Bullet Proof Nest-Egg Advice From Tony Robbins and Ray Dalio | Forbes

describe especially for younger people the freedom fund well the freedom fund is this idea nobody wants to save right and millennials right now are doing the worst job of it in a long time and it's not because they don't care they're irresponsible it's frankly they don't trust the market you know they saw what happened in 2008 they don't know where to really to go and so they're being stimulated like crazy and they're spending like crazy but if you really want to have freedom then what you have to do is you've got to take that percentage aside like theodore johnson did and you got to just say this is for me this is my freedom there's a part of what i earn as basic as it is we all know this from investing it's a part of what i earn that is mine and my family's to keep and no one's going to touch it and i'm going to grow it and but i also believe that where you put that really matters and so indexing is the most basic way to do it for sure but what all these investors showed me is asset allocation is where the difference is in business right in life if you look at it the fourth key we talk about in the four steps is you got to really understand asset allocation because uh when i was with david swenson dave said tony i said what are the dials you can move i mean there's a limited number of dials you can move to increase your returns to get to your financial freedom faster he said there's really only three he said you can make a better choice selection of the actual investments or the securities you can have better timing or you can have better asset allocation he said let me give you a clue the first two will never happen he said because they cost money if you get them from somebody else and everybody's wrong on timing everybody's wrong in the stocks this is where all your money is made as an asset this leads to uh what sounds uh goes against all the conventional wisdom what you call all-weather allocation yeah well let's talk about that that's which stocks only 30 percent yes explain yes well i sat down with the famous ray dalio right right and i i prepared for 18 hours for that interview because he's a genius and there's not that much on him and i wanted to absorb it all so i got every little bit of it sat down with him it turned out ray was a fan of my work which i was touched by 20 years ago i guess he listened my program so he was very generous with his time and we spent these three hours and in three hours when i got to the end i said to ray i said listen i really want to help the average person so i got a question for you i did this with everyone i said if you couldn't give your money to your children any of it and all you could do would be give them a portfolio or a set of investment strategies or instructions and they were going to start over and build it what would it be and he said tony i spent a decade figuring that out all my money's already there my kids money is there my money from philanthropy when i'm gone is there because i'm not going to be here and i want something that will do well in the future and i don't know what the future is going to be markets are going to always change i need something that could work in any market i call it my all-weather fund most of us in the business are familiar with it a little bit and so he explained it to me and i have a good understanding and i said i get it so what you're saying is the reason why this was obsessed him why is it if i have a balanced portfolio in 2008 i got nailed on both sides exactly why did that happen in 2000 everybody says portfolio theory this is supposed to protect me and it didn't work but he said as soon as things get better no one talks about it we just forget about it happens again happened in 2000 happened in 2008. he said i figured it out when you have a 50 50 portfolio right that's 50 50 of where you put your money in assets 60 40 50 50. however you look at balanced portfolio right but he said the problem is that's not balanced risk and this is where people are crazy i've seen people write things up they see this in the book and say tony robbins is promoting first of all i'm not promoting anything every word in this book is from the best investors on earth anything that's from me is about the emotions that i know for 36 years that's my expertise these are their views but i'll tell you what's amazing he said tony when you have stocks and bonds half and half you're not equal because equities are three times more volatile so your risk is 95 500. he said so that's why people get killed in 2008 and he said i try to get this through to people he said but all of our people handle it you know you manage money for countries the largest you know pension funds on earth he said when people don't listen they look at and go oh this is bond heavy the bond days are over because inflation's going forward he said it's not true tony this fund in the 1970s it was the worst time for bonds it was an extraordinary time for all weather because it isn't it looks over balanced because in order to get the same level of risk you have to go for more long-term bonds or you have to use more leverage on the bond side and so when he was all done it was you know for the average person complex i'm seeing financial people look at this and write things up that are just silly saying you know this is this is never going to work because we're in the you know interest rates going the only place to go if the treats go up it's a balanced fun the other areas kick in but here's what's interesting after he told the whole thing to me i said to him i said look i said this is wonderful you give me something that very few people understand on the planet i think i really got it and i played it back to him he said you got it i said here's the problem the average person is never going to know what to do with this and i said i'm trying to help somebody that needs to know what to do i said tell me you're telling me to make this beautiful chocolate cake and you're saying tony here's how to do it use some sugar right use some chocolate use some dairy products i need to know the amounts you know give me the amounts he goes tony that's my secret sauce and that's when he told me he said look 10 years ago for you to even get in to talk to me it was 5 billion net worth 100 million dollars to get in michael and he said and now for ten years i haven't taken anybody's money because you answered your own question i said you're not taking money anyway it's not going to compete with you the average guy he says never going to make it talking to a wealth manager tell me what to do and he's so generous you know he's giving up half his net worth like many other people and and in the end he said okay he said but it'll be complex i said i can make it simple he said well i don't want leverage in i said design one without leverage because it won't be perfect i said i don't care if it's not perfect your idea of unperfect will be somebody else's idea is the best thing they could do and they laid out the numbers we ran the numbers and used the same back testing so you saw year by year how it really did over the last 75 years of modern investing here's what's amazing like all weather similar in 75 years it's been right 85 percent of the time what's even more extraordinary is the 15 what it wasn't doing well or didn't do well its average loss was 1.6 not 50 40 30 20. i think of the last 10 years of 250 hits his biggest loss in 75 years was less than 4 minus three point nine five and that was 2008 when the market exploded you know down to fifty one percent here are the allocations in the book which would make a normal person gag at least initially stocks only thirty percent even though it's the stocks on average are supposed to gain what nine percent a year yes 9.2 long-term treasuries 40 yeah intermediates 15. i know gold seven and a half commodities seven and a half yeah absolute counter wisdom i know it's amazing you know when i read uh interviewed david swenson he said he wrote a book and when he said the whole secret to success is to be contrary to what else believes but the math on this is what works here's what's interesting that looks like your heavy bonds 40 and 15 55 bonds and it looks that way visually in terms of volume you are but in terms of risk you're not you're still you're making us here equally weighted think of it this way what triggers things to grow is inflation or deflation in terms of price certain things do really well in inflation certain deflation growing economy shrinking economy and he's figured out which quadrant you need to put each to actually have equal risk and that's why it's not well this year this formula is done it's one percent better than the market it's in 13 and the third right now uh and but more importantly three weeks ago when the market dropped and gave up all of its entire benefits for the entire year and everybody's guts were checking there was no gut check because they went up a quarter of a point so the beauty of this is i'm sure you know um uh there was a study done the last 20 years and studies from 1993 to 2013 and it's by dalbar and they found that the market s p 500 during that time did 9.2 on average just as you said but do you know what the average mutual fund owner got investor 2.5 that's before tax why because we as investors always do the wrong thing emotions that's right we sell we should hang on we buy when we shouldn't so the greatest thing that i think that ray offers somebody the opportunity to do is actually stay in the market because if you go yeah if you got 1.6 is your big hit if 4 was the biggest hit you've ever seen in 75 years i think you could stay in and you can do what jack talks about which is stay in that market through time this means resetting each year it's a reset once a year that's the one recalibration so 15 minutes a year and you're in the game

Channel: Forbes

Views: 585,545

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Keywords: Forbes, Forbes Media, Forbes Magazine, Forbes Digital, Business, Finance, Entrepreneurship, Technology, Investing, Personal Finance, Tony Robbins, Ray Dalio, Billionaire, Retirement, Wisdom

Id: c0ARb1N-3kM

Length: 8min 10sec (490 seconds)

Published: Tue Jan 27 2015

Reddit Comments

[u/delioj]

What do they mean by intermediate? Intermediate bonds?