because these problems are systemic not just limited to a handful of companies but when Craig told me the name of the infamous company that provided his 401k plan I couldn't help but cringe my diagnosis was immediate his Dentistry practice would need

to undergo an urgent extraction otherwise the pain would only get worse I put Craig in contact with my partners at America's Best 401k in a matter of minutes he emailed them his plans fee disclosure form and they drilled down to expose his fees he was shocked by the results it turned out that his plan contained a long list of overpriced mutual funds and an additional layer of bloated contract asset charges the total costs he and his employees paid for this terrible plan were north of 22% a year suddenly Craig understood why his broker used to

bring him donuts as a gift and why the man was always grinning from ear to ear you won't be surprised to hear that Craig fired his broker dumped his provider and entrusted his plan instead to America's Best 401k employers need to wake up just as Craig and I did so they can ensure that their employees aren't being exploited otherwise there could be a high price to pay not just for the employees but also for the employer if you're an employee after you use the fee Checker you can forward the report to your company's owner or

to Senior Management once they know the truth about what's going on they may well want to improve your 401k plan after all their financial future is also at stake business owners beware take 3 minutes to discover how you can eliminate legal liabilities and protect yourself and your company from new Department of Labor fines if you own or run a company that offers a 401k plan you're officially regarded as the plan's sponsor whether you know it or not that means it's your legal obligation to act as the fiduciary to your plan and to your employees which

means that you have to operate in their best interests if you trip up you could easily find yourself with a major liability that could damage your business and even your your own finances it's a bit like owning a house that's structurally unsound you might be fine for years until you're not so ignore this at your peril what do you have to do first you need to demonstrate to the Department of Labor do that you're taking the necessary steps to fulfill your role as the plan sponsor this includes periodically benchmarking your plan against other plans to

ensure that the fees being charged in your plan are reasonable most business owners I talked to have no idea about this obligation this potentially exposes them to the mighty Wrath of the do in 2014 the department determined that 75% of the plans it examined were illegal the average fine $600,000 and that's just the beginning you're also exposed to the risk that your own employees could sue you personally in 2015 the US Supreme Court issued a major ruling against Edison International the power Giant this decision should make it easier for 401k plan participants to sue their

employers for choosing Investments with excessive fees small businesses are particularly vulnerable not just because it's hard for them to afford Hefty fines but also because they tend to have small 401K plans which typically charge the highest fees one practical step that could save you a fortune is to contact my partners at America's Best 401k and ask them to provide you with a free Benchmark for your plan all it takes is a few minutes to furnish them with the fee disclosure statement for your plan the fact that you've obtained this Benchmark demonstrates to the do that

you've taken your legal responsibility seriously even better many companies discover that they can easily cut their plans fees in half or more if so that will endow you and your employees with a huge windfall for many years to come show meth fees.com where are we heading headed next before we turn our Focus to your investment Playbook we've got one more invaluable lesson to cover how to find sophisticated conflict-free Financial advice that will turbocharge your journey to financial success you learn how to avoid all those salespeople in Disguise who get rich by dishing out so-called advice

that benefits them not you as you'll see choosing the right advisor could mean the difference between poverty and wealth between insecurity and freedom the choice is yours so let's find out who can you really trust chapter five who can you really trust pulling back the curtain on the tricks of the trade it is difficult to get a man to understand something when his salary depends on his not understanding it Upton Sinclair when I ask people how they're doing the most common answer I get is busy we're all running faster than ever these days so it's

no surprise that more and more of us are hiring financial advisers to help us navigate the complicated journey to Financial Freedom from 2010 to 2015 the percentage of the US population using financial advisors doubled in fact more than 40% of Americans now use an advisor and the more money you have the more likely you are to seek out advice 81% of people with more than $5 million have an advisor but how do you find an adviser you trust and who deserves your trust it's astonishing how many people don't trust the person giving them Financial advice

a 2016 survey by the certified financial planner Board of Standards found that 60% of respondents believe that financial advisors act in their company's best interests rather than the consumer's best interests that figure had soared from 25% since 2010 to put that in perspective Congress currently has a dismal 20% approval rating but just 10% of Americans surveyed trust financial institutions it's hard to think of any other industry where customers feel so suspicious except perhaps the used car business what accounts for this epidemic of distrust well it's not easy to place your full faith and confidence in

an industry that's constantly in the news for yet another scandal in fact 10 of the world's largest financial firms have had to Fork out 179.50 billion in legal settlements just in the seven years from 2009 through 2015 Bank of America had 34 settlements and paid 77.9 billion JP Morgan Chase had 26 settlements and paid 4.12 billion City group had 18 settlements and paid $18.39 billion Wells Fargo 10 settlements at $1.24 billion BNP Perry BBA one settlement at 8.9 .9 billion UBS eight settlements at 6.54 billion Deutsche Bank four settlements at 5.53 billion Morgan Stanley seven

settlements at 4.78 billion Barclays also seven settlements at 4.23 billion and finally credit swis four settlements at 3.74 billion some of the Stories Behind These settlements are so outrageous that they make you shake your head and wonder here's a sample of four typical newspaper headlines just from the last few months Bank of America to pay $415 million to settle SEC probe The Wall Street Journal reports that the bank's maril Lynch brokerage unit misused customer cash and securities to generate profits for itself putting at risk up to $58 billion in client assets City Group finded in

rate rigging inquiry but avoids criminal charges the New York Times reports that the bank was fined for $425 million for manipulating Benchmark interest rates from 2007 to 2012 City groups motive to benefit its own trading positions at the expense of its trading partners and clients ex Barclay's employees guilty of liore rigging USA Today reports that three former barklay employees conspired to manipulate a Global Financial Benchmark used to set rates on trillions of dollars of mortgages and other loans did you get that that's Millions with a te Wells Fargo finded $185 million for fraudulently opening accounts

the New York Times reports that employees of the bank opened roughly 1.5 million bank accounts and applied for 565,000 credit cards without customer consent the bank fired at least 5,300 employees involved in this Scandal how can you place your financial future in the hands of people who work in an industry with this demonstrated record of putting its own own interests above those of its clients how can you expect them not to deceive exploit and abuse you after all these companies aren't Fringe operators with Fly by Night reputations these are or were some of the most

respected and most blue chip behemoths in this business for example Wells Fargo had long been celebrated as one of the best run banks in the world yet its CEO was forced to resign and shame over his firm's opening of fake bank accounts forfeiting $41 million in stock options that he'd received as a reward for his performance now let me be absolutely clear I'm not criticizing any individuals who work in this field or for these specific firms I'd be surprised if the CEO of Wells Fargo truly knew about this widespread wrongdoing within his massive company which

has more than a quarter million employees policing companies this enormous has become an almost impossible challenge for some I have lots of friends and clients in the financial industry so I'm speaking with firsthand knowledge when I tell you that they and the vast majority of their colleagues are people of real Integrity they have good hearts and good intentions the trouble is they work in a system that's beyond their control A system that has tremendously powerful Financial incentives to focus on maximizing profits above all else this is a system that richly Rewards Employees who put their

employer interest first their own interest second and their client's interests a distant third and for folks like you and me that's a recipe for disaster unless we take the precaution of learning how the system works against us and how to counter it you can trust me to take advantage of you before we go any further it's worth explaining where financial advisors fit within this profit hungry system and what exactly they do they operate in a realm where nothing is quite what it seems to be so it's fitting that they go by many different names which

often seem downright misleading according to the Wall Street Journal there are more than 200 different designations for financial advisers including financial consultants wealth managers financial advisors investment Consultants Wealth Advisors and in case that doesn't sound exclusive enough private Wealth Advisors these are all just different ways of saying I'm respectable I'm professional of course you can trust me regardless of the title what you really need to know is that 90% of the roughly 310,000 financial advisor ERS in America are actually just brokers in other words they're paid to sell Financial products to customers like you and

me and return for a fee why does this matter because Brokers have a vested interest in Hawking expensive products which might include actively managed mutual funds whole life insurance policies variable annuities and R Accounts these products typically pay them a one-time sales commission or even better for them ongoing Annual fees a broker at a major firm might be required to produce at least $500,000 a year in sales so it doesn't matter how fancy the title sounds these are salespeople under intense pressure to generate revenues if calling themselves a Financial Consultant or a private wealth adviser

helps them reach their aggressive sales targets so be it if calling themselves a wizard a pixie or an elf helped more that'd be just fine too does this mean they're dishonest not at all but it does mean they working for the house and remember The House Always Wins there's a good chance your broker is a sincere person with high integrity but he selling what he's been trained to sell and you should always assume that whatever he's selling will benefit the house first sophisticated customers know this is standard operating procedure one survey found that 42% of

ultra wealthy clients think their adviser is more concerned with selling products than with helping them Warren Buffett jokes that you never want to ask a bar Barber whether you need a haircut well Brokers are The Barbers of the financial world they're trained and incentivized to sell regardless of whether you need what they're selling that's not a criticism it's just a fact I also want to make it clear that I'm not out to criticize or demonize the financial firms that employ these Brokers have these companies done their fair share of stupid unethical and illegal things you

bet but they're not evil or malicious they never set out to sabotage the global economic system these companies simply do what they're incentivized to do which is to meet shareholders needs and what do shareholders need bigger profits and what creates bigger profits more fees if there's a legally gray area that these companies can exploit to generate those additional fees they're likely to do it because that's what they're incentivized to do you might expect all those enormous legal settlements to act as a deterrent encouraging these companies to improve their behavior but these penalties are poultry for

such colossal businesses Bank of America had to Shell out $415 million in fines for misusing its customers assets big deal in one 3-month period in 2015 the bank earned a profit of 5.3 billion that's in just 12 weeks for companies this Rich those pesky fines are just a routine cost of doing business the equivalent of you or me getting a parking ticket instead of changing their ways these companies Focus much of their effort on burnishing ing their brands through slick ad campaigns featuring dreamy images of sailboats and romantic walks on the beach why am I

telling you this because we're conditioned to trust Brands we need to break free from this conditioning and look with more critical eyes at the reality not the illusion otherwise how can we Safeguard ourselves against this powerful system that's fueled by self-interest it makes me angry and sad that the financial system is so broken but anger and sadness won't protect you from getting ripped off what will protect you is knowing how the system can work against you if you don't understand the incentives of your adviser you're liable to discover that you've done wonders for his financial

future while potentially wrecking your own in this chapter you will learn how to navigate the Minefield you'll learn to distinguish between three different types of advisers so you can sidestep the salespeople and choose a fiduciary who is required by law to act in your best interests we'll also give you the criteria to judge whether a particular adviser is right or wrong for you based on fact not on how likable he or she is after all it's easy to be persuaded by people you like especially when they are sincere remember people can be sincere and sincerely

wrong maybe you're wondering if you need an advisor at all if you decide to manage your own finances this audio book and money Master the game will set you on the right track so you can achieve your financial goals but in my experience the best financial advisers can add extraordinary value by helping you with everything from investing to taxes to insurance they provide holistic advice that's truly invaluable for me getting First Rate advice has been a game Cher saving me a tremendous amount of money and time I'm a capable guy and I pride myself on

understanding the most important principles in anything I'm a part of but I'm not about to do brain surgery on myself skeptical about the value of the right adviser while the wrong advisers can be detrimental to your Financial Health the right ones can be worth their value in Gold a recent Vanguard study explored exactly how much monetary value an adviser can bring to your Investments lowering your expense ratios 45 basis points 45% back in your pocket rebalancing portfolio 35 basis points 35% of increased performance asset allocation 75 basis points 75% of increased performance withdrawing the right

investments in retirement 70 basis points 7% in savings behavioral coaching 150 basis points 1.5% for serving as your practical psychologist the grand total 3.75% of added value that's more than three times what a sophisticated adviser would charge and heck that doesn't include reducing taxes and more a losing bet one of these things is not like the others Big Bird did you ever have that unsettling suspicion that someone wasn't telling you the whole truth but you couldn't quite put your finger on why you didn't trust the person or how exactly he or she might be lying

to you it's a familiar feeling when you're searching for financial advice how can you tell if the person offering you help is the real deal and how can you even know know where to start when so many different people with so many different titles are offering you potential Solutions in the interest of cutting through the confusion I'm going to make this as simple and straightforward as possible in reality all financial advisers fall into just one of three categories what you really need to know is whether your adviser is a broker an independent adviser or a

duly registered advisor now let's break this down in more detail so you know exactly what you're dealing with with Brokers as I mentioned earlier about 90% of all financial advisers in America are Brokers regardless of the title on their business card they're paid a fee or commission for selling products many of them work for enormous Wall Street Banks brokerage houses and insurance companies the kind that Splash their names on Sports Arenas how do you know if the product a broker recommends is the best one for you let me clear it up Brokers don't have to

recommend the the best product for you what yes you heard me right all they're obliged to do is follow what's known as the suitability standard that means they must simply believe that any recommendations they make are suitable for their clients suitability is an extremely low bar to clear do you dream of marrying a suitable person or your soulmate but for a broker suitable is good enough the problem is Brokers and their employers earn more by recommending C certain products for example an actively managed fund with high expenses will be far more lucrative for the broker

and The Brokerage house than a lowcost Index Fund which will be far more lucrative for you and your family does it sound to you like there's a serious conflict of interest here damn right how is it that profits over people has become the accepted standard to put this in context the United Kingdom has a fiduciary standard which means that all financial advisers are required by law to act in their clients best interests Australia also has a fiduciary standard so why aren't American professionals obliged to act as fiduciaries actually they are except for financial professionals doctors

lawyers and certified public accountants in the United States are legally required to act in the best interest of the people they help yet financial advisers get a free pass there have been many attempts to enact laws requiring advisers to serve their clients best interests but the financial industry has lobbied hard to block these laws why frankly advisers and their employers would earn way less money if they could no longer stack the deck in their favor imagine their horror if they could no longer Hawk their own overpriced products or collect substantial commissions and secret Kickbacks such

as Revenue sharing deals from other companies one piece of moderately good news is that the Department of Labor recently passed a new regulation requiring advisers to put their client interest first in one specific situation when handling 401k and Ira retirement accounts but even then there are still major loopholes if you're working with a broker at some point you'll probably receive a phone call or a letter asking you to sign a best interest contract exemption or Bic the broker may tell you the government passed the ridiculous law that limits your choices if you sign this form

I can continue offering you a full menu of options don't fall for it this is code for please sign this form so I can keep selling you my firm's most profitable products and collecting big Commissions in addition with the recent election of Donald Trump his advisers are all talking about rolling back the new regulations before they're even implemented so by the time you listen to this those protections may not even exist here's the bottom line this system is so riddled with conflicts of interest that it puts you in a highly vulnerable position but what if

you're already working with a broker you like and Trust I'm not suggesting that it's impossible to find talented trustworthy brokers who do a fine job but playing a game where the odds are so heavily stacked against you isn't an intelligent move the most successful investors and even professional gamblers always try to make sure the odds are on their side how can the odds be on your side if your broker has a hidden Financial agenda David Swenson Yale's investment Guru warned me that no matter how much you may like your broker your broker is not your

friend registered investment advisers of 30893 financial advisers in the United States only 31,000 approximately 10% are registered investment advisors also known as Ras or independent advisers like doctors and lawyers they have a fiduciary duty and a legal obligation to act in their client's best interest at all times it's simple common sense right but in the strange Twilight Zone of the the financial industry it's anything but common to give you a sense of how strong the laws are if your raia tells you to buy Apple in the morning and he buys it for himself at a

cheaper price in the afternoon he has to give you his stock try asking your broker to do that in addition before doing business with you your raia must disclose any conflicts of interest and explain upfront how he or she is paid no Hocus Pocus nothing hidden no tricks no lies all cards on the table now why would you ever choose a financial adviser who doesn't have to act in your best interests over one who does you wouldn't yet most people do just that one reason is that they simply don't know any better the fact that

you're listening to this book puts you in an elite group one that understands the fundamental rules of this high stakes game another reason why so many people use Brokers is that Ras are like rare birds there's only a one in 10 chance of spotting one how come there are so few raas if this is such a superior model the most obvious reason is that Brokers tend to earn a lot more money all those fat fees from selling Financial products can be extremely lucrative by contrast Ras don't accept sales commissions instead they typically charge a flat

fee for financial advice or a percentage of their client's assets under management it's a cleaner model that removes awkward conflicts of interest duly registered advisors when I first learned about the difference between Brokers and Ras everything seems so clear and simple to me you undoubtedly want someone who will act in your best interests right so it seemed obvious to insist on working with an independent adviser who's legally obliged to act as a fiduciary I thought of fiduciaries as the gold standard but then I discovered that this subject is murkier than I'd realized here's the problem

the vast majority of independent advisers are registered as both fiduciaries and Brokers WTF in fact as many as 26,000 out of 31,000 Ras operate in this gray area where they have one foot in both camps that's right only 5,000 of the nation's 310,000 financial advisers are pure fiduciaries that's am measly 1.6% now you know why it's so hard to get unconflicted and transparent advice when I wrote money Master the game I became a champion of fiduciaries only to discover this Inconvenient Truth About dual registration first brought to me by Peter maluk it infuriated me to

learn how these dual registrants actually operate one moment they play the part of an independent adviser reassuring you that they abide by the fiduciary standard and can provide you with conflict free advice for a fee a second later they switch hats and act as a broker earning commissions by selling you products when they're playing this broker ER role they no longer have to abide by the fiduciary standard in other words they're sometimes obliged to serve your best interests and sometimes not how warped is that how are you supposed to tell which hat they're wearing at

any given moment believe me it's not easy I've had the experience of asking an adviser if he was a fiduciary and having him look me in the eye and assure me that he was he talked to me about how untrustworthy Brokers are and how much better it is to be a fiduciary he told me that our interests were perfectly aligned then I discovered that he was also acting as a broker since he was duly registered and it turned out that he made all sorts of side deals that earned him loads of commissions here was a

person I thought I could recommend as a fiduciary and he lied to my face still he hadn't broken any laws I was Furious when I realized how easy it is to get misled ironically most dual registrants were originally brokers who gave up Corner offices and sizable incomes to make the leap to become coming Ras they wanted complete Independence to be able to provide their clients with the full range of investment options not just the carefully crafted menu of products that their previous employer imposed they wanted to wear the white hat and not the black hat

and so they took the risk and made the jump to raia only to discover the sad truth that it's financially really hard to be a pure fiduciary these duly registered advisors have good intentions but they get caught between two world trying to be honorable while also having to make compromises it's not the fault of the individuals it's that the industry is structured so that selling products is the easiest way to make good money and pay the bills a little respect I'm about to give you all of my money and all I'm asking in return honey

is for a little respect artha Franklin Respect by now you've learned some key facts that will save you a lot of suffering and sorrow you know that 90% of financial advisers are really just brokers in Disguise you know that they don't have to put your interest first you know that they're under tremendous pressure to Pedal overpriced products you know that the odds of finding good advice improve dramatically if you steer clear of all Brokers however unfair that seems and work instead with independent advisers who have a fiduciary duty to put your interest first you know

that all fiduciaries are not created equal since some can suddenly mutate into Brokers so now you know what to avoid we've eliminated about 98% of all the advisers out there on the grounds that they're either Brokers or duly registered hybrids what are you left with thousands of independent advisers who are legally obligated to act as fiduciaries it shouldn't be too difficult to find one who meets your needs but you still have to tread carefully why because conflicts of interest can arise even when you're working with an independent adviser typically involving clever but legal schemes to

make additional money off you while you're looking the other way here are three tricks of the trade you should watch out for the poison of proprietary funds Brokers routinely sell proprietary funds created by their own firm it's a not so subtle strategy for keeping fees in the family a common money-making scheme that depends on clients being naive enough not to ask whether another firm might offer better or cheaper funds it's just the kind of self-serving behavior that should make you wary of working with Brokers but I'm sorry to tell you that many independent advisers have

also figured out furtive ways to use this Rose here's how it typically Works The Advisory firm has two arms one of which is a registered investment advisor that offers independent advice so far so good but the firm's second arm is a sister company that owns and operates a bunch of proprietary Mutual funds the ra pretends to offer impartial advice but actually recommends that you buy the overpriced funds sold by its sister company a Saturday night lives church lady would say how convenient the great thing is that all the profits stay in house which is better

for everyone oh except for the client the poor client we might as well call him the mark pays the adviser twice for independent advice on which Investments to own and for the parent companies own mediocre funds most clients aren't even aware that they're buying funds owned by the same firm that's because the fund arm and the advisory arm typically operate under different brand names it's like watching a master pickpocket at work the trickery is so Sly and cynical that you almost have to admire it an additional fee for doing nothing here's another scheme that's becoming

increasingly common you pay an adviser of fee to to manage your money let's say 1% of your assets the adviser then recommends a model portfolio he may even give it a fancy name like the XYZ portfolio series which has its own additional fee let's say 0.25% of your assets this fee is over and above the cost of the underlying investments in your portfolio but nothing additional is being done for you the model portfolio consists of various Investments the adviser has assembled which is what you paid him to do in the first place it's like buying

$100 worth of groceries and getting slapped with a $25 fee for the right to carry them out of the store in a paper bag if an adviser charges a money management fee for selecting Investments That should be it end of story why should they be able to add another fee for pulling those Investments together I'll tell you why because they can because you might not notice I can't accept a commission so let's just call it a consulting fee some independent advisors make private deals with investment firms that enable the adviser to earn commissions without you

knowing it here's how it works your adviser recommends the funds of a specific mutual fund company the adviser can't do anything so todri is receiving a backdoor commission from the fund company in return for recommending its products this presents a terrible conundrum for the adviser what to do easy call this payoff something else so the ingenious adviser approaches the fund company and asks instead for a consulting fee the fund company gladly pays this fee and everyone lives happily ever after except for you the client who just got duped into thinking that you were actually getting

independent advice what's the moral if it walks like a duck and talks like a duck it's probably a duck or a broker how to find the best advisor for your needs competence is such a rare breed in these Woods that I appreciate it when I see it Frank Underwood House of Cards I hope it's clear by now that your best bet is to hire an independent adviser who's a true fiduciary but how do you select a specific adviser who makes sense for you not all fiduciaries are created equal it's not enough to find someone who's

legally obliged to put your interests first you also need someone who is financially sophistic ated and highly skilled in other words your fiduciary should fit in the top right corner of the quadrant High fiduciary with high sophistication that's the diametric opposite of the lower left corner which is a salesperson with low sophistication how can you tell if a particular fiduciary has the right skills and experience for you when you're selecting and vetting them you can apply the following five criteria one first check out the advisor's credentials you need to make sure that the person or

someone on her team has the right qualifications for the job you need done we're not talking about fancy titles here I mean actual professional credentials if you're looking for planning help make sure the adviser has a certified financial planner cfp on the team if you're looking for legal help make sure there are estate planning attorneys on the team looking for tax advice make sure there are CPAs on the team these credentials aren't a guarantee of highlevel skills even so it's important to know that any adviser you're considering has reached the minimum level of Competency required

to advise in the relevant field two ideally if you're using an adviser you should be getting more than just someone to design your investment strategy what you really need is someone who can help you as the years go by to grow your overall wealth by showing you how to save money on your mortgage insurance taxes and so on someone who can also help you to design and protect your legacy that might sound unnecessary right now but it's important to have this breadth of expertise since taxes alone can make a difference of 30% to 50% in

what you retain from your Investments today I find it ironic when I see ads for wealth management and all they're doing is designing a portfolio it's best to start with a person you're going to grow with through time so make sure he has the resources to grow with you even if you're starting small also keep in mind size does matter you don't want to end up with a sincere but inexperienced adviser who manages only a relatively tiny sum for a few dozen clients three next you want to make sure your adviser has experience in working

with people just like you does she have the track record to prove she's performed well for clients in your position with your needs for example if your main focus is on Building Wealth so you can retire you want a real expert in retirement planning yet in an anonymous survey the Journal of financial plan in found that 46% of advisers had no retirement plan of their own I can't believe they admitted this can you imagine hiring a personal trainer who hasn't exercised in decades or a nutritionist who's pounding down Twinkies while telling you to eat vegetables

four it's also important to make sure that you and your adviser are aligned philosophically for example does he believe he can beat the market over the long run by picking individual stocks or actively manage funds or does he recognize that the odds of beating the market are low leading him to focus on selecting a well Diversified portfolio of index funds some advisers might meet your need for a true fiduciary but still fall short because they're determined to pick stocks personally I'd run a mile from any adviser who claims to beat the market regularly maybe it's

true but I doubt it more likely he's too optimistic or is lying to himself five finally it's important to find an adviser you can relate to on a personal level a good adviser will be a partner and Ally for many years guiding you on a long-distance Financial Journey sure it's a professional relationship but isn't money also a deeply personal subject for you just as it is for me it's tied up with our hopes and dreams our desire to take care of the Next Generation to have a charitable impact to live an extraordinary life on your

own terms it helps if you can have these conversations with an advis you connect with trust and like the grand prize much of this chapter is focused on the many obstacles we need to overcome in our quest for great financial advice the conflicts of interests the dissembling and deceit the cynical and self-serving behavior isn't it extraordinary that it's so hard to find client focused advisers with highlevel skills who actually provide the service they claim to provide no wonder so many people lose heart and decide to handle their finances on their own but let me tell

you there's a huge prize when you reach the finish line of this crazy obstacle course and find a truly great adviser for many people nothing has a more positive impact on their financial future than partnering with an intelligent guide who knows the territory and can show them proven ways to win in any environment a world-class advisor will help you immeasurably from start to finish defining your goals keeping you on a steady path toward them in particular by helping you to weather Market volatility and massively increasing the probability that you'll actually achieve those goals creative planning

the registered investment advisory firm run by my co-author Peter maluk provides conflict-free investment advice that is also remarkably comprehensive he structured the company so that clients are advised by their own team which includes experts on investing mortgages Insurance taxes and even estate planning the cost less than 1% annually on average for this entire team of experts this might sound like a service build exclusively for high net worth individuals but Peter and his team don't just service the ultra wealthy at my request he's created a special division to help clients who are early in their financial

journey and have a minimum of $100,000 in assets I want to emphasize that I'm not pushing you to use creative planning even though I'm a board member and chief of investor psychology if you have someone else who can do a terrific job for you I'm truly delighted but I know how daunting it can be even to start the process of searching for great advice and figuring out who to trust if you want a shortcut you can start by asking creative planning for a free second opinion by visiting getasecondopinion.com one of the firm's wealth managers can

assess your situation and uncover whether or not your current adviser is operating in your best interests if you want to go further and higher creative planning to serve as your fiduciary we'd love to have you as part of the family let me give you one example of why this holistic approach is so powerful many people own real estate Investments outside of their more traditional Investment Portfolio but rarely are they accounted for when they're using a typical advisor imagine you own a number of properties an adviser with the proper expertise will look at how to maximize

your cash flow and might be able to help restructure the mortgages on those properties the result the ability to potentially invest in an additional property or two with no additional cash in fact your overall mortgage payments may be even lower than they were before that's the benefit of truly sophisticated advice seven key questions to ask any adviser one way to make sure you hire the right adviser is to ask him or her several key questions that will help you uncover any potential conflicts and concerns that you might miss otherwise if you have an adviser already

it's equally important for you to get the answers to these questions here's what I'd want to know before placing my financial future in the hands of any adviser one are you a registered investment adviser if the answer is no this adviser is a broker smile sweetly and Say Goodbye if the answer is yes he or she is required by law to be a fiduciary but you still need to figure out if this fiduciary is wearing one hat or two two are you or your firm affiliated with a broker dealer if the answer is yes you're

dealing with someone who can act as a broker and usually has an incentive to steer you to specific Investments one easy way to figure this out is to glance at the bottom of the advisor's website or business card and see if there's a sentence like this Securities offered through advisor company name member FN and sipc this refers to the financial industry regulatory Authority and the Securities investor Protection Corporation respectively if you see these words it means he or she can act as a broker if so run run for your life three does your firm offer

proprietary mutual funds or separately managed accounts you want the answer to be an emphatic no if the answer is yes then watch your wallet like a hawk it probably means they're looking to generate additional revenues by stearing you into these products that are highly profitable for them but probably not for you four do you or your firm receive any third-party compensation for recommending particular Investments this is the ultimate question you want answered why because you need to know that your adviser has no incentive to recommend products that will shower him or her with commissions Kickbacks

Consulting fees trips or other goodies five what's your philosophy with when it comes to investing this will help you to understand whether or not the adviser believes that he or she can beat the market by picking individual stocks or actively managed funds over time that's a losing game unless the person is a total Superstar like Ray Delio or Warren Buffett between you and me they're probably not six what financial planning services do you offer Beyond investment strategy and portfolio management investment help May all you need depending on your stage of life but as you grow

older and or you become more wealthy with various Holdings to manage things often become more complex financially for example you may need to deal with saving for a child's college education retirement planning handling your vested stock options or estate planning most advisers have limited capabilities once they Venture Beyond investing as mentioned most aren't legally allowed to offer tax advice due to their broker status ideally you want an adviser who can bring tools for tax efficiency in all respects of your planning from your investment planning to your business planning to your estate planning seven where will

my money be held a fiduciary adviser should always use a third party custodian to hold your funds for example Fidelity Schwab and tdameritrade all have custodial arms that will keep your money in a secure environment you then sign a limited power of attorney that gives the adviser the right to manage the money but never to make withdrawals the good news about this Arrangement is that if you ever want to fire your adviser you don't have to move your accounts you can simply hire a new adviser who can take over managing your accounts without missing a

beat this custodial system also protects you from the danger of Getting fleeced By a con man like Bernie maol mission accomplished we've covered an enormous amount of ground in section one of this audio book as you'll recall this section was designed as your rule book for financial success just think for a moment about some of the most important rules you've learned so far you've learned the power of becoming a long-term investor who doesn't trade in and out of the market who stays the course without getting shaken and stirred by Corrections or crashes you've learned that

the vast majority of actively managed mutual funds overcharge for underperformance which is why you're so much better off with inexpensive index funds that you can hold for many years you've learned that excessive fees have a devastating effect like termites eating away at the foundations of your financial future and you've learned how to find an independent adviser who truly deserves and will richly repay your trust now that you've completed the rule book you're one of the few who actually understands how our financial system works now that you know the rules you're ready to get in the

game section two of UN shakable will give you a financial Playbook that empowers you to put your personal action plan in place right now in chapter six I'll share the core four principles that the world's best investors use in making investment decisions in chapter 7 you'll learn how to slay the Bear by constructing a diversified portfolio that protects you during market meltdowns then in chapter 8 I'll show you how to silence the Enemy Within letting you in on the most important Secrets I've learned over 40 years on the psych ology of wealth creation this Playbook

will give you the knowledge and the Practical tools you need to Achieve Financial Freedom do you feel that strength that power coursing through your veins then keep going because it's time to design your PlayBook take control and get in the game section two The unshakable Playbook chapter six the core four the key principles that can help guide every investment decision you make let's make it simple really simple Steve Jobs co-founder of Apple anyone can get lucky and win the lottery anyone can pick a winning stock from time to time but if you want to achieve

lasting financial success you need more than just the occasional lucky break what I found over almost four Decades of studying success is that the most successful people in any field aren't just lucky they have a different set of beliefs they have a different strategy they do things differently I see this in every area of life whether it's sustaining a happy and passionate marriage for more than half a century losing weight and keeping it off for decades or building a business worth billions the key is to recognize these consistently successful patterns and to model them using

them to guide the decisions you make in your own life these patterns provide the playbook for your success when I embarked on my journey to find solutions that could help people financially I studied the best of the best ultimately interviewing more than 50 investment Titans I was determined to crack the code to figure out what explains their stunning results above all I kept asking myself one question what patterns do they have in common as I soon realized it was a remarkably difficult question to answer the trouble is all these brilliant investors have entirely different styles

and approaches to making money for example Paul tutor Jones is a Trader who makes huge bets based on his macroeconomic view of the world Warren Buffett makes long-term investments in public and private companies that possess a durable competitive Advantage Carl icon targets businesses that are underperforming and then kajol's or bludgeon management to change its strategy in ways that can benefit shareholders clearly there are many different paths to Victory finding common denominators was quite a challenge but over the last seven years I've done what I've always loved doing which is to take complex subjects that seem

overwhelming and break them down into a few core principles that people like you and me can actually utilize so what did I discover I came to realize that there are four major principles that nearly all great investors use to guide them in making investment decisions I call these the core four these four patterns which I'll explain in this chapter can powerfully influence your ability to Achieve Financial Freedom do you remember what I said earlier about complexity being the enemy of execution well when I tell you about these four principles you might respond by saying how

basic how simple and you know what you're right but it's not enough to know a principle you have to practice it execution is everything I don't want to needlessly complicate matter so that you end up sitting on a mountain of Rich information but don't know what to do with it my goal isn't to Dazzle you with elaborate arguments it's to synthesize simplify and clarify so you feel empowered to take action now together these principles provide us with an invaluable checklist whenever I'm speaking with my financial advisers about a potential investment I want to know whether

or not it meets the majority of these four criteria if not then I'm simply not interested why am I so adamant about this because it's not enough to say these are useful insights I'll try to keep them in mind the best investors understand that these principles must be obsessions they're so important that you need to internalize them live by them and make them the foundation of everything you do as an investor in short the core four should be at the very heart of your investment Playbook core principle one don't lose the first question that every

great investor asks constantly is this how can I avoid losing money this may sound counterintuitive after all most of us focus on exactly the opposite question how can I make money how do I get the biggest possible return and hit the jackpot but the best investors are obsessed with avoiding losses why because they understand a simple but profound fact the more money you lose the harder it is to get back to where you started I don't want you to feel like you're back in your high school math class but it's worth pausing to clarify why

losing money is such a disaster let's say you lose 50% of your money on a bad investment how much will you need to earn to make yourself whole again most people would say 50% but they'd be dead wrong let's look at it if you invested $100,000 and you lost 50% you now have $50,000 if you then make a 50% return on that $50,000 you now have a total of $75,000 you're still down $25,000 in reality you'll need a 100% gain just to recoup your losses and get back to your original 100,000 and that could easily

take you an entire decade this explains Warren Buffett's famous line about his first two rules of investing rule number one never lose money rule number two never forget get rule number one other legendary investors are equally obsessed with avoiding losses for example my great friend Paul tutor Jones told me the most important thing for me is that defense is 10 times more important than offense you have to be very focused on protecting the downside at all times but in Practical terms how can you actually avoid losing money for a start it's important to recognize that

financial markets are wildly unpredictable the Talking Heads on TV can pretend as much as they want that they know what's coming next but don't fall for it the most successful investors recognize that none of us can consistently predict what the future holds with that in mind they always guard against the risk of unexpected events and the risk that they themselves can be wrong regardless of how smart they are take Ray Delio forb says he's produced $45 billion in profits for his investors more than any other hedge fund manager in history his net worth is estimated

at $15.9 billion I've met a lot of extraordinary people over the years but I've never met anyone smarter than Rey even so he told me that his entire investment approach is built on his awareness that the market will sometimes outsmart him veering in a totally unexpected Direction he learned this lesson early in his career thanks to what he described as one of the most painful experiences of his life in 1971 back when Ry was a young investor learning his trade president Richard Nixon took the United States off the gold standard in other words dollars could

no longer be directly converted into gold which meant that the US currency was suddenly worth no more than the paper on which it was printed Rey and everyone he knew in the investment Community were certain that the stock market would plummet in response to this historic event so what happened stocks skyrocketed that's right they did the exact opposite of what logic and reason told him and all the other experts to expect what I realized is nobody knows and nobody ever will he says so I have to design an asset allocation that even if I'm wrong

I'll still be okay that my friend is an Insight that you and I should never forget we have to design an asset allocation that ensures we'll still be okay even when we're wrong asset allocation is simply a matter of establishing the right mix of different types of Investments diversifying among them in such a way that you reduce your risks and maximize your rewards I don't look to jump over s foot bars I look around for one foot bars that I can step over Warren Buffett we'll discuss the ins and outs of asset allocation in much

greater depth in the next chapter but for now it's important to remember this we should always expect the unexpected does that mean we should hide away and feel here because everything is so uncertain not at all it simply means that we should invest in ways that can help to protect us from nasty surprises as you and I both know many investors get hurt by market bubbles because they start to act as if the future will bring Nothing But Sunshine as a result they throw caution to the wind longtime winners such as Bogle Buffett and diio

know the future will be full of surprises both Pleasant and unpleasant so they never forget about their downside risk and they protect themselves by investing in different types of assets some of which will rise While others fall I'm no Economist or Market Seer but it strikes me that this emphasis on avoiding loss is particularly relevant today given that none of us can predict the effect of the radical economic policies we're seeing around the world we're in Uncharted Territory as Howard marks told me in late 2016 when you're in an uncertain world with high asset prices

and low perspective returns I think that should give you pause at his $100 billion investment firm oak tree Capital Management the Mantra in recent years has been proceed with caution he explains we are investing we're fully invested we're happy to be invested but everything we're buying has an unusually high degree of caution how do I apply the do not lose principle in my own life I'm so obsessed with this idea of not losing that I now tell all my advisers don't even bring me an investment idea unless you first tell me how we can protect

against or minimize the downside core principle two asymmetric risk reward according to Conventional wisdom you need to take big risks to achieve big returns but the best investors don't fall for this high-risk High return myth instead they hunt for investment opportunities that offer what they call asymmetric risk reward a fancy way of saying that the rewards should vastly outweigh the risks in other words these winning investors always seek to risk as little as possible to make as much as possible that's the Investor's equivalent of Nirvana I've seen this up close with Paul tutor Jones who

uses a five to1 rule to guide his investment decisions I'm risking $1 in the expectation that I'll make five he explained to me in the early days of our coaching relationship well what 5:1 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 how is that possible if Paul makes five Investments each for $1 million and four in a row go to zero then he's lost a total of $4 million but if the

fifth investment is a home run and makes $5 million he's earned back his entire $5 million investment in reality Paul hit rate is a whole lot better than that imagine that only two of his five Investments pan out is expected and go up fivefold that means his original $5 million has just grown to $10 million in other words he's doubled his money despite in this case being wrong 60% of the time by applying his 5:1 rule he sets himself up to win the game despite some inevitable mistakes now let's be clear 5 to1 is Paul's

ideal investment he obvious viously can't find that ratio every time in some cases the ratio of 3: one is his Target the larger point is he's always looking for limited downside and huge upside another friend of mine who's obsessed with asymmetric risk reward is Sir Richard Branson the founder of the Virgin group Richard who oversees about 400 companies isn't just an inspired entrepreneur he's also an adventurer with a dangerous passion for putting his life on the line from hot air ballooning around the globe to setting the record for the fastest crossing of the English Channel

in an amphibious vehicle so he's the ultimate risk taker right yes and no it's true that he takes outlandish risks with his life but when it comes to his finances he's masterful at minimizing risk I'll give you a classic example when he launched Virgin Atlantic Airways in 1984 Richard started with just five airplanes he was challenging an entrenched Goliath British British Airways in an infamously tough business he once joked if you want to be a millionaire start with a billion dollars and launch a new Airline but Richard spent over a year negotiating an unbelievable deal

that would allow him to return those planes if the business didn't pan out that left him with minimal downside and Limitless upside superficially I think it looks like entrepreneurs have a high tolerance for risk he says but one of the most important phrases in my life is protect the downside this pattern in thinking about asymmetric risk reward cropped up again and again in my interviews with famous investors consider Carl icon whose net worth is estimated at $17 billion and who was dubbed Master of the Universe on the cover of Time Magazine this is a guy

whose compounded rate of return since 1968 was 31% better even than war and Buffett's 20% Carl earned a fortune by making huge investments in poorly run business businesses and then threatening to take them over unless management agreed to mend its ways this might seem like the world's riskiest game of high stakes poer with billions on the line but Carl never lost sight of the odds it appeared that we were risking a lot of money but we weren't he told me everything is risk and reward but you've got to understand what the risk is and also

understand what the reward is most people saw much more risk than I did but math doesn't lie and they simply didn't understand it are you starting to see a pattern here these three multi-billionaires Paul tutor Jones Richard Branson and Carl icon have totally different approaches to making money yet all three share the same Obsession how to reduce risks while maximizing returns now forgive me if I'm wrong but I'm guessing that you're not about to start a new Airline or launch a hostile takeover of a company so how can you apply this pattern of thinking in

your own Financial life one way to achieve asymmetric risk reward is to invest in undervalued assets during times of mass pessimism and Gloom as you learn in the next chapter Corrections and bare markets can be among the greatest Financial Gifts of your life think back to the financial crisis of 2008 and 2009 at the time it felt like hell on Earth but if you had the right mindset and your eyes were open the opportunities were Heavenly you couldn't move without tripping over a bargain when the market hit rock bottom in March 2009 the future looked

so Bleak to most investors that you could snap up shares in Blue Chip companies for pennies on the dollar for example City Group sank to a low of 97 cents a share down from a peak of $57 you could literally own a piece of the company for less than it cost you to take money out of an ATM but here's the kicker winter is always followed by Springtime and sometimes the seasons turn much quicker than you'd ever guessed this 97 Cent stock shot to $5 within 5 months giving investors a 500% return that's why value

investors like Warren Buffett lick their chops during bare markets the turmoil enables them to invest in beaten up stocks at such low prices that the downside is limited and the upside is spectacular Buffett did just that in late 2008 investing in Fallen Giants such as Goldman Sachs and General Electric which were selling at once in a-lifetime valuations better still he structured these investments in ways that reduced his risk even further for example he invested $5 billion in a special class of preferred shares of Goldman Sachs which guaranteed him a dividend of 10% a year while

he waited for the stock price to recover most people get so scared during crashes that they see only the downside but Buffett made sure that it was almost impossible for him to to lose in other words it's all about asymmetric risk reward here's an example from my own personal Investments a window of opportunity opened up for me in the Years following the 2008 2009 financial crisis when Banks had decided to implement some of the most stringent lending requirements in years at the time many individuals had significant Equity value in their homes but no way to

access the funds A refinancing or refi was out of the question they were looking for a way to access short-term funds typically 1 to two years or less and were willing to post their home as collateral in short I would lend them the funds they needed and became what is known as the First Trust deed holder on their home back in 2009 a homeowner came to my team with a house valued at $2 million and it was owned free and clear he was requesting a $1 million loan 50% of the current appraised value of the

property and was willing to pay 10% interest for 12 months not bad in a world where I could invest in a 10-year treasury note and currently earn only 1.8% a year and since the Federal Reserve has already begun raising rates that will put downward pressure on bond prices so my net return could be less unless I'm willing to hold all the way to maturity so what was my downside if I invested in the trust deed if the borrower defaulted the real estate market would have had to Collapse by more than 50% for me not to

get my money back even in the worst real estate downturn we've seen in over half a century 2008 this specific community did not see price decreases greater than 35% so with a short one-year time Horizon this met the first of my criteria how to increase my odds of not losing money plus think about the asymmetrical risk reward there was little risk of losing money given that the real estate market could drop by 50% and I'd still break even and a 10% annual return gave me plenty of upside in an environment of compressed returns based on

these factors I was confident that this investment offered an excellent balance of risk and reward now you don't need to have a million dollars to do Investments like this many borrowers were asking for $25,000 to $50,000 loans as well but my point here is not that you should go hunting for First Trust Deeds there are other risks associated with these types of Investments that are important to understand the point is different opportunities will always present themselves depending on the economic climate or Market Behavior core principle three tax efficiency as we discussed earlier taxes can easily

wipe out 30% or more of your investment returns if you're not careful yet mutual fund companies love to tout their pre-tax Returns obscuring the reality that there's only one number that truly matters the net amount amount that you actually get to keep when people congratulate themselves on their investment returns without taking into account the impact of taxes let alone fees what they're really demonstrating is a gift for self- delusion it's a bit like saying I was so good on my diet today while conveniently forgetting that you scarf down a couple of donuts a double portion

of french fries and a hot fudge sundae in investing self- delusion is an expensive habit so let's remove the blindfold and confront the unvarnished truth if you're a high earner you could currently be paying an ordinary income tax rate of 50% between federal and state taxes if you sell an investment that you've owned for less than a year your gains will be taxed at the same Sky High rate you pay on your ordinary income brutal right by contrast if you hold most Investments for a year or more you'll pay long-term capital gains tax when you

sell the current rate is 20% Which is is way lower than the rate you pay on your ordinary income simply by being smart about your holding period you're saving up to 30% on taxes but if you ignore the impact of taxes you pay a heavy price let's say you own a mutual fund that earns 8% a year after deducting fees of say 2% a year you're left with 6% if the fund trades frequently as most funds do then all those short-term gains will be taxed at your ordinary income rate so if you're a high earner

in a state such as California or New York your 6% annual return just got cut in half to am easily 3% post tax return at this rate you'll double your money only every 24 years but you also need to take into account the effect of inflation if that comes in at 2% a year your real return has just dropped from 3% to 1% at this rate you're likely to retire at the age of 120 I have enough money to retire and live comfortably for the rest of my life the problem is I have to die

next week Anonymous now can you see why it's so important to invest in a tax efficient way believe me all the billionaires I've ever met have one attribute in common they and their advisers are really smart about taxes they know that it's not what they earn that counts it's what they keep that's real money which they can spend reinvest or give away way to improve the lives of others in case you're wondering there's nothing sorted or immoral about managing your finances in ways that lawfully reduce your tax burden The Authority most often quoted on this

subject by legal Scholars and the US Supreme Court is federal appeals court judge Billings Learned Hand he famously stated in 1934 anyone May arrange his Affairs so that his taxes shall be as low as possible nobody owes any public duty to pay more more than the law demands when I met David Swenson he pointed out that one of his biggest advantages in investing money for Yale is that it's a nonprofit institution and thus exempt from taxes but what should the rest of us do first steer clear of actively managed funds especially those that trade a

lot as David told me one benefit of index funds is that they keep trading to a minimum which means your tax bill is going to be lower this is huge one of the most serious problems in the mutual fund industry which is full of serious problems is that almost all mutual fund managers behave as if taxes don't matter but taxes matter taxes matter a lot as he spoke I could feel his deep concern his determination to help people understand the significance of what he was saying the enormous impact of taxes on your returns speaks to

the importance of taking advantage of every tax advantaged investment opportunity that you can David emphasized you should maximize your contributions if you've got a 401k or a 403b if you work for a nonprofit you should take every opportunity to invest in a tax deferred way sounds so obvious right we all know that tax advantaged Vehicles such as 401ks Roth IRAs traditional IRAs private placement life insurance or ppli the rich man's WTH and 529 plans for college savings can help us reach our goals quicker you're probably taking advantage of some of these opportunities already but if

you're not maximizing your contributions now is the time to do it if you want to learn more about this topic money Master the game covers it in depth in chapter 5.5 secrets of the ultra wealthy that you can use too remember one problem you'll encounter if you're using a broker is that they are not tax professionals so they're not allowed legally to advise you on tax taxes even most registered investment advisers don't have a tax expert on their team to guide you in this area that's why you ideally want to partner with a firm that

has CPAs on staff since they'll keep tax efficiency top of mind I've applied what David taught me this tax sensitive way of thinking permeates my approach to investing of course I don't start with taxes that would be a severe mistake I always start with a focus on not losing money and on getting asymmetric risk reward then before making any investment I make a point of asking how tax efficient is this going to be and is there any way we could make it more tax efficient one reason for this obsession is that I spent much of

my life living in California where after tax I kept as little as 38 cents of every dollar I earned when you're taxed that heavily it sensitizes you pretty quickly I learned to focus solely on what would be left after paying Uncle Sam his due whenever someone tells me about a financial opportunity that seems to offer enticing returns my response is always the same is that net more often than not the person replies no that's gross but the pre-tax figure is phony whereas the net number doesn't lie your goal and mine is always to maximize the

net I'll give you a specific example creative planning where I serve as chief of investor psychology might recommend master limited Partnerships MLPs for certain client portfolios when appropriate as I soon learned these publicly traded Partnerships offer an easy way to invest in energy infrastructure such as pipelines for oil gasoline and natural gas I called my friend tbon Pickins who has made billions in the oil business and asked what do you think of MLPs right now he explained that their price had tumbled because of a crash in Energy prices in fact from 2014 through early 2016

the price of oil had fallen More than 70% many investors assumed that this drop was terrible news for MLPs since they provide infrastructure to clients in the energy business but MLPs at least the best of them are much better protected than they seem that's because their clients typically sign long-term contracts with fixed fees in return for the right to use this infrastructure this provides a reliable income stream year after year enabling MLPs to pay out generous royalty income to their Partners as Boon explained you're not really betting on oil and gas prices when you invest

in an MLP as an owner of a pipeline you're more like a toll collector regardless of what happens to oil or gas prices energy is going to keep getting transported around the country because it's the lifeblood of the national economy and as an owner of the MLP you'll keep collecting your tolls like clockwork meanwhile the fact that the price of MLPs has no dived was actually good news for investors why because this was an overreaction to the drop in the price of energy most investors were so fearful that you could invest at a historically low

valuation even some of the highest quality MLPs had seen their prices fall 50% but the toll booth was still working beautifully an MLP that had sold previously for $100 paid an annual income royalty of $5 per share that's a 5% income per year on the invest investment when the price dropped to $50 the MLP still paid out $5 per share of income but this now amounted to a 10% annual income return that might not sound like a bonanza but in this era of Rock Bottom interest rates it's a whole lot better than bonds that yield

2% or less even better you still had all of the upside if the price of the MLP recovered so let's take a moment and see how MLPs stacked up against the criteria in our core 4 One don't lose the price of energy and MLPs had fallen so much that it was unlikely they'd fall significantly further experts like the oil Oracle tbon Pickin also pointed out that energy production had shrunk massively because prices had cratered that meant supplies were diminishing and even with lesser demand the prices would eventually have to rise with all this on your

side the odds of losing money were greatly diminished two asymmetric risk reward as we've said there was very little risk of loss but there was a high probability that energy prices would eventually recover and that MLPs would return to favor in the meantime you'd be collecting 10% a year an annual income and believe me I'm happy to sit tight and collect my tolls three tax efficiency but here's the best part the US government needs to promote domestic energy production and distribution so it is given mlp's preferential tax treatment as a result most of the income

you receive is offset by depreciation which means that roughly 80% of your income is tax-free so if you make a 10% return you're netting 8% annually that's pretty nice right by contrast if you didn't have this tax preferential treatment the income paid within the year would be taxed at your ordinary income tax rate a high income earner who PID pay 50% in taxes would net just 5% in other words by using the tax efficiency of an MLP you net 8% instead of 5% the difference 60% more money in your pocket that's the power of tax

efficiency as Peter will explain in the next chapter MLPs aren't right for everyone nor are we specifically recommending them for you but it's the broader principle that I'm looking to illustrate here by focusing on after tax returns you can put yourself on a much faster path to Financial Freedom incidentally it's worth pointing out that there's almost always an asset class or a country or a market that's getting clobbered presenting you with equally enticing opportunities for asymmetrical risk reward finally for good measure being smart about your taxes also helps you to have a greater impact on

the world instead of leaving the government to decide how to spend your money you get to decide for yourself my own life is infinitely richer because I'm able to support causes that excite and inspire me I've been able to provide a quarter of a billion free meals so far and I'm on my way to a target of 1 billion meals through my initiative with feeding America I'm also providing 250,000 people with fresh water every day in India and I'm helping to save over 1,000 kids from sexual slavery through a partnership with operation Underground Railroad these

are just a few the gifts I can share as a result of being tax efficient in my investments core principle four diversification the fourth and final principle in the core four is perhaps the most obvious and fundamental of all diversification in its Essence it's what almost everyone knows don't put all your eggs in one basket but there's a difference between knowing what to do and actually doing what you know as Princeton Professor Burton malel told me there are four important ways to diversify effectively one diversify across different asset classes avoid putting all your money in

real estate stocks bonds or any single investment class two diversify within asset classes don't put all your money in a favorite stock such as apple or a single MLP or one piece of waterfront real estate that could be washed away in a storm three diversify across markets countries and currencies around the world we live in a global economy so don't make the mistake of investing solely in your own country four diversify across time you're never going to know the right time to buy anything but if you keep adding to your investment systematically over months and

years in other words dollar cost averaging you'll reduce your risk and increase your returns over time every Hall of Fame investor I've ever interviewed is obsessed with the question of how best to diversify in order to maximize returns and minimize risks Paul tutor Jones told me I think the single most important thing you can do is diversify your portfolio this message was echoed in my interviews with Jack Bogle Warren Buffett Howard Marx David Swenson JP Morgans Mary cahan Erdos and countless others the principle itself may be simple but implementing it is is another matter that

requires real expertise this is such an important topic that we've devoted much of the next chapter to it my partner Peter maluk who guided his clients through the frightening crash of 2008 2009 will explain how to build a customized asset allocation diversifying among different types of investment such as stocks bonds real estate and Alternatives his mission to help you construct a portfolio that will enable you to prosper in any Environ this might sound like a big promise but diversification does its job in the worst of Seasons between 2000 and the end of 2009 us investors

experienced what has become known as The Lost decade because the S&P 500 was essentially flat despite its major swings but smart investors look Beyond just the largest US Stocks Bert malel authored a Wall Street Journal article titled Buy and Hold is still a winner in it he explained that if you were Diversified among a basket of index funds including US Stocks foreign stocks and emerging market stocks bonds and real estate between the beginning of 2000 and the end of 2009 a $100,000 initial investment would have grown to $191,800 average annual return during the Lost decade

one reason why diversification is so critical is that it protects us from a natural human tendency to stick with whatever we feel we know once a person is comfortable with the idea that a particular approach works or that here or she understands it well it's tempting to become a one-trick pony as a result many people end up investing too heavily in one specific area for example they might stake everything on real estate because they grew up seeing it work like magic for their family or they might be a gold bug or they might bet too

aggressively on a hot sector such as tech stocks the trouble is everything is cyclical and what's hot now can suddenly turn to ice as Ray Delio warned me it's almost certain that whatever asset class you're going to put your money in there will come a day when you will lose 50% to 70% can you imagine having most or all of your money in that one area and watching in horror as it goes up and Flames diversification is your insurance policy against that nightmare it decreases your risk and increases your return yet it doesn't cost you

extra how's that for a winning combination of course there are many different ways of diversifying I discuss this in detail in money Master the game laying out the exact asset allocations recommended by Ray and other Financial gurus such as Jack Bogle and David Swenson for example David told me how individual investors can diversify by owning lowcost index funds that invest in six really important asset classes you US Stocks International stocks emerging market stocks real estate investment trusts REITs long-term us treasuries and treasury inflation protected securities tips he even shared the precise percentages that he would

recommend allocating to each as for Ray Delio his unique approach to diversification does an extraordinary job of taming risk I had the privilege of speaking right after my dear friend Ry at the Robin Hood investor conference in late 2016 the best investors in the business listened intently as Ry revealed one of the great secrets of his approach the Holy Grail of investing is to have 15 or more good they don't have to be great uncorrelated bets in other words everything comes down to owning an array of attractive assets that don't move in tandem that's how

you ensure survival and success in his case this includes investments in stocks bonds gold Commodities real estate and other Alternatives Ry emphasized that by owning 15 uncorrelated Investments you can reduce your overall Risk by about 80% and you'll increase the return to risk ratio by a factor of five so your return is five times greater by reducing that risk I'm not suggesting that there's a perfect one-sized fits-all approach that you should necessarily follow what I really want to convey is that all of the best investors regard diversification as a core component of long-term financial success

if you follow their example by diversifying broadly you'll be prepared for anything freeing you to face the future with calm confidence ready to rumble by now you're already way ahead of the game you belong to a tiny Elite that understands these four all important principles that the best investors use to guide their investment decisions if you live by them your odds of investment success will rise exponentially in the next chapter we'll delve deeper into the nitty-gritty of asset allocation Peter maluk will explain the benefits of taking a customized approach that's tailored to your specific needs

and circumstances with his expert guidance you'll learn to construct a diversified portfolio that enables you to weather any storm remember we all know that winter is coming we all know that bare markets are regular occurrences most most investors live in fear of them but you're about to discover how to make winter the best season of all a season to relish so come with me Intrepid Warrior it's time to grab our weapons and slay the bear hey it's Tony Robbins again I'm going to read chapter seven the beginning then I'm going to pass it off to

my partner Peter Malo because he wrote half this chapter so you here directly from us and the reason I want to share this with you is it's quite personal this is a chapter that I really believe can change your financial life so listen deep might you want to take some notes let's begin chapter 7 slay the bear how to navigate crashes and corrections to accelerate your Financial Freedom I learned that courage was not the absence of fear but the triumph over it the brave man is not he who does not feel afraid but he who

conquers that fear Nelson Mandela the path to fearlessness when I was 31 years old I visited a doctor from my annual physical it was just a routine checkup that was required for me each year to renew my license as a helicopter pilot in the days that followed the doctor left several messages asking me to call him then he said it was very urgent I was running around like crazy and I didn't have time to speak with him so I asked my secretary to have him send the report then one evening I got home after midnight

and I found a note that my assistant had taped on my bedroom door quote you must call the doctor he says it's an emergency you can imagine how my mind began to race I was extremely disciplined about my health and I never felt fitter so what could possibly be wrong the Mind tends to go crazy in times like this so I began to wonder you know I travel a lot maybe it's related to the radiation on airplanes could I have cancer could I be dying surely not I pulled myself together and managed to get some

sleep but when I woke woke up the next morning I was filled with fear and dread so I phoned the doctor and of course he told me quote you need surgery immediately you have a tumor in your brain end quote I was stunned what are you talking about I said to him how could you know that the doctor a compatitive guy with no beds sign matter as you can probably tell said that he' done some extra blood tests because he believed I had an enormous amount of growth hormone in my body well it didn't take

a genius to figure that out given I'm 6' 7 I shot up 10 in in a single year when I was 17 I have a size 16 shoe and giant hands but he was convinced that this explosive growth was the result of a tumor and my pituitary gland at the base of my brain he wanted me to come in immediately and have the tumor cut out I was scheduled to fly to the south of France the next day to teach my date with Destiny seminar one of my very favorite in the world but now I'm

supposed to drop everything and undergo emergency surgery when I'm healthy as a horse so much for Destiny so you know what I did I went ahead and taught the seminar in the south of France anyway and then I traveled to Italy where I stayed in this beautiful fishing Village called ptoo if you've not been there it's truly magnificent but it was there that my brain finally had time to think and it started freaking out I personally felt like a different human being I got angry over little stuff I got frustrated over the tiniest things and

then I started asking myself what's wrong with me and I began to get some insights you know growing up I lived in a world with no certainty when my mom was on drugs and angry she'd sometimes lose control over little things even though she loved us and I had to protect my brother and sister if she thought I was lying about something for example she might pour liquid soap down my throat until I threw up or smash my head against the wall and I couldn't fight back because of those days I spent a lifetime training

and conditioning myself to find certainty and an uncertain world that's where unshakable comes from in me so it did serve but I allowed the doctor's comments to s plunged me back into that deep level of uncertainty that I grew up with out of nowhere my world had been turned upside down the life I built was crumbling after all how can you be certain about anything when you're uncertain about the most basic question am I going to live or die I was so stressed that morning that I found myself sitting in church in Pino praying for

dear life then I finally made a decision I need to go home and deal with a situation headon the next few days were surreal I remember coming out of the the MRI machine and seeing the grim look on the lab technician's face he said there was definitely a mass there but he wouldn't give me any details until the doctor had interpreted the scan now the doctor was busy so I had to wait another 24 hours now I knew for sure I had a problem but I still had no idea whether it was fatal or not

finally the doctor met with me to explain my test results the scan had confirmed that I had a tumor but it also showed something miraculous that the tumor had shrunk by more than 60% over the years there had been no treatment I had no negative symptoms and I hadn't grown since I was 17 so why did I need surgery the doctor warned me that the excessive growth hormone could trigger an array of health problems including heart failure you're in denial he said we have to operate immediately but what about the side effects beyond the danger

of dying under the knife the biggest risk was that the operation would damage my endocrine system and so I'd never again have the same level of energy well this was a price I wasn't prepared to pay my mission of helping people transform their lives requires tremendous energy and passion and I kept wondering what if the surgery left me unable to do my life's work to give you an idea my average weekend seminar today has 10,000 people in the attendance and we go for 50 hours over 4 days now that's in today's world where most people

won't sit for a three-hour movie someone spent $300 million to make so it takes enormous energy to Captivate an hence for 50 hours in a week and no way could I deliver that experience to people in 40 different countries and keep them all fully engaged in transforming their lives if I'm exhausted or tired the doctor is a bit furious with me quote without surgery you can't be sure that you'll live he told me I wanted a second opinion but he was a little bit angry by my questioning and he refused to recommend another doctor figur

it out yourself he told me through some friends I eventually found my way to a legendary endocrinologist in Boston he scanned my brain and again sat me down to review the results and he was a wonderful man he was full of compassion and his attitude was totally different he said I didn't need surgery I was thrilled he said the risks were too great instead though he wanted me to fly to Switzerland twice a year for an injection of an experimental drug that had not yet been approved in the United States he was certain he told

me that this drug would stop the tumor from expanding and prevent the growth hormone from causing dangerous heart problems when I told him about the doctor wanted to cut my brain he laughed and said the butcher wants to be a butcher the Baker wants to bake the surgeon wants to cut I want to drug you it was true we all like to do whatever we know best in order to achieve certainty and the problem was the drug was also likely to have a profound effect on my energy level as well IND chronologist could see why

this troubled me so deeply and he said you know Tony you're like Samson he said you're afraid that you'll lose your power if we cut your hair I asked them what would happen if I did nothing no surgery no drugs no injections he said I don't know nobody knows so why should I take the drug doc cuz if you don't take it he said you can't be certain you'll survive well by now I no longer felt uncertain there was no evidence my health had deteriorated in the 14 years since the tumor so why should I

roll the dice by having high-risk surgery and be injected with an experimental drug I went to see a series of additional doctors after that until I found one who said Tony it's true you have an enormous amount of growth hormone in your bloodstream but it hasn't had a negative side effect in fact it may be helping your body recover more quickly I know bodybuilders spend $1,200 a month to get what you're getting for free in the end I decided nothing more than get myself tested every few years to see if my condition had worsened or

not I didn't realize it then but I just dodged a lethal bullet the US Food and Drug Administration later outlawed the drug based on studies showing that it caused cancer despite his best intentions my big-hearted endocrinologist flawed advice could could have ruin my life and you know what 25 years later I still have that tumor inside me in the meantime I've had an amazing life and I've been blessed with the opportunity to help millions of people along the way this was all possible only because I made myself unshakable in the face of uncertainty listen if

IID overreacted or followed unquestionably the advice of either doctor without considering all my options I'd be missing a part of my brain right now or i' have cancer or perhaps I'd be dead if I'd lied on them for my certainty it would have been a catastrophe instead I found certainty Within Myself I found that unshake ability even though the nothing in my external Circumstances had changed could I die tomorrow because of my brain tumor of course I could also get hit by a truck as I crossed the street so could you still I don't live

in fear of what's going to happen anymore I shut that off you can be unshakable too but this is a gift that only you can give yourself when it comes to a your life that matter the most meaning your family your faith your health your finances you can't rely on anybody else to tell you what to do it's great to get their coaching especially coaching from great experts in the field but you can't Outsource the final decision you can't give another person control over your destiny no matter how sincere or skilled he or she may

be now why am I telling you this story of life and death in a book about money and investing because it's important to understand that there's never absolute certainty in life if you want to be certain that you'll never lose money in the financial markets you can keep your savings in cash but then you'll never stand a chance of achieving Financial Freedom as Warren Buffett has said quote we pay a high price for certainty end quote even so many people avoid Financial Risk because uncertainty terrifies them in 2008 the US Stock Market plunged by 37%

it crashed more than 50% from Peak trough but 5 years later a survey of credential Financial found that 44% of Americans still vowed to never invest in stocks again because they're so scared by their memories of the financial crisis in 2015 another survey discovered that nearly 60% of all Millennials distrusted financial markets having lived through the crash of 2008 and 2009 according to State Street Corporation Center for Applied research many Millennials keep 40% of their Savings in cash I'm heartbroken to see that so many Millennials aren't investing cuz let me tell you if you live

in fear you've lost the game before it even begins how can you achieve anything if you're too afraid to take a risk as Shakespeare wrote four centuries ago cowards die many times before their deaths the Valiant never taste of death but once let me be clear with you I'm not suggesting you take Reckless risks when it comes to my health I met with multiple experts exploring all the options and then let the facts guide me not somebody else's emotions or professional biases I then made an informed decision for myself to put the probabilities on my

side there is no guarantee in life this process allowed me to move from uncertainty to unshakable certainty it's the same with investing you can never know what the stock market will do but that uncertainty isn't an excuse for inaction you can take control by educating yourself that's what we're going to do in this chapter by studying the Market's long-term patterns modeling the best investors and making rational decisions based on understanding of what's worked for the best of them decade after decade as Warren Buffett says risk comes from not knowing what you're doing there's one thing

we do know for sure there will be Market crashes in the future just as there were in the past does it make sense to be paralyzed with fear merely because there's a risk of getting hurt believe me it wasn't easy to find out that I had a brain tumor but I flourished for the past 25 years because I've learned to live fearlessly by the way does being Fearless mean having no fear no it means fearing less it's still going to come up in moments you just let it go when the next be Market comes and

others are overwhelmed by fear I want you to have the knowledge and the fortitude to fear less that fearlessness in the face of uncertainty will bring you tremendous Financial rewards in fact While others live in the tear of bare markets you're going to discover in this chapter that there are the single greatest opportunity for building wealth in your lifetime why cuz that's when everything goes on sale imagine longing to own a Ferrari and discovering you can buy one for half price would you be downhearted no way yet when the stock market goes on sale most

people react as if it's a disaster you need to understand that bare markets are truly here to serve you the secret is if you keep your cool they'll actually accelerate your journey to Financial Freedom if you can find internal C C you'll be excited when the market crashes what I'm going to do now is pass the Baton to my dear friend and partner petm Luke who's going to explain how he and his firm created planning navigated the last great bare Market back in 2008 and 2009 Peter doesn't like to boast about his phenomenal results but

let me tell you he handled the crisis so masterfully that his firm's assets under management Rose from 500 million in 2008 to just under 2 billion 1.8 billion by 2010 with hardly any advertising or marketing and now he oversees 22 billion in counting what's more creative planning is the only company ever named by Barons to be the top financial adviser for three years in a row Peter's going to talk about how to prepare for and how to profit from a bare Market as he'll explain it all starts with building a diversified portfolio that can prosper

through thick and thin he'll give you invaluable advice on the art of asset allocation ation and armed with this knowledge you'll have nothing to fear from Market Mayhem While others flee you'll stand your ground and you will slay the bear prepare for the bear a simple rule dictates my buying be fearful when others are greedy and be greedy when others are fearful and most certainly fear is now widespread Warren Buffett in October 2008 explaining why he was buying stocks as the market crashed the eye of the storm on September 29 2008 the Dow Jones Industrial

Average plunged 777 points it was the biggest one-day drop ever obliterating 1.2 trillion in wealth that same day the VIX Index a barometer of fear among investors hit its highest level in history by March 5 2009 the market had tumbled more than 50% devastated by the worst financial crisis since the Great depression this was The Perfect Storm Banks collapsed high-flying funds blew up and crashed to the ground some of wall Street's most renowned investors saw their reputations shattered yet I look back on that tumultuous time as one of the highlights of my career a time

when my wealth management firm creative planning guided its clients to safety positioning them so they not only survived the crash but also benefited enormously from the rebound that followed Tony has asked me to share this story with you because it embodies a central lesson of This Book Bare markets are either the best of times or the worst of times depending on your decisions if you make the wrong decisions as most people did in 2008 and 2009 it could be financially catastrophic setting you back years or even decades but if you make the right decisions as

my firm and its clients did then you have nothing to fear you'll even learn to welcome bare markets because of the unparalleled opportunities they create for cool-headed bargain hunters how did our ship survive the storm while many others sank to the Bottom of the Sea first of all we were in a better ship long before the bare Market occurred we prepared for it in the knowledge that blue skies Never Last that hurricanes are inevitable none of us knows when a bare Market will come how bad it will be or how long it will last but

as you learned in Chapter 2 they've occurred on average every 3 years over the last 115 years that's not a reason to hide in Terror it's a reason to ensure that your vessel is safe and seaworthy regardless of the conditions as we'll discuss in detail in this chapter there are two primary ways to prepare for Market turmoil first you need the right asset allocation a fancy term for the proportion of your portfolio that's invested in different types of assets including stocks bonds real estate and alternative Investments second you need to be positioned conservatively enough with

some income set aside for a very rainy day so that you you won't be forced to sell while stocks are down it's the financial equivalent of making sure you're equipped with safety harnesses life vests and sufficient food before heading out to sea as I see it 90% of surviving a bare Market comes down to preparation what's the other 10% that's all about how you react emotionally in the midst of the storm many people believe they'll have ice in their veins but as you may have experienced yourself it's psychologically intense when the market is melting down

and panic is in the air that's one reason why having a battle hardened financial adviser can be helpful it provides an emotional ballast helping you remain calm so you don't waver at the worst moment and jump overboard one advantage our clients had is that we'd gone to Great Links to educate them in advance so they wouldn't be in shock when a crash occurred they understood why they owned what they owned and they knew how those Investments were likely to perform in a crash it's like being warned by your doctor that a medication might make you

dizzy and a ious you're not thrilled when this risk becomes reality but you'll cope much better than if it were a total surprise even so some clients needed a lot of reassurance shouldn't we get out of stocks now and go to cash they'd ask doesn't this crash feel different this reminded me of Sir John templeton's famous remark the four most expensive words in investing are This Time It's Different in the midst of a market meltdown people always think this time is different battered by all the bad news in the media each day they begin to

wonder if the market will ever recover or if something has fundamentally broken that can't be fixed I kept reminding my clients that every bare Market in US history has eventually become a bull market regardless of how Bleak the news seemed at the time just think of the many calamities and crises of the 20th century the 1918 flu pandemic which killed as many as 50 million people worldwide the Wall Street crash of 1929 followed by the Great Depression two world wars many other bloody conflicts from Vietnam to the gulf the Watergate scandal that brought about the

resignation of President Nixon plus countless economic recessions and market panics so how did the stock market fa in that chaos filled Century the Dow Jones Industrial Average Rose inexorably from 66 to 11,497 here's what you have to remember based on More Than A Century Of History the short-term Outlook may look dire but the stock Market always rebounds why would you ever bet against this long-term pattern of resilience and Recovery this historical perspective gives me unshakable peace of mind and I hope it will help you to keep your eye on the prize regardless of the corrections

and crashes we encounter in the years and decades to come the best investors know that the Gloom never lasts for example Templeton made his first Fortune by investing in dirt cheap US Stocks during the dark days of World War II he later explained that he likes to invest at the point of Maximum pessimism when Bargains were everywhere likewise Warren Buffett invested aggressively in 1974 when markets were slammed by the Arab oil embargo in Watergate While others were filled with despair he was exuberantly bullish telling Forbes now is the time to invest and get rich psychologically

it's not easy to buy when pessimism is rampant but the rewards often come spectacularly fast the S&P 500 hit bottom in October 1974 and then jumped 38% in the next 12 months in August 1982 with inflation out of control on interest rates at almost 20% the S&P 500 bottomed out again and then soared 59% in 12 months can you imagine how investors felt if they panicked and sold during those bare markets they not only made the disastrous mistake of locking in their losses but missed out on those massive gains as the market revived that's the

price of fear when the bare Market struck again in 2008 I was determined to make the most of this opportunity I had no idea when the market would recover but I was certain it would recover at the height of the crisis I wrote to our clients there is simply no precedent ever in history of the market staying at a valuation level this low there are only two potential outcomes the end of America as we know it or recovery every time investors have bet on the former they have lost throughout the crash we continue to invest

heavily in the stock market on behalf of our clients we took profits from strong asset classes such as bonds and invested the proceeds in Weak asset classes such as us small cap and large cap stocks International stocks and emerging market stocks instead of betting on individual companies we bought index funds which gave us instant diversification at a low cost across these massively undervalued markets how did this work out well after bottoming out in March 2009 the S&P 500 shot up 69 9.5% in just 12 months over 5 years the index Rose 178% vindicating our belief

that bare markets are the Ultimate gift for opportunistic investors with a long-term perspective as I write this the market has risen over 266 since the 2009 low as you can imagine our clients were ecstatic I'm proud to say that our clients held firm during the crash and hardly any Abandoned Ship as a result they profited handsomely from the recovery only two clients that left Stand Out by memory one of the two who abandoned our strategy was a new client who'd come to us shortly before the crisis with a portfolio loaded with real estate we helped

him diversify which saved him a fortune when the property Market crashed but he couldn't cope with the volatility of the stock market he panicked and put all his money in cash I called him a year later to see how he was doing by then the market had rallied dramatically but he was still waiting on the sidelines too nervous to invest for all I know he's still waiting and has missed the entire bull Market of the last s years as Tony mentioned you pay a high price for certainty the other client who left creative planning during

that time was overwhelmed by The Barrage of alarmist news in the media he'd heard a pundit claiming that the market would fall 90% or the dollar would collapse or the United States would declare bankruptcy and These Warnings terrified him to make matters worse his daughter fed those fears she worked at Goldman Sachs where she had no shortage of brilliant colleagues but one colleague convinced her that the financial system would collapse and that gold was the only Safe Haven her father listened cashed out of stocks at the worst moment and lost a fortune in Gold when

I spoke with him months later stocks were skyrocketing but he feared it was too late for him to get back in he was utterly dejected it saddens me to say this but these two former clients have both suffered permanent Financial damage because of rash decisions they made during the bare Market the reason their emotions got the better of them in the next chapter we'll look at how to avoid some of the most common psychological mistakes that trip up investors but first let's focus on an equally critical subject how to prepare for the next bare Market

by constructing a diversified portfolio that reduces your risks and enhances your returns this will help you to generate increasing wealth in any environment and allow you to sleep soundly at night the ingredients of success Harry marowitz the Nobel prize winning Economist famous ly declared that diversification is the only free lunch in investing if so what are the ingredients we'll run through them quickly here looking at stocks bonds and alternative Investments then we'll discuss how to mix these together to create a well Diversified portfolio but before we get to that it's worth clarifying why a portfolio

should include multiple asset classes let's start with a simple thought experiment imagine that I have a bunch of guests in my house I offer them $1 each to walk across the street as it happens I live on a quiet Suburban road with little traffic so my offer feels like free money but let's say I repeat the offer and this time I give them two choices either they can cross my street for $1 or they can cross a four-lane highway for $1 nobody will take me up on this offer to cross the highway but what if

I offer $1,000 or $10,000 at some point I'll arrive at a figure that entices someone to cross that Highway what I've just Illustrated is the relationship between risk and reward there's a risk of injury in both scenarios and as that risk increases the reward must rise in order for this to be perceived as a fair deal the additional reward you receive for taking that additional risk is called a risk premium when experts determine your asset allocation they evaluate the risk premium for each asset the riskier an asset seems to be the greater the rate of

return an investor will demand as a financial adviser I construct a client's portfolio by combining asset classes each with different risk characteristics and different rates of return the goal to balance the return you need to achieve with the risk you're comfortable taking the beauty of diversification is that it can allow you to achieve a higher return without exposing yourself to greater risk how come because different asset classes don't usually move in tandem in 2008 the S&P 500 fell 38% whereas investment grade bonds Rose 5.24% if you own stocks and bonds you took less risk and

achieved a better return than if you owned only stocks now let's look at the major asset classes we can combine to help you reach the promised land stocks when you buy a stock you're not buying a lottery ticket you're becoming a part owner of a real operating business the value of your shares will rise or fall based on the company's perceived fortunes many stocks also pay dividends which are quarterly distributions of profits back to the shareholders ERS by investing in a stock you're making the shift from being a consumer to being an owner if you

buy an iPhone you're a consumer of Apple products if you buy Apple stock you're an owner of the company and are entitled to a percentage of its future earnings what can you expect to earn as an investor in stocks it's impossible to predict but we can use the past as a very rough guide historically the stock market has returned an average of 9% to 10% a year over more than a century but these figures are deceptive because stocks can be wildly volatile along the way it's not unusual for the market to fall 20% to 50%

every few years on average the market is down about one in every four years you need to recognize this reality so you won't be shocked when stocks tumble and so you'll avoid excessive risks at the same time it's useful to recognize that the market has made money three out of every four years in the short term the stock market is entirely unpredictable despite the the claims of experts who pretend to know what's going on in January 2016 the S&P 500 suddenly sank 11% then it made a u-turn and Rose nearly as rapidly why Howard Marx

one of America's most respected investors candidly told Tony there was no good reason for the decline equally there was no good reason for the recovery but in the long run nothing reflects economic expansion better than the stock market over time the economy and the population grow and workers become more productive the rising economic tide makes businesses more profitable which drives up stock prices that explains why the market soared over the course of the 20th century despite all those Wars crashes and crises now do you see why it pays to invest in the stock market for

the long term nobody understands this better than Warren Buffett in October 2008 he wrote an article for the New York Times encouraging people to buy US Stocks while they were on sale even though the financial world was a mess and the headlines will continue to be scary he wrote think back to the early days of World War II when things were going badly for the United States in Europe and the Pacific the market hit bottom in April 1942 well before Allied fortunes turned again in the early 1980s the time to buy stocks was when inflation

raged and the economy was in the tank in short bad news is an Investor's best friend it lets you buy a slice of America's future at a marked down price over the long term the stock market news will be good I suggest you commit that line to memory over the long term the stock market news will be good if you truly understand this it will help you be patient unshakable and ultimately Rich so where do stocks fit within your portfolio if you believe that economy and businesses will be doing better 10 years from now it

makes sense sense to allocate a good portion of your Investments to the stock market over a 10-year period the market almost always Rises still there are no guarantees a study by asset management company Black Rock showed that the market average negative 1% per year from 1929 to 1938 the good news Black Rock noted that this 10-year losing streak was followed by two consecutive 10-year periods of robust gains as the market resumed its upward trajectory of course the challenge is to stay in the market long enough to enjoy these gains the last thing you want is

to be a forc seller during a prolonged bare Market how do you avoid that fate for a start don't live beyond your means or settle yourself with too much debt both reliable ways to put yourself in a vulnerable position as much as possible try to keep a financial cushion so you'll never have to raise cash by selling stocks when the market is crashing one way to build and maintain that cushion is to invest in bonds bonds when you buy a bond you're making a loan to a government a company or some other entity the financial

services industry loves to make this stuff seem complex but it's pretty simple bonds are loans when you lend money to the federal government it's called a treasury bond when you lend money to a city state or County it's a municipal Bond when you lend money to a company such as Microsoft it's a corporate bond and when you lend money to a less Dependable company it's called a high yield Bond or a junk bond voila you've now completed bonds 101 how much can you earn as a money lender it depends loaning money to the US government

won't earn you much because there's little risk that it'll reneg on its debts loaning money to the government of Venezuela where inflation may hit 700% this year is way riskier so the interest rates need to be much higher again it's all a trade-off between risk and reward the US government is asking you to cross a traffic free free Rural Road on a sunny day the Venezuelan government is asking to cross a busy highway on a stormy night while wearing a blindfold the odds that a company will go bust and fail to repay its Bond holders

are higher than the odds that the US government will default on its loans so the company has to pay a higher rate of return similarly a young Tech firm that wants to borrow money must pay a higher rate than a blue chip giant such as Microsoft rating agencies like Moody's use terms such as AAA and baa3 to grade these credit risks the other critical factor is the duration of the loan the US government will currently pay you about 1.8% a year for a 10-year loan if you lend the government that money for 30 years you'll

earn about 2.4% a year there's a simple reason why you receive a higher rate for Lending the money over a longer period it's riskier why do people want to own bonds for a start they're much safer than stocks that's because the borrower is legally required to repay you if if you hold a bond to maturity you'll receive all of your original loan back plus the interest payments unless the bond issuer goes bankrupt as an asset class bonds deliver positive calendar year returns approximately 85% of the time so where do bonds make sense in your portfolio

conservative investors who are retired or can't tolerate the volatility of stocks might choose to invest a large percentage of their assets in bonds less conservative investors might put a smaller portion of their assets in high quality bonds to meet any financial needs that could arise over the next 2 to 7 years more aggressive investors might keep a portion of their money in bonds to provide them with dry powder that they can use when the stock market goes on sale this is exactly what creative planning did during the financial crisis we sold some of our clients

bonds and invested the proceeds in the stock market snapping up once in a-lifetime Bargains there's just one problem it's hard to be enthusiastic about Bonds in today's weird economic environment yields are abysmally low so you earn a poultry return on the risk you're taking it seems particularly unappealing to invest in us treasuries which recently offered their lowest yields ever overseas the situation gets even Wilder the Italian government recently sold a 50-year bond with a 2.8% interest rate that's right if you loan your money for half a century you might be lucky enough to make 2.8%

a year if this economically vulnerable country doesn't run into trouble it's one of the worst bets I've ever seen the challenge is that you earn nothing these days if you keep your money in cash in fact after inflation you're losing money by holding cash at least bonds provide some income as I see it bonds are now the cleanest dirty clothing in the laundry pile alternative Investments any Investments other than stocks bonds and cash are defined as Alternatives that includes exotic assets such as your Pablo Picasso collection your seller full of rare wines the vintage cars

in your air conditioned garage your Priceless jewels and your 100,000 acre ranch but we'll focus here on a few of the most popular Alternatives which are likely to be relevant to a broader audience first a word of warning many alternatives are a liquid in other words hard to sell tax inefficient and Laden with high expenses that said they have two attractive attributes they can't sometimes generate Superior returns and they may be uncorrelated to stock and bond markets which means they can help to diversify your portfolio and reduce overall risk for example if the stock market

drops 50% you don't suffer a 50% drop in your net worth because all your eggs aren't in one basket any challenge you face is much smaller let's talk about five Alternatives starting with three that I like followed by two that I don't real estate investment trusts I'm sure you know people who've done really well by investing directly in residential property but most of us can't afford to diversify by owning a slew of houses or apartments that's one reason why I like to invest in publicly traded real estate investment trusts REITs they provide a no hassle

lowcost way to diversify broadly both geographically and across different types of property for example you can own a small slice of a Reit that invests in assets such as apartment buildings office Towers senior housing facilities Medical Offices or shopping malls you get to benefit from any appreciation in the price of the underlying property while also receiving a healthy stream of current income private Equity Funds private Equity firms use pooled money to buy all or part of an operating company they can then add value by say restructuring the business cutting costs and minimizing taxes ultimately they

attempt to resell the company for a much higher price the upside a private Equity Fund that's run with true expertise can make outsized profits while also adding diversification to your portfolio by operating in the private Market the downside These funds are liquid risky and charge High fees at creative planning we're able to leverage our relationships and 23 billion in Assets in order to gain access to funds managed by one of the country's top 10 private Equity companies their minimum investment is usually 10 million but our clients can invest with a minimum of 1 million as

you can see this isn't for everyone but the best funds May well earn their High fees master limited Partnerships I'm a big fan of MLPs which are publicly traded Partnerships that typically invest in energy infrastructure including oil and gas pipelines what's the appeal as Tony mentioned in the last chapter we sometimes recommend MLPs because they pay out a lot of income in a tax efficient way they don't make sense for many of investors especially if you're young or have your money in an IRA but they can be great for an investor who is over 50

and has a large taxable account gold some people have an almost religious belief that gold is the perfect hedge against economic chaos they argue that it'll be the one true currency if the economy falls apart inflation Soares or the dollar collapses my view gold produces no income and is not a critical Resource as Warren Buffett said once gold gets dug out of the ground in Africa or someplace then we melt it down dig another hole bury it again and pay people to stand around guarding it it has no utility anyone watching for Mars would be

scratching their head even so gold prices SAR occasionally and everyone piles in every time without exception the price has ultimately collapsed historically stocks bonds energy Commodities and real estate have outperformed gold so count me out hedge funds at creative planning we have no place for hedge funds in our portfolios why not a few of these private Partnerships have performed brilliantly over many years but it's a minuscule minority and the very best of them tend to be closed to new investors the problem is hedge funds start with a huge disadvantage in every major category fees taxes

risk management transparency and liquidity most charge 2% a year no matter what plus 20% of their investors profits what do you get in return well from 2009 to 2015 the average hedge fund lagged the S&P 500 for 6 years in a row in 2014 the nation's largest pension fund cpers the California Public Employees Retirement System abandoned hedge funds entirely as I see it hedge funds are handmade for suckers or for speculators looking to roll a dice on a big bet they'll make someone rich but it ain't likely to be you or me a customized approach

to asset allocation now you know what ingredients you can use but how should you combine them to create the perfect meal the truth is there's no single method that's right for everyone yet many advisers use a cookie cutter approach to acid allocation ignoring critical differences in their client's needs that's like serving steak to a vegetarian or a kale salad to a carnivore one common but misguided approach involves using a person's age to determine the percentage of bonds in his or her portfolio for example if you're 55 you'd have 55% of your assets allocated to bonds

to me that's crazily simplistic in reality the type of assets you own should be matched to what you personally need to accomplish after all a 55-year-old single mom who is saving for her kids college tuition has different priorities than a 55-year-old entrepreneur who's just sold her business for millions and wants to build a philanthropic Legacy it makes no sense to treat them as if their needs are the same just because they're the same age another common approach involves basing a person's asset allocation on his or her tolerance for risk as the client you fill out

a questionnaire to establish whether you're an aggressive or conservative investor you're then sold a prepackaged model Investment Portfolio that supposedly matches this risk profile to me this approach is equally misguided because it ignores your needs what if you're risk averse but have no chance of retiring unless you heavily invest in stocks setting you up with a conservative portfolio loaded with bonds would just Doom you to disappointment so how should you approach the challenge of asset allocation as I see it the real question that you and your financial adviser have to answer is this what asset

classes will give you the highest probability of getting you from where you are today to where you need to be in other words the design of your portfolio must be based on your specific needs your advisor should start by getting a clear picture of where you are today your starting point how much you're willing and able to save and how much money you'll need and when you'll need it your ending point once these needs have been clearly identified your advisor should provide a customized solution to help you achieve them can you figure all this out

yourself without hiring a professional sure but the stakes are high and you don't want to mess it up so it probably makes sense to get help unless you're particularly knowledgeable about these matters in any case let's say you need an average annual return of 7% over the next 15 years so you can retire your advisor might conclude that you ought to invest say 75% of your portfolio in stocks and 25% in bonds it doesn't matter if you're 50 or 60 years old remember your needs determine your asset allocation not your age once your advisor is

settled on the right asset allocation to meet those needs you should discuss whether you can live with the volatility you're likely to experience if you can't then you can adjust your goal downward and your adviser can create a more conservative allocation that allows you to achieve this scaled back goal a sophisticated adviser will customize your portfolio to address whatever is unique about your financial situation let's say you work for an oil company and have a hefty portion of your net worth in your employer's stock your adviser would adjust your asset allocation accordingly to ensure that

your other Investments don't expose you too heavily to the energy sector another priority is to create a customized game plan that minimizes your tax liabilities let's say you show an existing portfolio to a new adviser your asset allocation is clearly out of whack so the adviser suggests a total overhaul in a perfect world he or she may be right but what if your Investments have done well and selling them would saddle you with a big tax spill on all your capital gains a sophisticated adviser would first assess the tax impact of selling these assets as

a result you might end up taking a much slower approach for example using your additional monthly contribution to build more gradually toward your new allocation the point is you want an adviser with the skills to tailor your portfolio to suit your specific needs a one-size fits-all approach to asset allocation can be disastrous it would be like going to a doctor who tells you this drug I'm giving you is the best arthritis treatment in the world you reply that's great doc but I don't have arthritis I've got a cold core and explore before we wrap up

this chapter I want to leave you with a few key guidelines to keep in mind when you're constructing or reconstructing your portfolio these are principles we live by at creative planning and I'm confident that they'll serve you well through sunny days and storms number one asset allocation drives returns let's start with the fundamental understanding that your asset allocation will be the biggest factor in determining your investment returns so deciding on the right balance of stocks bonds and Alternatives is the most important investment decision you'll ever make whatever mix you choose make sure you diversify globally

across multiple asset classes imagine being a Japanese investor with all your money in domestic stocks Japan's Market is still down from insane highs it reached in 1989 the moral never bet your future on one country or one asset class number two use index funds for the core of your portfolio at creative planning we use an approach to asset allocation that we call core and explore the core component of our clients portfolios is invested in us and international stocks we use index funds because they give you broad diversification and a lowcost tax efficient way and they

beat almost all actively managed funds over the long run for maximum diversification we want exposure to stocks of all sizes large cap midcap small cap and micro cap by diversifying so broadly you protect yourself against the risk that one part of the market say tech stocks or Bank stocks could get crushed by indexing you enjoy the long-term upward trajectory of the market without letting expenses and taxes corrode your returns for other parts of your portfolio there are more sophisticated options to consider as we will discuss later number three always have a cushion you never want

to be in a position where you're forced to sell your stock market in Investments at the worst moment so it makes sense to maintain a financial cushion if at all possible we make sure our clients have an appropriate amount of income producing Investments such as bonds REITs MLPs and dividend paying stocks we also diversify broadly Within These asset classes for example we invest in government bonds Muni bonds and corporate bonds if stocks crash we can sell some of those income producing Investments ideally bonds since they are liquid and use the proceeds to invest in the

stock market at low prices this puts us in a strong position where we can view the bear as a friend rather than a fearsome Enemy Number Four the rule of seven ideally we like our clients to have seven years of income set aside in income producing Investments such as bonds and MLPs if stocks crash we can tap these income producing assets to meet our clients short-term needs but what if you can't afford to set aside years of income simply start with an achievable goal and keep raing the bar as you progress for example you might

start with a goal of saving 3 or 6 months of income and then work your way over many years toward the ultimate goal of setting aside seven years of income if that sounds impossible check out the wonderful story of Theodore Johnson a UPS worker who never earned more than $14,000 a year he saved 20% of every paycheck plus every bonus and invested in his Company's stock by age 90 he'd accumulated 70 million the lesson never underestimate the awesome power of disciplined saving combined with long-term compounding number five explore the core of our clients portfolios is

invested in index funds that simply match the Market's return but at the margins it can make sense to explore additional strategies that offer a reasonable chance of outperformance for example a wealthy investor might add a highrisk high return investment in a private Equity Fund you might also decide that a particular investor like Warren Buffett has a specific Advantage which could justify putting a modest portion of your portfolio in shares of his company Berkshire Hathaway number six rebalance I'm a big believer in rebalancing which entails bringing your portfolio back to your original asset allocation on a

regular basis say once a year at creative planning we take opportunities to buy as they happen rather than waiting for the end of the year or quarter here is how it works imagine you start with 60% in stocks and 40% in bonds than the stock market plunges so you find yourself with 45% in stocks and 55% in bonds you'd rebalance by selling bonds and buying stocks as Princeton Professor Burton malill told Tony unsuccessful investors tend to buy the thing that's gone up and sell the thing that's gone down one benefit of rebalancing says malel is

that it makes you do the opposite forcing you to buy assets when they are out of favor and undervalued you'll profit richly when they recover a final word if you follow the advice in this chapter you'll be able to write out any storm sure there will be turbulent times when the news is full of frightening headlines but you'll have the comfort of knowing that your portfolio is properly Diversified so it can withstand any Market Mayhem in Chapter 2 you learned that there's no need to fear Market Corrections and I hope you see now that there's

no need to fear bare markets either in fact they provide the best opportunity to buy the bargains of a lifetime so so you can leap frog to a whole new level of wealth the bear is your gift one that comes on average every 3 years these aren't just times to survive these are times to thrive but as you and I both know there's a big difference between theory and practice just think of my former client who cashed out of the stock market and gambled everything on gold during the last bare Market fear led him to

jettison a carefully constructed plan that would have ensured him a future of total Financial Freedom so how can you make sure that your own emotions won't get out of hand and knock you off course the next chapter will focus on how to master the psychology of wealth so you won't make the common and entirely avoidable Financial mistakes we see again and again as you'll discover there's only one real barrier to financial success you once you know how to silence the Enemy Within nothing can stop you section three the the psychology of wealth chapter 8 silencing

the Enemy Within the six money mistakes investors make and how you can avoid them the Investor's Chief problem and even his worst enemy is likely to be himself Benjamin Graham author of the intelligent investor and mentor to Warren Buffett congratulations you've made it through the rule book and the Playbook and now possess the knowledge you need to become truly unshakable you've learned what you need to watch out for you've learned the facts that can free you from the fear of the inevitable Corrections and crashes and you're fully armed with the winning strategies of the best

investors on the planet you've also acquired invaluable knowledge about fees and how to find a truly qualified and effective financial advisor all of this gives you an amazing Edge vastly enhancing your ability to remain clear-headed even in the face of UN uncertainty you have a proven Pathway to Financial Freedom but I have to ask what could mess this up I'll give you a clue it's nothing external it's you that's right the single biggest threat to your financial well-being is your own brain I'm not trying to insult you here it's just that the human brain is

perfectly designed to make dumb decisions when it comes to investing you can do everything right invest in lowcost index funds minimize fees and taxes and diversify intelligently but if you fail to master your own psychology you may ultimately become victim of a costly form of financial self-sabotage in fact this is part of a much broader pattern in every area of life whether it's dating marriage parenting the workplace our health our fitness our finances or anything else we have a tendency to Be Our Own Worst Enemy the problem is that our brains are wired to avoid

pain and seek pleasure pleasure instinctively we yearn for whatever feels likely to be immediately rewarding needless to say this isn't always the best recipe for smart decision making in fact our brains are particularly prone to bad decisions when we're dealing with money as we'll discuss there's an array of mental biases or blind spots that make it surprisingly difficult to invest rationally it's not our fault it's part of being human in fact it's built into the system inside your head like a piece of faulty code in a computer program this chapter is designed to give you

the key insights and tools you can use to free yourself from the natural psychological tendencies that derail so many people on the journey toward Financial Freedom let me give you an example of a common psychological obstacle that we're all likely to encounter neuroscientists have found that the parts of the brain that process Financial losses are the same parts that resp respond to Mortal threats think about what that means for a moment imagine you're a hunter gatherer searching for dinner in the forest when you're suddenly confronted by a saber-tooth tiger with a serious attitude problem your

brain goes into high alert sending you urgent messages to fight Freeze or run for your life you might grab the nearest rock or spear so you can battle the Beast or you might flee and hide out in the safety of a dark cave now imagine that it's 2008 and you're an investor with a big chunk of your life savings in the stock market the global financial crisis slams The Market your Investments Take a Tumble and your brain begins to process the reality that you're losing heaps of money as far as your brain is concerned this

is the financial equivalent of that saber-tooth tiger roaring in your face ready to make you his dinner so what happens Red Alert the ancient survival mechanism inside your brain starts sending you messages that you're in mortal danger rationally you may know that the smartest move in a market crash is to buy more stocks while they're on sale but your brain is telling you to sell everything grab your cash and hide under your bed more convenient than a cave until the threat subsides it's no wonder that most investors do the wrong thing it's an unfortunate side

effect of the human survival mechanism we have a tendency to freak out because our brains believe our financial downfall is certain death and what counts is not reality but rather our beliefs about it our beliefs are what deliver direct commands to our nervous system beliefs are nothing but feelings of absolute certainty governing our Behavior handled effectively beliefs can be the most powerful force for creating good but our beliefs can also limit our choices and hamstring our actions severely so what's the solution how can we bypass the survival instincts that have been hardwired into into our

brains and belief systems for millions of years so we can learn to stand firm in the face of a plunging Market or a hungry tiger it may seem overly simplistic but all that's really required is a set of system Solutions a simple system of checks and balances to neutralize or minimize the harmful effects of our faulty Flintstone wiring there has to be a kind of internal control checklist since knowing is not enough you need the systemic ability to execute every time just think of the airline industry where the consequences of human error can be devastating

for Airlines it's imperative that they follow the correct procedures every time so they minimize risks by implementing a series of system Solutions and a series of checklists along the way consider the co-pilot who provides an array of potentially life saving checks and balances just in case the pilot slips up the co-pilot isn't there to merely steer the plane if the captain is in the washroom but also serves as a second opinion for every decision point that may arise plus it doesn't matter how many thousands of hours they've flown both the pilot and co-pilot constantly monitor

detailed checklists to keep everybody safely on course so they'll arrive at their intended destination when it comes to investing human error may not be a matter of life and death but Financial mistakes can still be catastrophic just ask those who lost their homes during the financial crisis or couldn't pay for their kids to stay in college or can't afford to retire this is why investors also need simple systems rules and procedures to protect us from ourselves know what to do do what you know the best investors are acutely aware of this need for simple systems

because they recognize that despite their abundant talents they can easily mess up in ways that could cause them A World of Pain they understand that it's not enough to know what to do you also need to do what you know that's where systems come in over my 20 plus years as a coach to Paul tutor Jones a key Focus has been to constantly update and improve the systems he uses to evaluate and make investment decisions in fact when I first met Paul he had just made one of the greatest investment trades in history taking full

advantage of the market on Black Monday in 1987 an Infamous occasion when the market fell 22% on a single day Paul produced an almost unimaginable return of 200% that year for his investors but after this stunning success he became overconfident a common bias that you'll learn more about in this chapter the result he became less rigorous in his adherence to the vital systems he' accumulated over the years to become his most effective self in order to correct this bias I set out to discover how his behavior Behavior as an investor had changed I met with

Paul's peers including some of the greatest investors in history such as Stanley dren Miller interviewed his co-workers and watched videos of him trading during his most successful times based on this in-depth understanding I worked with Paul to create a checklist a simple set of criteria that he could use as his checks and balances before making any trade for example one of the criteria we established was that before he could make any investment or trade Paul had to First establish in his own heart and soul that it was a hard trade meaning it wasn't a trade

that everyone would make second he disciplined himself to make sure that there was asymmetrical risk reward in order to determine this he would ask himself is it a 3:1 is it a 5:1 can I get disproportionate rewards for the least amount of risk what's the potential upside and what's the risk on the downside third he would sit down and ask himself where are the breaking points for other investors when will the price get so low or high that they will get out he would then use this insight to establish his own entry point his Target

price for executing his investment and finally he would also establish his exit if his projections turned out to be wrong what's the pattern here the common link in Paul's criteria is a simple set of questions that he uses to examine his beliefs and look at the situation more objectively and while all of these questions have provided a great checklist for Paul what made it work was discipline after all a system is effective only if you use it in order to be sure that he did I asked Paul to write a letter to the members of

his entire trading team stating clearly that they were not to make any investment until they checked with him first and asked these questions is this truly the hard trade does it really have asymmetric risk reward is it a 5 to1 or a 3:1 what's the entry point where are your stops to take it one step further they were also instructed not to process any orders after the opening bell in other words they weren't allowed to trade in the middle of the day why not because Paul realized that too often a trade in that stage of

the game meant that he was reacting to the market buying at the high price for the day and selling at the low giving away his power and gifting someone else a better deal as you can see great investors such as Paul understand a fundamental truth psychology either makes you or breaks you so it's imperative to have a robust system that enables you to stay on target together in this chapter we're going to create a simple checklist with six items to watch out for and effectively counter to ensure your long-term financial success 80% psychology 20% mechanics

for four decades I've studied the most successful people in many different fields including investing business education sports medicine and entertainment and what I found again and again is that 80% of success is psychology and 20% is mechanics investor psychology is an incredibly rich and complex subject in fact there's an entire academic field called behavioral Finance which explores the cognitive biases and emotions that cause invest ERS to act irrationally these biases often lead people to make some of the costliest investing mistakes such as trying to time the market investing without knowledge of the real impact of

fees and failing to diversify our goal here is to keep things short and sweet in this brief chapter we're going to explain what you really need to know about one of the biggest psychological pitfalls and how to avoid getting snagged by Common investment mistakes your brain can cause you to make as Ray doio told me if you know your limitations you can adapt and succeed if you don't know them you're going to get hurt by creating systematic Solutions you can free yourself from the tyranny of your conditioning and operate the control room like one of

the best investors on the planet mistake one seeking confirmation of your beliefs why the best investors welcome opinions that contradict their own during the 2016 presidential election battle between Donald Trump and Hillary Clinton you probably found yourself in heated political debates with friends but did you ever have the feeling that it wasn't a debate at all that everyone had made up his or her mind already people who loved Trump and loathed Hillary or vice versa felt so strongly that it often seemed like nothing could alter their opinions this was magnified by the way we consume

media today many people watch TV channels that typically favor one point of view such as MSNBC or Fox News and our news is filtered more than ever by Facebook and other organizations the result it often feels like we're in an echo chamber listening primarily to people who share our views the 2016 election provided a perfect example of confirmation bias which is the human tendency to seek out and value information that confirms our own preconceptions and beliefs this tenden also leads us to avoid undervalue or disregard any information that conflicts with our beliefs for investors confirmation

bias is a dangerous predisposition let's say you love a particular stock or fund that's performed exceptionally well in your portfolio over the last year your brain is wired to seek out and believe information that validates you owning it after all our minds love proof especially proof of how smart and right we've been investors often visit newsletters and message boards that reinforce their beliefs about the stock they own or they pump their accelerator by reading positive articles about the hot sector where they've been earning fabulous returns but what if the situation changes and that highflying stock

or sector starts crashing back to Earth how well equipped are we to change our perspective and recognize that we've made a mistake do you have the flexibility to change your approach or is your mind locked into its beliefs Peter maluk saw this phenomenon up close with a new client who had previously made a fortune on a biotech stock that had skyrocketed over a decade the client had almost $10 million in this one stock Peter and his team at creative planning set up an efficient plan for the client to diversify dramatically reducing her exposure to this

stock the client agreed initially but then changed her mind claiming she knew her beloved stock and understood why it would continue continue to soar she told Peter I don't care what you're saying this stock is what got me here over the next 4 months Peter's team kept trying to convince her to begin the diversification process but the client wouldn't listen during that time the stock dropped by half costing her $5 million she was so upset that she dug in her heels even more and insisted on waiting for the stock to recover it never did if

she had listened to this well-considered advice that contradicted her own beliefs she would now likely be on track toward a life of total Financial Freedom in fact this is also an example of another emotional bias called the endowment effect in which investors Place greater value on something they already own regardless of its objective value this makes it much harder to part ways and buy something Superior the truth is it's never wise to fall in love with an investment as the saying goes Love is Blind don't get swept off your financial feat the solution ask better

questions and find Qualified people who disagree with you the best investors know they're vulnerable to confirmation bias and accordingly do everything they can to counter this tendency the key is to actively seek out qualified opinions that differ from your own of course you don't want just anyone with a different opinion but rather someone who has the skill track record and intelligence to give another educated perspective all opinions are not created equal nobody understands this better than Warren Buffett he consults regularly with his 93-year-old partner Charlie Munger a brilliant thinker who is also famously outspoken in

his 2014 annual report Buffett recalled that Munger had single-handedly convinced him to change his investment strategy persuading him that there was a smarter approach forget what you know about buying Fair businesses at wonderful prices instead buy wonderful businesses at fair prices in other words Warren Buffett the greatest investor in history has openly attributed his success to his willingness to follow the advice of his partner whose logic was irrefutable that's how powerful it can be to resist our tendency to seek opinions that merely confirm our own Ray diio too is obsessed with the idea of searching

for Divergent viewpoints it's so difficult to be right in the markets he told me so what I found very effective is to find people who disagree with me and then find out what their reasoning is the power of thoughtful disagreement is a great thing as Ry explains the key question is what don't I know you can benefit greatly as an investor by finding people you respect ideally this includes a financial adviser with an extraordinary long-term record and asking them questions designed to uncover what you don't know whenever I'm contemplating a major investment I speak with

friends who think differently including my wise pal and genius entrepreneur Peter goober I explain what I believe and then I ask where could I be wrong what am I not seeing what's the downside what am I failing to anticipate and who else should I speak with to deepen my knowledge questions like these help to protect me from the danger of confirmation bias mistake two mistaking recent events for ongoing Trends why most investors buy the wrong thing at exactly the wrong moment one of the most common and dangerous investing mistakes is the belief that the current

Trend will continue and when investors expectations aren't met they often overreact leading to a dramatic reversal of the trend that previously seemed inevitable and Unstoppable a perfect example of this phenomenon occurred election night in 2016 Hillary Clinton by far the front runner was expected to win by a landslide or at least by a significant margin according to nearly every poll at noon on Election Day bookies around the country gave her a 61% chance of Victory but by 8:00 the situation flip-flopped completely giving Trump a 90% chance of winning as the election results became clear investors

panicked because their expectations about the future were suddenly turned upside down the market responded violently with Dow futures dropping more than 900 points ironically the next day the market snapped back in the opposite direction with the Dow jumping 316 points as investors began to adjust to their new version of reality we witnessed a trump rally that continued for weeks as I write this in December 2016 the S&P 500 just hit an all-time high for the third day in a row the Dow Jones Industrial Average has scored its 11th all-time high in a month and the

market has surged 6% in 7 weeks since the election how do you think investors feel right now pretty cheerful that's how when you read that the market is roaring ahead it's hard not to feel a little rush of delight maybe you peek at your Investment Portfolio and notice that it's the highest it's ever been life is sweet granted I have no idea where the market is headed from here and as the greatest investors in the world will tell you neither does anyone else but I do know that people get carried away at times like this

in the stacking of emotions and beliefs they start to convince themselves that the good times will keep on rolling likewise when the market is plunging they start to believe that it will never recover as Warren Buffett says investors project out into the future what they have most recently been seeing that is their unshakable habit what's the explanation for this there's actually a technical term for this psychological habit it's called recency bias this is just a posh way of saying that recent experiences carry more weight in Our Minds when we're evaluating the odds of something happening

in the future in the midst of a bull market the neurons in your brain help you to remember that your recent experiences were positive and this creates an expectation that the positive trend is likely to continue why is this so problem IC because as you know the financial seasons can suddenly change with bull markets giving way to Bare markets and vice versa you don't want to be that guy who after a long sundrenched summer concludes that it'll never rain again great things are not accomplished by those who yield to Trends and fads and popular opinion

Jack kowak I recently interviewed Harry marwitz a famous economist who won the Nobel Prize for developing modern portfolio Theory the basis for much of what we know today about how to use asset allocation to reduce risk Harry is a financial genius and at the age of 89 he's seen everything under the Sun so I was eager to speak with him about the most common investing mistakes we need to avoid here's what he told me the biggest mistake that the small investor makes is to buy when the market is going up on the assumption that the

market will go up further and sell when the market is going down on the assumption that it's going to go down further in fact this is part of a much broader pattern of believing that current investment Trends are bound to continue investors repeatedly fall into the Trap of buying what's hot whether it's high-flying stock like Tesla Motors or the latest five-star mutual fund and abandoning what's not as Harry puts it whatever is going up that's what they buy people assume that these shooting stars will continue continue to burn brightly but as we warned in chapter

3 today's winners tend to be tomorrow's losers as you may recall one study looked at 248 stock funds that received morning Stars five-star rating 10 years later only four of them kept that rank even so Brokers routinely promote funds that outperformed in the previous year only to see these recommendations underperform the following year investors tend to arrive just as the party is winding down they miss out on all of the gains and participate fully in all of the losses David swensson summ this up neatly telling me individuals tend to buy funds that have good performance

and they chase returns and then when funds perform poorly they sell and so they end up buying high and selling low and that's a bad way to make money the solution don't sell out rebalance what the best investors in the world do is create a list of simple rules to guide them so that when things get emotional they stay the course and remain on target long term you might want to start making a list of your own an investment Success Checklist for the flight deck that spells out where you're trying to go as an investor

what you have to watch out for and how you plan to navigate The Journey securely share your flight plan with someone you trust ideally a sophisticated financial advisor he or she can help you stick with the program by making sure you don't violate your own rules with impulsive survival brain decisions think of this as the financial equivalent of having a co-pilot to clarify and verify that you're not heading into the side of a mountain an important component of these investment rules is deciding in advance how you're going to diversify by allocating a specific percentage of

your portfolio to stocks bonds and alternative Investments what what will your ratio be if you don't lock it down circumstances will change and your mood will change with them you're likely to react to the moment instead of sticking consistently with an asset allocation that's ideal for you over time if you recall one of the solutions to this emotional stumbling block is to regularly rebalance your portfolio once a year what does that mean Harry marwitz gave me a clear example of an investor who starts with 60% of her portfolio and stock and 40% in bonds if

the stock market Soares she might find herself with 70% in stocks and 30% in bonds so she would automatically sell stocks and buy bonds thereby restoring her portfolio to her original asset allocation ratio the beauty of rebalancing says Harry is that it effectively forces you to buy low and sell High mistake three overconfidence get real overestimating our abilities and our knowledge is a recipe for disaster forgive me for getting personal here but let me ask you three questions are you an above average driver are you an above average lover and are you better looking than

the average person don't worry you can keep your answers to yourself my reason for asking you these impertinent questions is to raise a fundamental point that could be vitally important to your financial future humans have a perilous tendency to believe believe that they're better or smarter than they really are again there's a technical term for this psychological bias it's called overconfidence to put it simply we consistently overestimate our abilities our knowledge and our future prospects countless Studies have described some of the wonderfully absurd effects of overconfidence for example one study found that 93% of student

drivers believe they are above average in another study 94% of college professors consider themselves above average in the classroom there was even a finding that 79% of students believed their character was better than most despite the fact that 60% admitted they had cheated on an exam in the previous year we each Envision ourselves as a member of the I'd never do that moral minority all this reminds me of Lake wagon the fictitious Minnesota Town invented by the writer Garrison Keeler where all of the women are strong the men are good-looking and all the children are

above average so how do individual investors become overconfident in many cases a professional convinces them that there is a hot new investment that's going to crush everything out there and they allow that person's passion to become their unwarranted confidence in other words one person's salesmanship fuels another person's misguided certainty some individuals are extremely successful in running a business or living their lives so they just assume that they'll be equally as effective as an investor but investing as you know now is more complex and challenging than it might initially seem to these high Achievers are certain

people more prone to overconfidence finance professors Brad Barber and Terren Odin examined the stock Investments of more than 35,000 households over 5 years they found that men are especially prone to overconfidence when it comes to investing in fact men traded 45% more than women reducing their net returns by 2.65% a year when you add to this the additional cost of high transaction fees and taxes you can see that excessive trading is truly a disaster but there's another form of overconfidence that can prove even more costly the perilous belief that you or any TV pundit Market

strategist or blog writer can predict what the future holds for the stock market bonds gold oil or any other asset class if you can't predict the future the most important thing is to admit it Howard Marx told me if it's true that you can't make forecast and yet you try anyway then that's really suicide the solution get real get honest one of the best antidotes to overconfidence is to stand in front of a mirror and ask yourself this do I really have an edge that will allow me to be a market beating investor unless you

have some some secret sauce for example the superior information and analytical skills that distinguish great investors such as Howard Marx Warren Buffett and Ray Doo there's no rational reason on Earth to believe you can outperform the market indexes over the long run so what should you do easy do what Howard Warren Jack Bogle David Swinson and other of the world's greatest investors tell the average investor to do invest in a portfolio of lowcost index funds and then hold them through thick and thin this will give you the Market's return without the triple burden that active

investors must carry exorbitant management fees High transaction costs and Hefty tax bills if you can't add value if you can't create an asymmetry then the best thing you can do is minimize your costs says Howard in other words just invest in an index index funds also give you broad diversification which is another Power protection against overconfidence after all diversification is an admission that you don't know which particular asset class which stock or Bond or which country will do best so you own a bit of everything here's the great Paradox by admitting to yourself that you

have no special Advantage you give yourself an enormous Advantage how come because you'll do so much better than all those overconfident investors who delude themselves into believing they can outperform when it comes to investing self-deception may be the biggest expense of all mistake four greed gambling and the Quest for home runs it's tempting to swing for the fences but Victory goes to the steady survivors when I was 19 I rented a house in an upscale Community by the Pacific Ocean in Marina Delray California one day I was dropping off some clothes at a local dry

cleaner when a convertible Rolls-Royce Cornish pulled up and a gorgeous woman stepped out I couldn't help but pay attention we started chatting while she picked up her clothes and I asked what she and her family did for a living she told me that her husband was in penny stocks and had done really well I can see that I said do you have any tips she replied actually right now there's an extraordinary one she gave me the name of a hot stock and let me tell you it felt like a gift from on high a sure

thing right from the horse's mouth so I took $3,000 which was the equivalent of 3 million for me back then and I bet it all on that one stock and guess what happened it went to zero boy did I feel like an idiot as I learned from that painful experience greed and impatience are dangerous traits when it comes to investing we all have a tendency to want the biggest and best results as fast as possible rather than focusing on small incremental changes that pound over time the best way to win the game of investing is

to achieve sustainable long-term returns but it's enormously tempting to swing for home runs especially when you think other people are getting rich faster than you the trouble is you're more liable to strike out when you swing for the fences and that can be devastating as we discussed in chapter 6 all of the best investors are obsessed with the idea of not losing remember our math lesson when you lose 50% on an investment you need a 100% return just to get back to where you started and that could easily take you a decade unfortunately the desire

to gamble is built into us the gaming industry knows this well and ingeniously exploits our physiology and psychology when we're winning our bodies release chemicals called endorphins so we feel euphoric and don't want to stop when we're losing we don't want to stop either since We crave those endorphins and also want to avoid the emotional pain of losses casinos know how to manipulate Us by pumping in extra oxygen to keep us alert and by plying us with free drinks to reduce our inhibitions after all the more we play the more they'll win Wall Street isn't

all that different brokerage houses love it when customers trade a lot generating a blizzard of fees they try to lure you in and hook you with advertisements that offer free or lowcost trades along with Market insights that will support supposedly help you pick the winners yeah right do you think it's a coincidence that your online trading platform looks and sounds like a casino with green and red colors scrolling tickers flashing images and dinging sounds it's all designed to Unleash Your Inner Speculator the financial media reinforces the sense that the markets are just one giant Casino

an intoxicating get-rich quick scheme for speculators it's easy to get sucked in which is is why so many people lose their shirts by betting on the hottest stocks trading options and moving in and out of the market all this activity is motivated by the gambler's desire to hit the jackpot what you need to understand is that there's a world of difference between short-term speculation and long-term investing speculators are doomed to fail while disciplined investors who stay in the market through thick and thin set themselves up for victory thanks to the power of compounding over time

time Wall Street wins by getting you to be more active but you win by patiently staying in the game for decades remember as Warren Buffett says the stock market is a device for transferring money from the impatient to the patient the solution it's a marathon not a Sprint so here's the big question in Practical terms how can you silence your inner Speculator and force yourself to be a patient long-term investor one person who's obsessed with this question is Guy spear a renowned value investor guy began coming to my events two decades ago and he credits

me with inspiring him to model the best investors he applied this idea by modeling Warren Buffett's long-term approach to investing in 2008 guy and another hedge fund manager even paid $650,000 to charity to have lunch with Buffett as guy sees it one of the biggest barriers to success for most investors is that they get distracted by all the short-term noise on Wall Street this makes it much harder for them to hold their Investments for the long run and harness the awesome power of compounding for example they frequently check the performance of their Investments and they

listen to TV pundits and Market experts making useless predictions when you check your stock prices or fund prices on your computer every day you're feeding candy to your brain says guy you get an endorphin hit you have to realize its addictive behavior and just stop doing it move away from the candy guy suggests checking your portfolio only once a year he recommends avoiding Financial TV entirely and He suggests that you disregard all research produced by Wall Street firms recognizing that their motive is to push products not to share wisdom the vast majority of what purports

to be analysis and information about the stock market is actually just as designed to generate activity to get us to pull the trigger because somebody out there will make money out of the fact that we're being active he explains if it's activity generating information we should shut it off instead guy recommends creating a more wholesome information diet by studying the wisdom of ultra patient investors such as Warren Buffett and Jack Bogle the result you're feeding your mind thoughts that will make it much easier for you to think and act long term mistake five staying home

it's a big world out there so how come most investers stay so close to home humans have a natural tendency to stay within their comfort zone if you live in the United States you're more likely to crave a cheeseburger with fries than a feast consisting of fuagra poutine or escargo likewise you probably have a favorite grocery store gas station or coffee shop that you visit regularly instead of venturing further a field when it comes to investing people also tend to stick with whatever they know best preferring to trust what's most familiar this is known as

home bias it's a psychological bias that leads people to invest disproportionately in their own country's markets and sometimes to invest too heavily in their employer stock and their own industry for our cave dwelling ancestors home bias was a Savvy survival strategy if you ventured too far outside the hood who knew what dangers might be lying in weight but in our own era investing globally actually reduces your overall risk that's because different markets are imperfectly correlated which means they don't move in lock step you don't want to be Overexposed to any country even if it's where

you live because you never know when it will hit a rough patch in the late 1980s Japanese investors had 98% of their portfolios in domestic stocks this paid off handsomely for most most of the 80s when Japan seemed to be on top of the world then in 1989 the Japanese Market collapsed and it's never fully recovered so much for home sweet home a report by Morning Star showed that the average American investor in mutual funds had almost 3/4 73% of his or her total Equity allocation invested in the US Stock Market at the end of

2013 yet US Stocks accounted for only half 49% of the Global Equity Market in other words Americans significantly overweighted the US market leaving them relatively underexposed to foreign markets such as the United Kingdom Germany China and India in fact it's not just American investors who view the rest of the world with suspicion Richard Thor and Cass sunstein who are leading experts on behavioral Finance have written that Swedish investors have an average of 48% of their money in Swedish stocks despite the fact fact that Sweden accounts for around 1% of the global economy a rational investor

in the United States or Japan would invest about 1% of his assets in Swedish stocks can it make sense for Swedish investors to invest 48 times more no the solution expand your horizons this is really simple as we've said in previous chapters you need to diversify broadly not only in different asset classes but also in different countries it makes sense to discuss your Global asset allocation with a financial adviser once you've decided on the appropriate percentages to keep at home and abroad you should write down these figures in your investment Success Checklist it's also important

to lay out in writing the reasons why you own what you own that way you can remind yourself of these reasons whenever a part of your portfolio is underperforming the best advisors help you to keep a long-term perspective so you can avoid falling into the common trap of favoring whatever Market is in Vogue Harry marwitz who has a deep sense of History told me we've recently had a long stretch where the US market has been doing better than the European market and Emerging Markets have had a dry spell but these things come and go by

diversifying internationally you're not only reducing your overall risk but also increasing your returns remember when we talked about the Lost decade of 2000 through 2009 when the S&P 500 produced an annualized return of only 1.4% a year including dividends during that time International stocks averaged 3.9% a year while emerging market stocks returned 16.2% a year so for investors who Diversified globally those lost years were just a minor bump in the road mistake six negativity and loss aversion your brand bra wants you to be fearful in times of turmoil don't listen to it human beings have

a natural tendency to recall negative experiences more vividly than they do positive ones this is known as negativity bias back when we were cavemen this mental bias was really handy it helped us to remember that fire hurts that certain berries could poison us and that it was dumb to pick a fight with a hunter twice your size recalling negative experiences can also be pretty helpful in modern times maybe you forgot that it was your wedding anniversary spent the next day in the dogghouse and thereby learned never to make that mistake again but how does negativity

bias affect the way we invest thanks for asking as you know Market Corrections and bare markets are regular occurrences remember on average Corrections have occurred about once a year since 1900 and bare markets have occurred about once every 3 to 5 years if you lived through the bare Market of 2008 2009 you know firsthand how emotionally painful these experiences can be if like many investors you owned funds or stocks that plunged by a third or half or more you're not likely to forget those negative experiences anytime soon now you and I both know that the

best investors relish Corrections and bare markets because that's when everything goes on sale by now I'm sure you remember Warren Buffett wants to be greedy when others are fearful and sir Templeton made his fortune do you remember that's right at the point of Maximum pessimism at this point I'm guessing that your rational mind knows that market crashes are a wonderful opportunity to build long-term wealth not something to fear but negativity bias makes it hard for the average investor to act on this knowledge why because in the midst of Market turmoil our brains are wired to

bombard us with memories of those negative experiences in fact there's a part of the brain the amydala that acts as a biological alarm system flooding the body with fear signals when we're losing money even a minor Market correction is liable to trigger our negative memories causing many investors to overreact because they're afraid that the correction could turn into a crash during a bare Market this fear reflex goes into overdrive making investors anxious that the market will never recover to make matters worse the psychologist Daniel and aist verski also demonstrated that Financial losses cause people twice

as much pain as the pleasure they receive from Financial gains the term used to describe this mental phenomenon is loss aversion the trouble is losing money causes investors so much pain that they tend to act irrationally just to avoid this possibility for example when the market is plunging many people sell their battered Investments and go to cash at exactly the wrong moment instead of snapping up Bargains at once in a-lifetime prices one reason why the best investors are so successful is that they override this natural tendency to be fearful during periods of Market turmoil take

Howard marks in the last 15 weeks of 2008 when financial markets were imploding he told me that his team at Oak Tree Capital Management invested about $500 million a week in distressed debt that's right they invested half a billion dollars a week for 15 straight weeks during a time when many thought the end times had arrived it was obvious that everybody was suicidal Howard told me in general that's a good time to buy by focusing calmly on this bargain hunting opportunity Howard and his teammates made billions of dollars in profits when winter ended and spring

began this would never have been possible if they had succumbed to fear the solution preparation is key Key by failing to prepare you are preparing to fail Benjamin Franklin first of all it's important to be self-aware once we know that we're vulnerable to negativity bias and loss aversion we can counter these psychological Tendencies after all you can't change something if you're not aware of it but what specific measures can you take so that fear won't knock you off course even in the most tumultuous times at we discussed in chapter 7 Peter maluk had tremendous success

in helping his clients navigate the global financial crisis one reason he educated them in advance about the risks of a bare market so it wasn't as surprising or scary when it actually occurred for example he explained how each asset class had performed in previous bare markets so they were prepared mentally for what could happen they also knew in advance that Peter planned to use this turmoil to their advantage selling conservative invest investment such as bonds and deploying the proceeds to buy more stocks at bargain prices we provided certainty about the process says Peter so they

knew exactly what to expect this dramatically reduced their uncertainty in other words the single best way to handle Market turmoil and the fears it can trigger is to be prepared for it as we've discussed at length one critical way to prepare is to have the right asset allocation it also helps to write down your reasons for investing in each of the Assets in your portfolio since inevitably there will be times a particular asset class or investment performs poorly sometimes for several years many investors lose Faith because they're so focused on the short term but when

the going gets tough you'll be able to look over these notes and remind yourself why you own each asset and how it serves your long-term goals this simple process can take a lot of the Heat and emotion out of investing as long as your needs haven't changed and your assets are still aligned with your goals you can sit tight and give your Investments the time they need to prove their value it also helps immeasurably to have a financial adviser who can talk you through your fears and concerns during the most difficult times reminding you that

the strategy you agreed upon in writing when you were calm and unemotional is still valid it's a bit like flying a plane through a really rough storm most Pilots would be just fine if they were flying solo but it's a whole lot easier when you know that you've got an experienced co-pilot in the seat beside you remember even Warren Buffett has a partner mastering your mind now that you're aware of these destructive psychological patterns you're much better positioned to guard against them given that we're human beings we're bound to trip up from time to time

after all the biases we've discussed in this chapter are part of our ancient survival software so we can't expect to eliminate them totally but as guy spear says this isn't about getting a perfect score even small improvements in our Behavior can deliver enormous rewards why because investing is a game of inches if your returns improve by say two or three percentage points a year the cumulative impact over decades is astounding thanks to the power of compounding the systematic Solutions we've discussed in this chapter will go a very long way helping to avoid or minimize the

most expensive mistakes that the majority of investors make for example these simple rules and procedures will make it easier for you to invest for the long term to trade less to lower your investment fees and transaction costs to be more open to views that differ from your own to reduce Risk by diversifying globally and to control the fears that could otherwise derail you during bare markets will you be perfect no but will you do better you bet and the difference this makes over a lifetime can amount to many millions of dollars now you understand both

the mechanics and the psychology of investing you know what it takes to master your mind so that you can invest successfully over the long term the knowledge you've acquired is priceless and it can enable you and your family to achieve total Financial Freedom so let's get to our final chapter and learn how to create real and Lasting wealth chapter nine real wealth making the most important decision of your life every day think as you wake up today I'm fortunate to be alive I have a precious human life I'm not going to waste it the dolly

Lama if this book helps you to become financially free I'll be thrilled for you but if I'm honest I don't believe that's enough why not because having Financial wealth doesn't guarantee you'll be wealthy as a human being anybody can make money as you've learned in the previous chapters the tools and principles you need are pretty simple for example if you harness the power of compounding stay in the market for the long term diversify intelligently and keep your expenses and taxes as low as possible your odds of attaining Financial Freedom are extremely high but what if

you Achieve Financial Freedom and you're still not happy many people dream for decades of becoming millionaires or billionaires then when they finally reach their goal they say is this all there is and believe me if you get what you want and you're still miserable then you're really screwed when people dream of becoming rich they're not fantasizing about owning millions of pieces of paper with pictures of deceased notables on them what we really want are the emotions we associate for money for example the sense of Freedom or security or comfort that we believe money will give

us or the joy that comes from sharing our wealth in other words it's the feelings we're after not the money itself I'm not belittling the importance of money if you use it well there are countless ways in which it can enrich your life and the lives of those you love but real wealth is about so much more than money real wealth is emotional psychological it's spiritual if you're financially free but you're still suffering emotionally then what kind of Victory is that maybe this strikes you as an odd degression in a book about money and investing

but I'd feel remiss if I wrote an entire book that shows you how to achieve Financial wealth while neglecting to share with you the secret of how to achieve emotional wealth fortunately you don't have to choose between them as you'll discover in this chapter it's possibly financially rich and emotionally Rich this my friend is the Ultimate Prize to my mind the chapter you're about to hear is undoubtedly the most important in this Audi book why because what you're about to hear is that there is a single decision you can make today that can truly change

the course quality of the rest of your life this one decision if you consistently act on it will bring you more joy more peace of mind more real wealth than most people can imagine and best of all you don't need to wait 10 20 or 30 years if you make this one decision today you can be rich right now the truth is I want to share this idea with you because it's changed my life so powerfully so if you're ready to join me let's begin the final step in our journey an extraordinary quality of life

my entire life has been focused on helping people turn their dreams into reality I've visited more than 100 countries and have spoken with people from every corner of the earth about what they really want and you know what I found every culture has different beliefs and values yet there are fundamental needs and desires that all human beings share what I found is wherever I go we all crave an extraordinary quality of life now for some people that means owning a beautiful home with an Exquisite Garden for others it means raising three wonderful children for some

it might mean writing a novel or a song for others it means building a billion- dooll business and for others it just means being closer with God in other words it's not about living somebody else's Dream It's about living a magnificent life which is really life on your terms but how can you achieve this how can you close the gap between where you are today and where you really want to be the answer you need to master two entirely skills the science of achievement the first is what I call the science of achievement in every

field There are rules of success that you can either break in which case you'll be punished or follow through on in which case she'll be rewarded for example there's a science to health and fitness biochemically we're all different but there are fundamental rules that you can follow and if you do you're going to thrive you're going to have high levels of energy if you violate those rules you're going to pay the consequen it's the same in the financial world just think about what you've learned in this audio book the most successful investors left a trail

of clues for us to follow by studying these patterns and applying these tools strategies and principles in your own life you'll accelerate your journey to success it's obvious right sew the same seeds of the most successful people and you'll reap the same rewards that's how you'll Achieve Financial Mastery when it comes to the science of achievement there are three key steps that can enable you to achieve whatever it is you want can you think of something fantastic that you've achieved in your life that once seemed impossible maybe it was a relationship or maybe it was

a dream job or a successful business or owning you know some special sports car think about how this dream went from being impossible to actually being in your life what you'll find is that there's a path to achievement that is followed and it's fundamentally has three steps the first step to to achieving anything you want think about it when you really wanted something badly enough you begin to focus on it focus is power remember wherever your focus goes your energy flows when you put your entire focus on something that really matters to you when you

can't stop thinking about it every day this intense focus unleashes a burning desire that can help you obtain what might otherwise be Out Of Reach here's what's going on beneath the surface a part of your brain called the reticular activ system also known as the Rees is activated by your desire and this mechanism draws your attention to whatever can help you achieve your goal the second step is to go beyond hunger and drive and desire and consistently take Massive Action a lot of people dream big but never get started to succeed you need to take

Massive Action it is the cure all but you also need to find the most effective execution strategy which means you got to keep changing your approach till you find what really works now you can speed this process up exponentially by modeling people who have already been successful which is why we focus so intensely on the money Masters like Warren Buffett and Ray Dalia and Jack Bogle and David Swinson by studying these incredibly successful Role Models you could learn in a week what might otherwise take you a decade the third step to achieving whatever you want

is what I call Grace some people call it luck some people call it God here's what I can tell you based on my life experience and I think you find this true in your own the more you acknowledge Grace in your life the more you seem to have more of it I've been amazed to see how a deep sense of appreciation brings more and more grace into our lives of course you need to do everything in your power to achieve your goals but there are still things over which you have no control even the fact

that you're born at this time in history you're given a brain and a heart you didn't have to earn that you get to benefit from the awesome power of modern Technologies like the internet none of which was within your control nor did you create these gifts now you know these three basic keys to achievement if you look at something once was impossible and now is in your life I'm sure you got excessively focused on it I'm sure you took Massive Action and Grace has flown to you because it's in your life today but as important

as achievement is there's a second skill that you'll need to master if you truly want to create an extraordinary life this is the skill I call the art of fulfillment the art of fulfillment for decades I was focused obsessively on the science of achievement on learning to master the external world and on figuring out ways to help break through and solve every challenge I could but I got to tell you I really believe now in my heart and soul that the art of fulfillment is an even more important skill to master why because if you

master the external world without mastering the internal world how can you truly sustain happiness that's that's why my greatest Obsession today is truly the art of fulfillment the 869 million painting as I mentioned earlier we each have a different idea of what constitutes an extraordinary quality of life for us as individuals you know put this in another way what fulfills you is likely to be different than what fulfills me or anyone else our needs and our desires are infinitely and marvelously diverse one experience that brought this home to me was an unforgettable day that I

spent with my dear friend Steve win a few years ago Steve phoned me on his birthday to see where I was as luck would have it we were both staying in our vacation homes in Sun Valley Idaho so Steve invited me over to hang out he told me on the phone Tony when you get here I've got to show you this painting I've covered it for more than a decade and I out bit everyone at SES 2 days ago and I finally bought it it cost me 86.9 million can you imagine how intrigued I was

to behold this precious treasure that my friend had dreamed of for so long I was imagining some sort of renissance Masterpiece as I was driving over something you might see in a museum in Paris or London but when I got to Steve's house you know what I found a painting of a big orange Square I couldn't believe it I took one look at it and jokingly said give me 100 bucks worth of paint and I can duplicate this in an hour Steve wasn't overly amused apparently this is one of the greatest paintings by the abstract

artist Mark Rothco so why am I telling you this story because it perfectly illustrates the fact that we're all fulfilled by different things Steve is so much more sophisticated than I am when it comes to Art so he can detect a depth of beauty emotion and meaning in those breast Strokes that I couldn't see to put it in another way one man's orange splotch is another man's $ 86.9 million fantasy now while it's true that we're all different there are still common patterns when it comes to achieving fulfillment if if that's your goal what principles

or patterns of behavior do you think you can model well the first principle that makes us fulfilled is that we must keep growing everything in life either grows or dies that goes for relationships businesses or anything else if you don't keep growing you'll become frustrated and miserable no matter how many millions you have in the bank in fact I can tell you the secret to happiness is one word progress progress equals happiness even if you're not there but you're making progress to things that matter you're going to start to feel more fulfilled the second principle

is you have to give to feel Fully Alive if you don't give there's only so much you can feel inside you'll never feel absolutely alive as Winston Churchill said quote you make a living by what you get you make a Life by what you give whenever I ask people about the most fulfilling aspects of their lives something that really has touched them I ask them what's the first thing you want to do and they almost always say I want to share it with somebody I love that's because the true nature of a human being isn't

to be selfish we're driven by our desire to contribute at a deep level we want to share it makes our life richer to share if we stop feeling that sense of contribution we'll never feel truly fulfilled it's also worth reminding ourselves of the obvious truth that becoming financially rich is not the key to fulfillment as you and I both know people often chase after money in a delusional belief that it's a kind of magic potion that's going to bring joy meaning and value to their lives but money alone will never give you an extraordinary life

over the years I've spent a lot of time with billionaires and some of them are miserable I wouldn't say You' feel sorry for them but almost and if you're not happy you can't have a magnificent life no matter how fat your wallet may be remember money doesn't change people it just magnifies who they really are if you have a lot of money and you're mean you have a lot more to be mean with if you have a lot of money and you're generous you'll naturally give more more what about professional success well it's wonderful if

your success brings you a sense of growth and contribution we all need that to feel fulfilled but I'm sure you've met plenty of successful people who never seem to be happy or fulfilled and how does that qualify a success in fact I truly believe in my heart and soul that success without fulfillment is the ultimate failure let's think for a moment about a painful example of this a national treasure in 2014 we lost someone who I consider to be a national treasure the actor and comedian Robin Williams over the last couple of years I've spoken

to audiences all over the world about this astonishingly Gifted Man and again and again I asked the same question how many of you in this room loved Robin Williams and I'll tell people don't raise your hand if you liked him only if you loved him and you know what every place I go from London to Lima from Tokyo to to Toronto about 98% of the people in the audience raised their hands now here's a question was Robin Williams a master of the science of achievement absolutely he started out with nothing but then he decides he

wants to Star on his own TV show and he does it how many people say they're going to go to Hollywood and become a star and actually achieve it he doesn't stop there then he decides he wants to have a beautiful family and he creates it then he decides he wants more money than he can spend in a lifetime and he makes that happen then he decides he wants to become movie star not just TV and he does it then he decides he wants to win an Oscar for not being funny his number one skill

and he does that too here's a man who has it all who achieved everything he'd ever dreamed of achieving and then he hanged himself think about that he hanged himself in his own home leaving behind hundreds of millions of people love him to this day and even more devastating leaving behind his wife and children traumatized and broken hearted when I think about this terrible tragedy I'm struck by one simple lesson if you're not fulfilled you have nothing Robin Williams achieved so much that our culture has conditioned us the value including Fame and Fortune yet despite

all his gifts it was never enough he suffered for decades trying to deal with his stress through the use and sometimes the abuse of alcohol and drugs near the end of his life he was also diagnosed with a progressive neurological disorder Louis Body Disease his wife Susan wrote in the medical journal neurology quote Robin was losing his mind and he was aware of it can you imagine the pain he felt as he experienced himself disintegrating look Robin Williams was a good man who cared deeply about others a man who contributed so much Joy to the

World despite his long battle with addiction depression and ill health but in the end he made everybody happy except himself this reminds me of the importance of of the safety instructions that they announce whenever you get on an airplane quote in the event of an emergency please put on your oxygen mask before assisting others end quote it sounds callous and selfish when you first hear it I'm going to put the mask on myself and not my child what are you nuts but it actually makes sense unless you help yourself first how can you help others

you'll be in trouble you won't be able to help the people you care about believe me I know that Robin Williams is an extreme example and I'm not worried you're going to go kill yourself but I see so many people even the richest even the most successful people who are missing out on so much of the joy and fulfillment they deserve to experience and I want you to experience that joy and fulfillment today not someday in the future yet nobody teaches us really how to be happy to suffer or not to suffer that is the

question a man is but the product of his thoughts what he thinks he becomes Gandhi let me tell you the story of what changed my own life over the last two years I've been on a marvelous journey of the mind and maybe even more importantly of the heart I'm always looking to grow personally so I'm constantly exploring different tools strategies and ideas to help reach a new level a couple years ago I went to India and I was visiting a dear friend of mine named Krishna G who was equally fascinated by these questions about how

to achieve an extraordinary quality of life and as my friend knows I've taught for many years about the power of being in energy-rich State a peak state if you will where you can accomplish anything where your relationships are filled with passion where there's energy pulsing through You by contrast some people allow themselves to live in more of an energy poor state where the body feels lazy the Mind feels sluggish and you can't really do anything much but worry get frustrated and snap at people my friend said to me one day what if you use different

words to describe those two states as he explained there are really only two states you can live in in any given moment of your life either you're in a high energy state that could be described as what he called a beautiful state or you could be in that low energy State and often characterized by internal pain that could be described often as a suffering State he told me that his spiritual vision was really simple he's committed to living every day in a beautiful state no matter what happened in his life that was the gift he

wanted to give those around him and himself Krishna G then echoed what I and so many others have taught for years we can't control all the events in our lives but we can control what those events mean to us and thus what we feel and experience every day of Our Lives by consciously choosing and committing to live in a beautiful state my friend believed that he could not only enjoy so much more of his life but he could also have so much more to give his wife his child and the World At Large I thought

a lot about what he'd said and now look I'm an achiever if you're listening to this Audi book you probably are too and we Achievers we don't believe that we ever suffer do we no we just have stress in fact if you told me two years ago that I was suffering I would have laughed at you I have a Heavenly wife four glorious children total Financial Freedom a mission that inspires me every day of my life but then I started to take the time to really look deeper and I allowed myself to see that yes

there are times where I fall into a suffering state for example I get frustrated or pissed off or overwhelmed or you know worried or stressed about stuff and at first I think well those emotions are just part of life they're no big deal in fact the truth is I even convinced myself that I needed them as fuel to move me forward but this was just my mind playing tricks on me see the trouble is the human brain isn't designed to make us happy and fulfilled it's designed to make us survive this 2 milliony old orgon

is always looking for what's wrong for what can hurt us so that we can either fight it or flight from it and if you and I leave this ancient survival software running the show what do you think the chances of really enjoying your life are an undirected mind operates naturally in survival mode constantly identifying magnifying these potential threats to our well-being the result a life filled with Stress and Anxiety no matter how much money you have and yet most people live this way since it's really the path of least resistance they make unconscious decisions based

on habit and conditioning and that the mercy of their own minds they assume that it's just inevitable part of life to get frustrated and stressed and sad and angry in other words to live in a suffering State they think is natural just like I used to but I'm happy to tell you there's a whole another path available one that involves directing your thoughts so that your mind does your bidding not the other way around this is the path I chose and it's the one I really want to entice you into in this chapter I decided

directly that I was no longer going to live in a suffering State I decided what I was going to do is everything in my power to live in a beautiful state for the rest of my life every single day and become an example of what's humanly possible not something fake and phony something real something that has the joy that we all deserve to have and after all think about it there's nothing worse is there than a rich and privileged man or woman who's angry and ungrateful flying high and falling low now before we go any

further let's just clarify the difference between these two emotional and mental States let's talk first about a beautiful state when you feel love or Joy gratitude awe playfulness ease creativity Drive caring growth curiosity appreciation or anything like that you're in a beautiful state and you know what it feels like in this state you know exactly what to do and you do the right thing in this state your spirit and your heart is alive and The Best of You comes out nothing feels like a problem everything has flow and if there is a challenge you just

solve it quickly you don't feel a bunch of fear or frustration because you're in harmony with your true Essence by contrast a suffering state is when you're feeling stressed out worried frustrated angry depressed irritable overwhelmed resentful or fearful any of those States or ones like it are suffering States we've all experienced these and countless other negative emotions even if we're not always Keen to admit it but as I mentioned earlier most Achievers prefer to think they're stressed than fearful but stress is just the achiever word for fear if I follow the trail of your stress

it'll take me to your deepest fear so what determines whether you're in a beautiful state or a suffering State you might assume that it depends mostly on your external circumstances if you're relaxing on a beach eating ice cream of course it's easy to be in a beautiful state but in reality the mental and emotional state in which you live is ultimately the result of where you choose to focus your thoughts in fact the state you're in is the result of the last thought you've had let me give you an example from my own life for

the last 25 years I've flown around the world doing seminars and specifically I've flown between America and Australia usually three times a year nowadays I'm privileged to have my own plane which is a little bit like having a high-speed office in the sky for better or worse there's no need to ever disconnect from work and I'm so grateful for the privilege but I can vividly remember the dread I used to experience whenever I get on a commercial flight to Australia and i' wonder how I could possibly live without my connection emails and texts for the

next 14 hours How Could my business possibly survive without me then one magical day I was on a quanis Airlines flight to Sydney Australia when the captain proudly announced that the plane had International internet access for the first time all around me people started cheering and clapping and high-fiving one another it was as if God had descended from on high and entered the plane I didn't stand up and do a jig but I have to confess in my mind I was clapping two but then after 15 minutes of giddy Delight do you know what happened

you guessed it we lost internet access it didn't work for the rest of the flight and it probably still not working after all these years so how do you think passengers reacted to the change we were crushed one minute we're euphoric the next minute we're cursing our terrible misfortune what's amazing to me is how quickly our perspective changed moments earlier internet access had been a miracle now it was an expectation it wasn't being met all we could think about was that the airline had violated our inable right to internet access a right that hadn't existed

until that very day in our outrage we'd instantly lost sight of the Wonder that we're flying through the air like a bird crossing the globe in a matter of hours and watching movies or sleeping as we flew Birds can't do that isn't it ridiculous how jaded we are and how upset we allow ourselves to become over little things I mean when it rains on our parade when we don't get what we want to expect we're so quick to give up our happiness and sink to a state of suffering now let's be honest everyone has his

or her own favorite flavor of suffering so here's my question for you what's your favorite flavor of suffering which energy sapping emotion do you tend to indulge in most is it sadness frustration anger despair self-pity jealousy worry the specific details don't really matter because they're all states of suffering and all this suffering is really just a result of undirected mind that's hellbent on looking for problems think for a moment about a recent situation that caused you pain or suffering of some type you know a time when you felt frustrated or angry or worried or overwhelmed

or stressed whenever you feel emotions like these your sense of suffering is caused by your undirected mind engaging in one or more of these particular patterns of perception consciously or unconsciously you're focused on at least one of these three triggers for suffering the first is loss when you focus on loss you become convinced that a particular problem has caused or will cause you to lose something you value for example you might have a conflict with your spouse and it leaves you feeling that you've lost love or respect or Joy together but it doesn't have to

be something someone else did or failed to do that caused you to perceive that sense of loss the sense of loss can be triggered by something you did or something you failed to do for example if you procrastinated and now you've lost a business opportunity you're certainly going to probably feel a sense of suffering whenever we believe in the illusion of loss we suffer the second trigger is the word or thought of less when you focus on the idea that you have less or because something happened you will have less of something you value then

you're going to suffer for example you might become convinced that because a situation is occurred or a person acted a certain way that you'll have less Joy less money less success or some other pain painful consequence once again less can be triggered by what you do or don't do or what others do or fail to do and finally the third trigger that makes people feel suffering inside is the concept of never see when you focus on the idea or become consumed by a belief that you'll never have something you value you'll never have that same

love that joy that respect that wealth that opportunity then you're doomed to suffer you're never going to be happy you're never going to become the person you want to be this pattern of perception is a Surefire route to pain remember the mind is always trying to trick us into a survival mindset it's not a bad thing it's trying to make sure we survive but there's no saber-tooth tiger to run from today so now we get into suffering thinking we've lost respect or we don't have enough money or things that quite frankly are not truly survival

at this stage of Our Lives we can figure it out so the secret is Never Say Never don't allow yourself to be triggered by an illness or an injury or something your brother said or did and allow yourself to believe you'll never get over it that's just the mind in fear now look these three patterns of focus account for most if not all of our suffering and you know what's crazy it doesn't even matter if the problem is real or not whatever we focus on we feel regardless of what actually happened have you ever had

the experience of thinking that friend did something horrible or took advantage of you you might have gotten really angry and upset only discovered that you were dead wrong and the person didn't deserve all that blame in the midst of your suffering when all those negative emotions are swirling in your head it really didn't matter your focus created your feelings and your feelings create your experience notice too that most if not all of our suffering is caused by focusing or more likely obsessing about ourselves and what we might lose have less of or never have even

parents will often say to me well I'm just so worried I'm so stressed I'm so angry with my kids and what I discover as I dig underneath is that they're really angry or stressed with themselves because they feel they failed their kids they're really focused on their own failure that's where the emotion's coming from otherwise they would just focus on helping their kids but here's the good news once you're aware of these three patterns of focus you can systemically change them thereby freeing yourself from the habits of suffering it all starts with a realization that

this involves a conscious choice either you master your mind or it Masters you I always tell people the secret to living an extraordinary life is take control of the mind since it alone will determine whether you live in a suffering state or a beautiful state regardless of your Financial Freedom or lack thereof in the end it's all about the power of decisions our lives are shaped not by our conditions but by our decisions if you look back on the last 5 or 10 years I'd be willing to bet that you can recall a decision or

two that's truly changed your life maybe there's a decision about where to go to school or what profession to pursue or who to choose to love or even marry and looking back on it now can you see how radically different your life would be today if you made a different decision back then these and so many other decisions determine the direction of your life and they can change your destiny so the big question is what's the biggest decision you can make if you want to change your life for the better if you wanted to change

your life right now in the past I would have told you that the most important decision is who you're going to spend time with who you decide to love after all the company you keep will powerfully shape who you become but I have to say over the last two years my thinking is evolved what I've come to realize is as important as that decision is perhaps the most important decision that you're ever going to make in your life is are you committed to being happy no matter what happens to you CU if you're not I

can promise you the mind will take over and find things to be upset about no matter how much money or wealth you've accumulated to put this another way will you commit to enjoying life not only when everything goes your way but also when everything goes against you when Injustice happens because it happens to all of us when someone screws you over when you lose something or someone you love or when nobody seems to understand or appreciate you unless we make this definitive decision to stop suffering now and live in a beautiful state our survival mind

will create suffering whenever it desires whenever our expectations or our preferences aren't met what a waste of so much of our lives this is a decision that can change everything in your life please hear me and it can change it starting today not 10 20 years from now but it's not enough just to say that you'd like to make the change or you'd prefer to be happy no matter what you have to own this decision you got to do whatever it takes to make it happen and cut off any possibility of turning back I always

tell people if you want to take the island you got to burn the boats if you decide to take 100% responsibility for the state of your mind the state of your emotion and your experiences of life you will be free what it really comes down to is drawing a Line in the Sand today and declaring I am done with suffering I'm going to live every day to the fullest and find the juice in every moment including the ones I don't like because life is too short to suffer beware of Godzilla there are many different techniques

you can use to take control of your mind and achieve a beautiful state this is such an important subject that I plan to write an entire book about it but you don't need to wait to begin this life-changing Journey you can decide right now that you'll no longer settle for a life that's less than the one you deserve to feel experience and give from all you have to do to change your life forever is commit your heart and soul to find something to appreciate in every moment and there's always something if we retrain our minds

that's when you'll experience the real wealth of ongoing happiness so let me ask you are you up for making this bold and Brilliant decision right now if so let's support you by reviewing two simple techniques that I found to be enormously helpful in staying on course the first tool I created for myself is really simple I call it my 92nd rule whenever I start to suffer and the way I know it is I feel some stress in my body I feel tension in my stomach or my chest or holding of my breath tension is the

trigger that's that's how you know you're beginning what I do is I give myself 90 seconds to stop it so I can return to living in a beautiful state sound good right but how do you actually do it let's say I'm having an intense conversation with an employee at one of my companies and I discover he or she has made a mistake that could cause an array of problems naturally my brain leaps Into the Danger detection mode launches this ancient survival software and starts bombarding me with thoughts about all the ways I and our whole

team might suffer as a result of their poor decisions or actions in the past I could have easily been swept up in a whirlwind of worry frustration or anger a MM of mental suffering but here's what I do now as soon as I feel that tension rising in my body I catch myself and the way I catch myself is really simple I gently breathe and slow things down I step out of the situation and start to distance myself from those stressful thoughts my brain's generating it's natural for these thoughts to arise by the way they're

just thoughts when you slow down you realize you don't have to believe these thoughts or identify with them you can step back and say to yourself wow look at these crazy thoughts going by there goes that crazy mind again now why is this helpful because the problem isn't the existence of our negative destructive limiting thoughts everyone has them what hurts us is the habit of believing those thoughts so for example if you ever found yourself getting so mad at someone you thought to yourself I'm going to throttle this guy I could kill him I'm guessing

though you didn't kill them why because you didn't believe your thoughts you were just blowing off steam at least I hope you didn't kill them so once I detach myself from those unwanted thoughts I start to focus my mind and finding something to appreciate see you can't suffer and appreciate simultaneously the survival brain is always searching for what's wrong but there's always something to appreciate as well as I always say what's wrong is always available but so is what's right maybe it's the simple fact that I'm alive and well that I'm still breathing maybe it's

the fact the person who made the mistake is a beautiful human being and I can appreciate how hard they work and I can appreciate their highest intentions maybe it's the fact that I have the awareness to see that I'm suffering and I have this ability to stop it immediately and I can be appreciative of that it doesn't matter what you appreciate what matters is by shifting your focus to appreciation you slow down that survival mechanism and you bring back your heart your soul and your spirit the emotions of love joy and giving Will all trigger

the same positive transformation inside of you this shift in your focus creates a space for your spirit to enter the game so you don't get stuck inside your head I always tell people get in your head you're dead if you keep doing this with real consistency you actually rewire every situation so your experience of life becomes one of thankfulness and joy and you want to know what's miraculous before you know it you'll feel free the thing people think money will give them only happens when we stop the suffering we stop believing those stressful thoughts when

you let go and start to laugh at things that used to drive you nuts this all makes for such a happier life and healthier relationships while also helping you think more clearly and make smarter decisions as well after all when you're stressed and angry or sad or fearful you're not likely to find the best Solutions but when you're in a beautiful state the answers come more easily it's like turning a radio the right frequency so the static disappears you get to hear the music loud and clear now when I first started use this technique I

should have called it the 4our rule or maybe the 4 day rule because sometimes it took me a long time to stop suffering you know I got so much momentum into suffering that it was hard to change but like any skill the more you use it the more you do it the better you get I found that it really helps when I catch myself quickly instead of letting those negative thoughts linger longer than 90 seconds why well think about it the best time to kill any monster is when it's little you don't to wait till

it's Godzilla and devouring your entire city your entire life now don't get me wrong I'm certainly not perfect in this and there's certainly times when I get hook still but I use this 92nd rule so often that it's gone from being a discipline to becoming just a habit and it's a beautiful one because it produces freedom and joy and happiness and love and gratitude this one technique is giv me so much freedom freedom from those destructive emotions used to rob me of my joy and my peace of mind listen the emotions still come that's how

the mind works but they disappear quickly because they're not welcome and they're overwhelmed by the power of appreciation enjoyment that I built into me and as a result I can tell you honestly as great as my life ever was it's more beautiful than it's ever been and that's what I want for you what you'll also find when you practice this 9 second rule and break your pattern and go straight for enjoyment is that you're going to be much more present for the other people when you're not caught up in the thoughts of lost lesson never

when you're in a beautiful state you can give so much more to everyone you love and you know what there's power in happiness there is a Happiness Advantage in life happiness is an advantage in your relationships it brings you closer in business people want to do business with you in your health because it makes you physically better your immune system stronger when you're happier and everything Everything You Touch really becomes different when you live in a beautiful state no matter what that's the ultimate Freedom that's the Ultimate gift you can give to those you love

it's the experience of absolute abundance an abundance of Joy that's the true wealth we all want even better you can possess this abundance again right now instead of having to wait until you acquire a certain amount of money and the good news is this decision rests entirely in your hands you alone give yourself the happiness Edge unchain your heart the power of alignment to overcome fear the best thing is to be overwhelmingly grateful Sir John Templeton billionaire investor the second tool that I'd like to share with you is a simple two-minute gratitude meditation that I've

taught to tens of thousands of people in my seminars over the last year or so I've also recorded this meditation and made it available online onl at unshakable docomo app so you can listen to the audio anytime there too but first let me give you a quick word of explanation about the science behind this meditation if you went to a hospital and we hooked you up to an EEG and an EKG what we've be measuring is the electrical impulses in your brain and in your heart I'm sure you've seen these either at a hospital or

maybe on television what you'd see when you're stressed out and suffering mentally is that the lines on the EEG and the lines in the EKG both look very Jagged but the jaggedness from your heart rhythms would look nothing like the jaggedness for your brain rhythms in other words they're out of sync but scientific Studies have shown that this short meditative Focus can dramatically alter those electrical impulses in your brain and heart and what's miraculous is the jagged lines on the EG and EKG tend to become rounded after this meditation what's even more powerful is the

lines from the heart and the Brain become almost identical why because the mind and heart and operating as one that's what happens naturally when you're in a state of flow the simple goal of this meditation the one we're about to do is to change your emotional state by filling you with a sense of gratitude and to use that emotion to solve whatever challenges have been causing you to suffer why gratitude because you can't be grateful and angry simultaneously you can't be grateful and fearful at the same time if you want a miserable life there's no

better way to achieve it than focus on anger and fear but if you want a happy life if you want to live a beautiful state there's nothing that works better than a focus on gratitude so if you're ready to test drive the technique here's what I'd like you to do I'm going to just walk you through it right now and unlike the book since you're listening to me in audio let's just do it so the first step is stand up if you would and shake out your body now if you're in a car that might

be difficult so just get yourself so that you got some energy there just shift your body standing up you know a couple jumping jack ta make a strong move just get yourself in a strong state for a couple moments and then as you're standing what I want you to do is pick an aspect of your life where you have some unfinished business something you need to change or resolve in your professional life or personal life it might be an issue that you've been putting off dealing with because you got so much going on your life

to deal with us would be so frustrating or upsetting or stressful maybe it's a problem at work or a conflict or a difficulty with a family member will you think of on right now let's just do this right now and then on a scale from 0 to 10 once you think of the problem you know 10 being the most upsetting zero being not upsetting at all where would you rank this challenge is it a five is it a six a seven eight nine or a 10 ideally pick an issue that when you think about it

and maybe right now it's not bothering you but if you think about it it's at least a six or a seven because if you pick something at least that high or more then you'll be able to feel the true impact of this simple little technique okay so as soon as you got that breathe deep you know what unfinished business the problem you need to solve you've been putting off let's go to step two and in step two what I want to do now is I want you to set aside that situation for a moment just

forget about it and I'd like if you would to place both your hands on your heart right now breathe deep in your heart and feel your heart beating i' like if you were to please close your eyes and just breathe deeply in your heart and as you breathe in your heart feel both your hands on the heart and feel as you breathe deeply the blood and the oxygen flowing into your heart feel the power of your heart feel the strength of your heart what are you grateful your heart has guided you to do or to

enjoy or you appreciate or to give and now as you continue to touch your heart and breathe deeply in your heart we're going to go to step three with your eyes still closed I want you to just feel grateful for your heart feel what a gift your heart is breathe deep into it with both your hands on it filling up with gratitude remember every day it beats a 100,000 times a day it pumps blood through 60,000 miles of blood vessels it's enough to go around the earth twice at the equator if you put them side

by side that's what's inside you and you know what you don't even have to think about your heart and yet it's always there for you even while you sleep keep breathing in your heart and feeling grateful it's the ultimate gift and yet you didn't have to earn it did you it was given to you you didn't have to prove your worth something loved you so much that it gave you this heart and as long as it beats in your chest you live what a gift feel the power of that heart and as you're feeling the

power of your heart will do step four breathe in your heart feel that deep gratitude for your heart feeling that physical heartbeat and as you're doing this now we're going to take two minutes and that's all it'll take during these two minutes I want you to think of three different experiences in your life that if you wanted to you could feel incredibly grateful for right now they could be little experiences or big experiences it really doesn't matter just something you could step into the memory of that as if you were there and we're going to

do them one at a time they could be big experiences or small doesn't matter they could take back to your childhood or they could be from this week or even today and then as you begin now to think of the first experience I'd like to ask you to breathe deep and as we go into step five step into that memory step into it right now as if you were there back in that moment seeing what you saw reliving it as if you were there and fill up with a sense of gratitude for that moment feel

it breathe it own it feel so grateful for this moment fill yourself up with gratitude because when you're grateful there's no sadness when you're grateful there's no hurt there's no anger remember you can't be grateful and angry simultaneously you can't be grateful and worried simultaneously so we cultivate gratitude we have a different life are you experiencing it breathe see that memory and fill up with gratitude for that special moment in your life that magic moment that sacred moment that moment now think of a second experience another moment from your life that you could feel deeply

grateful for a miracle an act of Grace Act of love a Magic Moment something you treasured step in that moment now like you're there and fill yourself up fill yourself up with the Beauty and the joy of that experience fill yourself up with gratitude for that moment see what you saw hear what you heard feel what you felt appreciate that take it in when you really feel strong gratitude for that second moment let's go on now to the third moment a third moment you could feel so grateful for but don't just think about it step

into that experience like you're there Step into the moment step back into your body as if you were there and feel that moment feeling so grateful for it savor it feel fill yourself up with joy with the miracle with the gift of that experience and just feel the beauty the grace the appreciation the enjoyment the gratitude for that moment and now while you're in this beautiful state with your eyes still closed feeling these beautiful States feeling so grateful now we do step six and I want you to think now of an experience that was a

coincidence we all love love coincidences a coincidence that really turned into something beautiful in your life it wasn't something you planned for it's just something that brought great love or Joy or happiness to your life maybe it was a chance experience that led to a meeting with a person you now love or someone who changed or enriched your life in some way or maybe it led to a new career choice or you had this coincidence happen and it brought New Opportunities or growth to your life again we all love coincidences because we didn't do them

they happened for us we didn't do anything to make it happen was this a coincidence or were you guided I have a core belief that has often pulled me out of pain and negative meanings or suffering in my soul I really believe that if we're honest and if we step out of our fear or our pain or our suffering and we look at it from a higher perspective I really believe in my soul that life is always happening for us not to us even the most painful situations that have happened in our life often caused

us to grow grow expand or deepen I'm sure you have been through some events in your life that you never want to go through again and that you never want anybody you care about to go through but if you look back on the situation five or 10 years later often we see the higher purpose in it we see how that tough situation made us care more or made us stronger or made us more driven to help even those moments of suffering can be great triggers for growth so find that moment and take in and be

grateful for it as well give thanks for the coincidences of our life and be grateful to the universe to God to whatever you believe in and Trust in this you know the universe is billions of years old and it's always taken care of you as long as you've been alive you've not lost your way so finally as you breathe into your heart and you feel this tremendous gratitude for the guidance for the surprises for the coincidences and for the beauty of your life now in this beautiful grateful state in this beautiful state of being I

want you to think of what was bothering you earlier you know the unfinished business we talked about whether it was at work or at home and all I want you to do is stay in your heart stay in this beautiful state the whole time don't get in your head stay in your heart keep touching it and repeat this phrase and finish it in your heart all I need to remember about that situation the one that was bothering you all I need to focus on all I need to remember all I need to believe all I

really need to do is what and let your heart give you the answer don't filter your first instinctive heartfelt thoughts are usually the right ones so stay in that beautiful state ask you that question again all I need to remember about that situation all I need to focus on all I need to believe all I need to do is what and your heart knows the answer doesn't it yes it does trust your heart it knows what to do breathe in your heart and give thanks for the answer your heart and mind are aligned they're a

powerful force when unified they're truly unshakable as I mentioned earlier I've guided tens of thousands of people through this meditation and if you're feeling it right now you're probably having the same experience when I'm in a room with 10,000 people doing a seminar I always ask raise your hand if you know what to do in that situation that used to stress you out and then I asked them to open their eyes and look around the room and see how many people have their hands raised and it's usually more than 95% of the audience now in

some cases the situation requires more intense work but I figured I'd give you a quick two-minute simple meditation right now as a simple technique to get around it so did you come up with some answers or what to you to solve it aren't they pretty simple your heart knows the answer but here's the broader point I'm making you and I have the power to Vault ourselves out of suffering States and into beautiful States in less than 2 minutes how by focusing on what we appreciate by being grateful it's so simple and yet so profound appreciation

enjoyment and love are nothing less than the antidotes to suffering it's all about shifting your focus away from the illusion of loss or less or never and engaging gratitude appreciation love for what you already have in your life I always tell people trade your expectations for appreciation and your whole life changes in a moment a dream of happiness and a vision of Hope yesterday is but a dream and tomorrow is only a vision but today well live makes every yesterday a dream of happiness and every tomorrow a vision of Hope kalidasa the fifth century Sanskrit

dramatist and poet now I want to be clear here I'm not saying that you'll never suffer or be stressed again obviously that's not true you know as well as I do that life is full of extreme circumstances no matter how smart we are no matter how rich we are none of us is immune to health issues or the pain of losing people you love or the Myriad of other difficulties that are part of life I can't control what's going to happen to you or your family in the future and I can't control what will happen

within the financial markets including the possibility of a crash that lasts longer or is more severe than anyone expects I wish I could but I can promise you this if you make the decision to master your own mind if you make the decision to live in a beautiful state no matter what if you live with the decision to no longer suffer no matter what happens then you'll be mentally equipped to handle whatever challenges come your way and you will have a beautiful life now some people are experts on post-traumatic stress but I've spent a lifetime

focusing on the opposite the miracle of post-traumatic growth that happens for some people who've been through the most difficult of times see I study the resilient people who've been through the worst wor situations and still end up creating a magnificent life let me give you an example a few years ago I met an incredible woman named Alice Herz summer a brilliant pianist born in Czechoslovakia 1903 during World War II Alice and her son were deported and sent to a concentration camp there she was forced to give piano recitals in the camp and she was somehow

to pretend that she was gladly and happily performing for a Nazi captors why because they were filming this they were trying to convince Europeans that the Germans were looking out for the Jews and if she didn't look happy or she didn't perform at the highest level she was told that they would kill her son in front of her the extraordinary story of how Alice not only survived the experience but found a way to thrive with her spirit intact is recounted in her biography entitled a Garden of Eden in hell now when I first met Alice

she was 108 years old and living in England she'd endured so much tragedy yet she was one of the most positive and inspiring people I've ever encountered full of life and joy she lived on her own insisted on taking care of herself at 108 she still played the piano and saying every day what struck me the most though was that literally everything seemed so beautiful to her how amazing is that to me it's the ulter reminder that even someone who's been through hell can be filled with happiness there is no relationship to happiness and problems

you can have tons of problems and be happy you can have everything in your life great and be miserable I was most deeply moved by her description of her time in the Concentration Camp Alice told me that every moment of her life including those years has been a gift now when you meet people like this you never forget them because they possess such an outstanding ability to live in appreciation and awe and gratitude and despite all their challenges these people radiate love and joy and they experience it and then there are those people you just

want to slap in the head because they freak out when the milk in their cafe latte isn't hot enough so so what are you going to do are you going to join me on this quest to experience true and Lasting wealth today by training your mind to find joy in every moment it's your choice whether you live in a suffering state or a beautiful state it has nothing to do with the environment it's the one power we have is to choose what our perception is how we're going to feel our mindset our attitude and our

emotions you have the capability to become the master of enjoyment to fill your mind with appreciation to be happy no matter what best of all the joy in you will affect everyone around you now if you're ready to burn the boats and take the island I recommend that you write a note explaining your decision to live in a beautiful state every day no matter what and why you made it then send this note to three people you respect and ask them to tell you of course gently if they ever see you slipping into a suffering

State you could say look you know I'm committed to living this state every day if you see me in a suffering State gently ask me do you really want to feel this way or would you like to to be in a beautiful state now you have the power you can also send me a note I'd love to read the decision you made and why you can send it to uffing now tonyrobbins.com that's uffing now tonyrobbins.com I'd be touched to hear that you've made the decision why you've made it and how it's enriched your life by

writing down your decision you crystallize it while also committing yourself publicly in a way that'll help you stay on course even better you may Inspire the recip of your note to follow up and make the same decision in their own life to live in a beautiful state look everyone needs a vision mind is simple I'm going to live in a beautiful state every day of my life and when I get off track I'll snap myself back immediately this will not only enable me to have a beautiful life personally but maybe even more importantly it'll strengthen

me it'll give me the ability to bring more Beauty to the lives of others and all those I love look I hope you'll join me in this Mission because let me tell you living living in a beautiful state is The Greatest Prize it is the real jackpot it is the ultimate treasure and it's rarer and a much greater achievement of becoming a millionaire or a billionaire if you can learn to ride the roller coaster of life and enjoy both the ups and the Downs then you become utterly unshakable the secret to living is giving now

I started this chapter by talking about real wealth so as we come to the end of our time together what is it how can you truly experience it every day when I interviewed Sir John Templeton one of the greatest International investors to become a billionaire I asked him what's the secret to wealth he said Tony it's what you teach I laughed and I said well I teach a lot of things which thing I teach is the secret to wealth with a big smile on his face he replied gratitude Tony you know we've both met people

have a billion dollars and they're miserable so you and I know they're truly poor and we both know people see seemingly have nothing and yet they're grateful for the Breath of Life for their health for their family for God for everything so they're rich Beyond Compare in our hearts we all know it's not money that makes us rich as I'm sure you found the greatest treasures are never Financial it's those moments of Grace when we appreciate the Perfection and the beauty of it all it's those moments when we feel something Eternal and Invincible inside of

us the core of our spirit it's the loving warmth of our relationships with our family and our friends it's finding meaningful work it's the capacity to learn and grow and share and serve for me it's always been the joy of helping people to break through their limits and seeing them light up as they remember who they really are and what they're really capable of achieving it's the Delight of seeing their lives become a celebration instead of a battle it's the magical feeling that somehow I've made a little difference and I've played a role in The

Awakening of this marvelous unique human being it's appreciating that everything I've ever gone through has somehow eventually served not only me but others and that even the deepest pain I've experiened has led to something beautiful in fact there can be no greater gift than for your life to have meaning Beyond yourself this is the Ultimate Game Changer just find something to serve a cause you can be passionate about that's greater than yourself whether it's your family or friends or something for your community this is what's going to make you truly wealthy nothing enriches us as

much as helping others you know people often say they'll give when they're rich but the truth is you can start giving even when you have very little and if you do it'll transform you today by the way if a person won't give a dime out of a dollar they're never going to give a h 100,000 out of a million or 10 million out of a 100 million so start right now with whatever you have and I can promise you blessings Beyond Compare will flow your way the psychological shift from scarcity to abundance makes you wealthy

and brings you a glorious sense of freedom and making this shift by giving when you feel you don't have much you teach your brain that there's more than enough and remember it's not just money you can donate you can also give your time your talent your love your compassion your heart my daily prayer is simple to be a blessing in the lives of every person I have the privilege to meet if you make the tools and principles in this book a part of your core you'll be able to receive and give more than you could

ever imagine and as this extraordin abundance flows to you and from you you'll feel truly blessed and you'll become a greater and greater blessing in the lives of others this is what it feels like to possess real wealth I want you to know that I'm deeply grateful to you and thankful for the privilege of spending this time with you I know you're a unique human being because most people don't even pick up a book to improve their life much less listen to the entire one and if you're hearing my words now you're one of the

few who do versus than many who talk and I want you to know I sincerely hope this little audio book has been helpful to you on your journey to Financial Freedom and that you'll act on it and experience the blessings that you deserve please come back here and listen again whenever you need a reminder of who you really are and all you can truly create in this life remember that you're more than the moment you're more than your economics you're more than any challenge you may face you are soul Spirit essence you are truly unshakable

and it's been a priv to serve you God bless you and I look for our path Crossing sometime soon appendix your checklist for Success fortifying your kingdom how to protect your assets build your legacy and ensure against the unknown invincibility lies in the defense sunzu The Art of War congratulations on taking this journey with us I hope I hope you feel more prepared informed and fully equipped to Achieve Financial Freedom after listening to this audio book as you know now unshakable isn't just the title it's a way of living that can permeate every aspect of

your life ultimately it means freedom and peace of mind yet the truth is none of us has absolute control over the future there are a variety of unknowns that could emerge to prevent you from enjoying the very wealth you've worked so hard to build what if you are no longer able to work due to an unexpected illness or disability what if you get slapped with a lawsuit putting all your hard-earned money in Jeopardy what happens to your money if you're confronted with the harsh realities of divorce what happens to your wealth and Legacy when you

inevitably pass away remember how we said that losers react and leaders anticipate anticipation can be the ultimate power and these final pages are all about anticipation both of things that you know will happen and things that you pray will not I know I know it's not the most fun thing to sit down and plan for unlikely events or one's eventual passing however there will be tremendous relief and peace of mind once you buckle down and bulletproof your wealth there's nothing like the unshakable feeling of knowing that you and those you love will never have to

worry about any external events disturbing the quality of your lives remember Ray Doo's Mantra to expect surprises this section allows you to do just that for the same reasons that you diversify your portfolio the items in this checklist allow you to prepare for all those unknowns that could be lurking around the corner plus you'll discover even more ways to save on taxes think of true wealth management as the building of your personal financial Kingdom at the center is your portfolio but you must fortify all the areas in and around the kingdom to protect your treasure

from being destroyed or eroded by unnecessary taxes costly lawsuits or government intervention and ultimately you want your heirs to get exactly what you wish upon your death or to be able to leave a legacy of impact in philanthropy to causes of your choice we'll keep this section as short as possible this is not even really a chapter it's designed to be a guide or checklist in fact there are four distinct checklists for you to utilize with your attorney and financial adviser one for health one for wealth one for insurance and one for charitable giving dear

dearly beloved we are gathered here today to get through this thing called life Prince Let's Go Crazy in 2016 millions of fans around the world mourned the unexpected loss of the icon we came to know as Prince one of my favorite artists according to the New York Times Prince died at 57 years young without a will he didn't set up an estate plan or take any necessary steps to protect his estimated $300 million estate now instead of his assets going to his family they'll be tied up in court for years and the government has guaranteed

more than 120 million or 40% of his estate all because he failed to put together a plan while purple may not be your favorite color and you might not win seven Grammys the lesson is clear whether we realize it or not if we fail to plan we are planning to fail so bring this advice to your meeting with your advisers and get your finan cial World in order transferring and protecting your wealth hold on before you stop listening with one of the many excuses I've heard before let me just address them straight on I don't

really have that much so it's not important to set up a will if it's not important why do you work why do you invest why do you budget of course this is important and you've probably put this off because it seems like a hassle it can be done quickly and inexpensively and your family deserves to be protected don't they I'm young and this stuff is irrelevant to me this is relevant to you if you have people you care about a mother a father a grandfather an aunt or Uncle who have not taking the time to

set up protection for themselves and their family I have a lot of assets so it's going to be a hassle if you think it's going to be a hassle to set up your estate plan now imagine what it will be like for your loved ones if you become incapacitated or die I'm sorry to be blunt but I must nudge you here if you have significant assets you should begin your estate planning immediately there is no time to waste none of us knows how much time we have left putting this off can have catastrophic consequences my

personal situation is complicated if you think your situation is complicated and will involve tough decisions for instance children from multiple marriages five ex-spouses and so on imagine what it will be like to have your estate go through probate the probate court with all the efficiency and effectiveness of a state-run program will make all of those tough decisions for you without the benefit of your input I hope you picked up on my sarcasm I don't even know what probate is and why should I care I'll be dead probate is the process that a court uses to

establish the validity of a will if there is one and recognize the executive if there is no will the court will appoint an administrator of its choosing to handle the Affairs required by probate better the devil you know so let's just admit that the downsides of avoiding the inevitable are more costly than the one-time hassle of meeting with your financial adviser or lawyer in the four check lists that follow we'll tackle setting up measures to protect you if you fall ill we'll discuss your estate plan or will we'll talk about ways to protect your assets

while you're alive and then finally we'll talk about creating a legacy of generosity these lists are designed to be used with your adviser of choice if you don't have a financial adviser a tax expert an Insurance Specialist and an attorney in your corner if you would simply like a second opinion know that we handle all of these areas as part of our family office services at creative planning if you have any questions or would like our guidance feel free to reach us at getasecondopinion.com checklist one I got the power if I am incapacitated I really

don't care who makes Healthcare decisions for me nor do I care who handles my financial affairs if a choice has to be made I think the government is the best choice to do all this for me said no one ever I had a client who at 53 despite seeming to be in perfect health suddenly became unresponsive as her family rushed her to the hospital it was soon determined that she had a brain tumor she had not set up power of attorney and thus her husband was unable to access any of her accounts and get her

disability benefits activated she passed away shortly thereafter never having regained Consciousness and the family soon learned that she had not set up her will leading her estate to go into probate the three items on this checklist could have been taken care of with a few simple decisions this is not complex stuff any qualified attorney can quickly handle these core Essentials and these documents would have protected my client's family here's what you must do if nothing else to protect you and yours durable power of attorney for healthc care healthcare proxy what if you or your spouse

suddenly become incapacitated and are no longer able to make any decisions on your own who is going to make medical decisions about your care should this happen this is something you should think about now while you have yes the power if you have a living spous house he or she might be your first choice make sure to consider the implications of the person you choose for instance if you have a lot of life insurance you might want to give authority to someone who isn't invested in pulling the plug okay I'm kidding but all joking aside

you need someone you trust inherently who can make the entire range of decisions from whether to remove life support as mentioned or whether to change doctors or whether to move you to a different healthc Care Facility these decisions literally have life or death consequences make a wise decision and get it in writing now durable power of attorney for finances maybe you trust your family with your health care decisions but know that managing money can be a problem for them just like you may need someone to handle health care decisions you will need someone you trust

to be able to handle your financial affairs this can involve paying ordinary bills such as your mortgage signing legal documents and even interacting with other entities on your behalf like the phone company or your health insurance provider if you become incapacitated without this document in place your spouse relatives or friends may have to go before a judge to get authority to handle your financial affairs no one wants to have to jump through these hoops in the midst of what is already a difficult situation take care of this now so that you know you will be

in good hands and your family members will be spared some stress during an already trying time a living will also known as a declaration a directive to Physicians or a health care directive if you are unwilling to turn over decision-making power regarding your health to anyone you can set up a living will which tells the doctors which procedures you would like provided or withheld in the event that you are unable to communicate such wishes yourself again this alleviates stress for your loved ones as your wishes are already stated clearly in writing checklist two estate planning

the best things in life are free but you can keep them for the birds and bees now give me money that's what I want Barett strong money that's what I want when most people think of aate planning they usually think of Simply drafting a will but there is much more to estate planning than just who gets what when you die there are a number of different things you can do today to help decrease your taxable income and increase your tax efficiency here are the four core Essentials setting up a will drafting a will is the

first step in any estate planning and there are four key decisions you must make who are the beneficiaries in other words who gets what who will be the guardian for your children if you have any children under the age of 18 when you pass away if this isn't spelled out in a will the court gets to determine who will raise your children let me say that again the courts will get to decide who will raise your children are you paying attention yet sometimes the very people the court might likely choose your parents or siblings are

not necessarily who you would choose to be guardians of your children this is an important moment think about who in your family or even your close friends you trust to raise your children the way you would want them raised what would provide your children with the most peace of mind after this tragedy talk about this with your spouse determine who you'd like to choose and then have the important conversation with them asking that they be listed as Guardians who will be the executive of the will this is the person who will be in charge of

making sure that what you request in your will actually happens and the one dealing with probate if your estate must go through that process but everyone should avoid probate regardless of how much money he or she has we'll get into that in a minute do you want your assets distributed directly to the recipients or distributed to trusts set up on their behalf a testamentary trust for example let's say a couple has $400,000 in assets that will be split equally between their two children who are currently ages 19 and 20 when they die if the parents

both pass today the children will each get a check for $200,000 with no restrictions what would you have done with $200,000 at age 19 or 20 instead the parents could include a provision in their will for a testamentary trust that would allow their children to receive principal and income for their health and education until they are 30 at which point the balance of the trust will be distributed to them the will would also name a testamentary trustee a person or company you select to hold the money invest it and distribute it in accordance with the

terms of your testamentary trust what is probate and why should you avoid it at all costs the main point of probate is to give your creditors time to seek payment of the money money you owe them and your executive time to collect money owed to you probate involves payment of taxes and debts and the distribution of what is left under Court supervision what are the other downsides of probate control of assets during the probate process your beneficiaries cannot sell your assets the executive can only sell assets with the permission of the court time the probate

process takes approximately 6 months at a minimum but it usually lasts at least a year it can take even longer if matters become Complicated by a will contest where the validity of the will is challenged business problems or anything else unusual expenses it's possible for the costs of probate to stretch into the tens of thousands or even the hundreds of thousands for some Estates privacy probate is a matter of public record which means anyone can have access to your personal financial affairs for many people the thought of their most personal information being made public is

pretty chilling you may think that no one will be interested in your Affairs however some people actually work probate records looking for people who are going to inherit substantial sums of money in order to find ways to take advantage of them trusts a quick word on trusts all too often people assume that trusts are only for the Rockefellers and other 1ent or something that you set up for your children should you pass away while they are still young but I believe that trusts should be a centerpiece of estate planning for people with more modest assets

as well they don't need to be expensive or complex to set up one important responsibility we all have is to make sure that whatever wealth we build however large or small it may be our families benefit from it and it doesn't get stuck in a legal process that drains the gift from our heirs trusts are an important tool to do just that keep listening to discover how to use them to your benefit but first a bit about tax planning estate tax planning as we discussed in chapter six on the core four it's not necessarily about

how much money you earn it's about how much you keep tax efficiency is key to your Financial Freedom while you're alive but you also have to consider what taxes you will incur upon your passing for most people estate taxes are not and will never be a concern why the IRS will allow you to give away up to $5.45 million over your lifetime or at your death without paying any taxes this is referred to as your lifetime exemption think of it as a one-time coupon married couples get to combine their lifetime exemption amount so estate taxes

are due only if their combined net worth exceeds 10.9 million if you're one of the wealthy that has more than $5.45 million to bestow upon your death you will be paying an estate tax of 40% ouch I hope you'll agree with me that it is worthwhile to discover ways to pass on some of your wealth now before you pass away so that you can decrease the amount of your taxable estate so how can you do this the IRS allows you to give away $14,000 per year to whomever you choose without counting against this lifetime exemption

limit this is referred to as your annual exclusion any amount over $114,000 is taxed at the gift rate of 40% this means that you could give away $14,000 per person to all of your friends and family every year and still give away $5.45 million when you die paying no gift or estate taxes on any of it that can add up to quite a sum depending on how many friends you actually have here are a few strategies for passing along your wealth without handing a huge chunk over to the government help pay for your children's or

grandchildren's college education expenses and get a tax benefit too most people don't realize that you can use part of your annual gift of $14,000 to fund a529 College savings plan for your kids or grandchildren you may even get a state income tax deduction for the gift as well if the student is already attending college tuition payments can be made directly to the school instead of waiting to pass on your wealth after you die you can give $114,000 per year taxfree directly to each of your family members let's say you have grown kids who are married

you and your spouse can each give your child $144,000 per year for a total of $28,000 annually you can also each give your son-in-law or daughter-in-law $14,000 per year for another $28,000 that means one married couple can give another married couple $56,000 per year with no gift tax consequences and without reducing your lifetime exemption they get the benefit today and you get the joy of sharing with your children while you're still alive pay for medical expenses you can pay for the medical expenses of friends or family members without counting against your annual gifting limit so

long as the payments are made directly to the care provider so what does this mean if your grandchild needs an emergency appendectomy costing $20,000 you can cover those costs and still give that grandchild an additional $14,000 in the same year without paying the 40% gift tax charitable giving any money you give to charitable organizations does not count toward the estate tax calculation either why pay it to the government when you can give it away that's what the world's wealthiest have done including Bill Gates and Warren Buffett we cover this in more depth in checklist 4

revocable living trust as you begin to accumulate wealth please don't wait to set up a living trust everyone needs one why because all assets in the trust avoid the complex state-run proceedings of probate a revocable living trust is a simple legal arrangement to hold assets the trust part because this trust is put in place during your lifetime it is a living trust and because the trust is written to allow you to terminate the arrangement at any time it's revocable so even though the name looks confusing revocable living trust just means a legal Arrangement created to

hold your assets which you can end any time you want while you're alive you will be named as the trustee or the person in charge of the assets so you make whatever decisions you want with the Assets in the trust if you become incapacitated or after you pass away a successor truste you name will take over the administration of the trust for you and nothing touches probate protect your assets with an irrevocable trust some of the wealthiest families in the world have known for centuries is what any great asset protection expert will tell you the

secret is to own nothing and control everything this can be done through an irrevocable trust it is considered to be a separate legal entity so the assets inside it are not subject to estate tax when you die that's right your family will keep that 40% rather than see it confiscated by the government also if the trust is established properly the assets inside can be protected while you are alive from creditors divorce legal judgments and other risks thus its other name an asset protection trust so what are the best ways to use an irrevocable trust to

your advantage giving annual gifts as you learned a few pages ago you were allowed to give an annual gift of $114,000 per person each year tax-free rather than giving your annual gifts to your beneficiaries outright it may make more sense to put that money in an irrevocable trust instead and that person can be the beneficial AR of the trust this is particularly effective if a beneficiary is Young has difficulty managing money or if there are extenuating circumstances that lead you to want to establish some benchmarks the person must achieve in order to obtain access to

the funds such as sobriety attending college or holding down a full-time job holding life insurance Sheltering life insurance through the use of irrevocable trust has become so common that this type of trust has acquired its own acronym the IIT which stands for irrevocable life insurance trust most people know that the proceeds from a life insurance policy are not subject to income tax however it's not as widely known that the proceeds are subject to estate tax that pesky 40% however if the policy is held within an irrevocable trust you are able to avoid both income tax

and estate tax a double whammy here's how it works you take the $144,000 annual gift for 14,000 per kid per grandkid if you want to contribute more and use it to fund Life Insurance within an irrevocable trust which allows your children or grandchildren to receive the life insurance payout completely tax-free for ultra high net worth individuals use your lifetime exemption today giving away a portion or all of your $5.45 million limit today or 10.9 million if you're married can be a great strategy especially if given to a family member through a irrevocable trust for protection

for asset and tax protection why would anyone want to give away that much today let's say that you have certain assets valued at $5 million today that you expect to increase considerably in value over your lifetime for example shares of a company or a piece of undeveloped Land by giving the assets to the trust today you pay no taxes on the transfer because it's under your lifetime exemption amount at your passing hopefully decades later the assets could have ballooned in value by that time if the original $5 million piece of land is now worth 20

million the entire 20 million passes to the trust beneficiaries tax-free checklist three Insurance everyone's got a plan until they get punched in the mouth Mike Tyson many of the scenarios that can take you down financially can be covered with insurance that's right just like you ensure your car because you don't want to be stuck with a bill in the thousands for a car accident that was just that an accident or how you pay for health insurance in case something catastrophic happens to your health and you don't want hospital bills to cause you to go bankrupt

there are other kinds of insurance that can be a fantastic tool if wielded correctly listen I get it nobody likes Insurance until he needs it but you can do everything right hire a fiduciary reduce fees and taxes construct an awesome portfolio and in the blink of an eye your efforts will be wiped out if you aren't prepared for a catastrophic loss so let's protect ourselves shall we the fear of death follows from the fear of Life a man who lives fully is prepared to die at any time Mark Twain life insurance if you have insurance

on your cell phone but not on your life we need to talk I'm not kidding life insurance is a crucial aspect to protecting your wealth and family I've seen devastating situations where people with substantial means didn't have life insurance or enough of it and the family members quickly ran out of money when the income disappeared and the expenses piled up so even if you have life insurance let's take a look at the different types and make sure you have the right policy for you term insurance term insurance is the most appropriate type of life insurance

for nearly all Americans however term insurance is not often recommended by insurance agents because selling it results in the lowest commission with a term insurance policy you're ensuring your life for a specific period of time usually 10 15 20 or 30 years at the end of the term the policy ends and you no longer have the coverage many insurance agents will use this as the reason that you should not buy term insurance because you might never get a return on your investment I find this to be quite a silly argu arent it's like arguing that

I should feel disappointed that I have homeowners insurance and my home hasn't burned down but term insurance can be helpful if you want to safeguard your family in case something happens to you before you have secured Financial Freedom how long you need the coverage depends on how far off you are from your financial goals an insurance agent or your financial adviser can help you determine those numbers permanent insurance as the name implies you have this type of insurance for your entire life thus it's much more expensive because the insurance company is expecting to pay a

death benefit at some point in the future when is it a good idea to buy permanent insurance as we discussed in the previous section you can utilize permanent life insurance as part of your estate planning to both maximize your legacy and minimize your taxes by creating an irrevocable life insurance trust you can also buy survivorship life insurance also known as second to die policy this is a single policy covering the lives of two spouses or domestic Partners the policy pays out only after both insured individuals have passed because two lives are insured the death benefit

is greater than a policy would be on only one individual and remember if held in an irrevocable trust the proceeds will be free of income tax and estate tax variable life insurance this is a kind of permanent life insurance except the cash value is reinvested in a number of sub accounts that are similar to Mutual ual funds watch out for these these quasi investment vehicles are bogged down with fees huge commissions and actively managed funds they also have high surrender charges if you want to get out the only exception is a tool for the ultra

affluent called private placement life insurance ppli or sometimes referred to as rich man's Roth where there is no commission paid no surrender charges and few limitations on the Investments within you haven't heard of it because life insurance agents can't make a dime selling it and so it's usually structured by sophisticated attorneys that said private placement life insurance typically requires a deposit of $1 million or more so it's truly a tool for those who have significant assets how much life insurance do you really need determining how much life insurance you need should be an integral part

of creating your financial plan and is something to be done with your financial adviser there are many popular methodologies used to estimate how much life insurance a person needs most of them make no sense for example one popular rule of thumb is that you should purchase life insurance equivalent to five times your income but when you think about it if you make $100,000 per year and have $5 million you likely don't need life insurance the family will get by just fine if you just graduated medical school with $250,000 in debt purchased a $700,000 home and

have three little kids then five times your income is likely nowhere near enough obviously the best method to determine how much you need is to customize the solution to your situation you'll need to reassess this number as you age as you reach certain goals or as you create new ones for example once your children are through college or your mortgage is paid off you no longer need to carry insurance to cover those liabilities but you may need to keep saving for retirement again this is when your financial adviser will earn his or her weight in

gold time and health are two precious assets we don't appreciate until they are depleted Dennis waitley speaker writer consultant disability insurance what do you think is your greatest asset many people think of their home or possibly their retirement account for most though it is your ability to earn your goals for Financial Security and freedom are often dependent on your ability to keep the paychecks rolling in so that you can sock away enough to compound into a substantial nestegg a disability could seriously derail all that you have set up employers typically offer both short-term and long-term

disability coverage for their employees so it's a good idea to check what your employer offers before meeting with an insurance specialist 40% of individuals who reach age 65 will enter a nursing home during their lifetime times Morning Star long-term care insurance covering the costs of Assisted Living nobody likes to think about growing old I understand but unless you're Benjamin Button you have to make sure that if you someday need long-term care you have the necessary coverage according to the New York Times some 70% of those over age 65 will require some form of long-term care

before they die but only about 20% have a long-term care insurance policy instead millions of those who end up needing long-term care pay for it out of pocket if you're fortunate enough to have a multi-million dollar portfolio a properly structured portfolio would spin off the money needed to cover your needs however the typical cost of a nursing home varies across the country from $ 67,5 25 per year in De Mo Iowa to $168,600 per year in New York City given that just 44% of the population over age 50 has more than $100,000 in liquid assets

it shouldn't be much of a surprise that most people who enter a nursing home are broke within a few years how do we prevent this you need to get a long-term care policy for yourself or those you love well before it's needed you can for example purchase a policy that will cover $200 per day or $72,800 per year for up to three years for a 65-year-old person for just $5,000 annually however if you wait too long it becomes cost- prohibitive and most insurance companies won't insure people over the age of 84 long-term care typically covers

Home Care assisted living adult daycare hospice nursing home and Alzheimer's facilities insurance policies like this are available for someone who is as young as 45 years old for as little as $100 per month homeowners insurance our homes are one of our biggest assets and thus it makes sense to make sure that we are protected from certain things beyond our control such as a fire tornado earthquake or flood homeowners insurance protects you by covering the cost of damage to your home within the limits of your policy this is key often we don't fully understand the limits

and conditions of these policies and then find ourselves stuck with bills we never expected to pay as with all Insurance your first step should be to determine exactly how much coverage you need this requires you to evaluate the replacement value of your home which can be different from the sales price of your home your dwelling coverage should match what it would cost to rebuild your home from the ground up using the same or similar materials in some areas of the country the cost of materials has continued to go up while real estate values have remained

level so it's important to understand what current building costs are and to calculate your dwelling coverage appropriately however it's important to note that your insurance company will fully cover damages to your home only if your dwelling coverage is at least 80% of the replacement value of your home what does that mean let's say you own a home valued at $500,000 and your dwelling coverage is $350,000 if one of your water pipes bursts causing $50,000 in damage even though your dwelling coverage more than covers the $50,000 in damage the insurance company is going to send you

a check for $43,750 minus any deductible and not $50,000 many people are surprised to discover that their policies do not provide as much coverage as they think because of internal caps on how much damage is covered by the policy or payout limitations for valuable articles for this reason it often makes sense for individuals with high value homes rental properties or other valuable or unique properties Yachts collectors vehicles and so forth to work with specialty insurers selling products designed to protect these types of assets so that you don't find yourself paying for insurance that ultimately doesn't

protect you the way you thought umbrella Insurance an umbrella policy is an excess liability policy that covers you above and beyond the liability limits of your home and auto policies it's effectively an asset protection policy that covers all sorts of things that can happen any time and for any reason often unfolding in ways we couldn't imagine we live in an increasingly litigious society and the parents of that kid down the street might sue you if he gets hurt jumping on your trampoline we may do everything in our power to secure our financial Independence but none

of that would matter if we lost a big lawsuit for this reason it makes sense for many of us to have an umbrella policy when we purchase an umbrella policy we're also purchasing the ability to access the team of attorneys that works for the insurance company in the hopes that any liability issues that may come up will be settled by this team checklist four leaving a legacy there is one thing in common among all the Titans we interviewed they not only love to earn money for themselves and their families but also love to give it

away they know firsthand the joy that comes from sharing wealth with causes that are important and mean something to them remember one of the reasons this book was written is to help feed a billion people however when most people think of donating they think of writing a check to their favorite charity or cause but in the section that follows I'll suggest the best ways to share your wealth with these causes while also increasing your tax efficiency here are a few ways you can truly maximize your impact leave the right assets to charity many times individuals

name their children as the beneficiaries of their Ira or retirement account and they specify a bequest of cash or other property to a charity this isn't always the best solution for example if you leave a traditional IRA valued at $100,000 to your children and a piece of land valued at $100,000 to a charity your children will have to pay taxes on the distributions from the IRA If instead you leave the IRA to a charity and the land to your children the charity can cash out the IRA with no tax consequences and your children can sell

the property at your death without paying taxes either here's another example let's say that Mrs donor owns some Microsoft stock that she bought ages ago if she sold it she would have to pay significant capital gains tax however if the stock is donated the donor avoids ever having to pay capital gains tax doesn't have to part with cash and still gets the tax deduction for giving to a charity of her choice work with a Donor advised fund a Donor advised fund is a public charity that has two primary functions first it will help you find

organizations that are making a meaningful difference in areas in which you have an interest second when you donate to a Donor advised fund it will segregate those donations into a separate account that is yours to direct it's kind of like your own private charity so if you donate $25,000 to a Donor advised fund first you get an immediate tax deduction then at your leisure you can direct those funds to different charities as you see fit establish a private foundation for ultra high net worth individuals creating your own private Foundation can be a great way to

create a multi-generational charitable Legacy a private Foundation is an independent charitable entity with a staff and directors who administer the operations of the foundation and the distribution of assets to support the mission while there are more rules and regulations regarding the use and distribution of funds from a private Foundation which along with staffing needs can make it more expensive to operate family members can be paid a salary for their work with the foundation look for creative ways to increase your impact a number of companies are creating exponential impact in the field of charitable giving using

crowdsourcing for example crowdrise crowdrise.com was co-founded by actor Edward Norton and has exploded into the top 25 Global philanthropies according to Barons given new technologies and large social networks crowdrise has a unique approach for creating Maximum Impact a friendly competition among Charities that want your donation let's say that you wanted to donate $100,000 to a charity focused on clean water crowdrise will approach 10 or more different clean water Charities to compete for your donation for one month the competing Charities will go to their own donor Network letting them know that whoever raises the most money

in the month will win this $100,000 Grant if each charity raises $50,000 on average 10 Charities times $50,000 equals $500,000 and the winner also gets your $100,000 a total total of $600,000 was raised 500,000 more than you donated personally and here's your diploma if you have made it this far congratulations you have now not only determined how to become unshakable in building your wealth but also learned exactly what you need to do to protect your family reduce your taxes and leave a legacy of giving it may take a few conversations with your lawyer your financial

adviser and your Insurance Specialist a little bit of focus today can provide invaluable peace of mind for you and your family this Audi book is designed to provide information that the author believes to be accurate on the subject matter it covers but it is sold with the understanding that neither the author nor the publisher is offering individualized advice tailored to any specific portfolio or to any individual's particular needs or rendering investment advice or other Professional Services such such as legal or accounting advice a competent Professional Services should be sought if one needs expert assistance in

areas that include investment legal and accounting advice this publication references performance data collected over many time periods past results do not guarantee future performance additionally performance data in addition to laws and regulations change over time which could change the status of the information in this book this book solely provides historical data to disc and illustrate the underlying principles additionally this book is not intended to serve as the basis for any financial decision as a recommendation of a specific investment advisor or as an offer to sell or purchase any security only a prospectus may be used

to offer to sell or purchase Securities and a prospectus must be read and considered carefully before investing or spending money no warranty is made with respect to the accuracy or completeness of the information contained herein and both the author and the publisher specifically disclaim any responsibility for any liability loss or risk personal or otherwise which is incurred as a consequence directly or indirectly of the use and application of any of the contents of this book in this audio program many people's names and identifying characteristics have been changed legal disclosure Tony Robbins is a board member

and chief of investor psychology at creative planning Incorporated an SEC registered investment adviser raia with wealth managers serving all 50 states Mr Robbins receives compensation for serving in this capacity based on increased business derived by creative planning from his Services accordingly Mr Robbins has a financial incentive to refer investors to creative planning more information regarding rankings Andor accolades for creative planning can be found at get aecond opinion.com rankings