Many of us feel overwhelmed just hearing the word “investing.” We may have heard that investing is very complicated or risky. So, we’re afraid of making a wrong decision and losing money. But if you follow the right investing strategy, there’s no reason to feel overwhelmed or worried. In his book Unshakeable, Tony Robbins explains the simple rules for investing safely and profitably. This isn’t about gambling to get rich quick. This is about growing our wealth on a rock-solid foundation, so we can have peace of mind for our future. The end goal here is about getting our money to work for us, instead of us always needing to work for money. Tony Robbins puts it this way “Making money your slave instead of being a slave to money.”
In this summary, I’ll share with you 3 key lessons that I learned from the book.
Key Lesson #1: Index Funds provide reliable long-term growth with low fees
A stock is a small part of a company that you can buy or sell. Like you can buy a small fraction of Disney by buying its stock. Then if Disney becomes more successful, your stock will be worth more money as well. When we talk about investing, usually people think about “stock picking”. Like we need to choose the right stocks to buy. But what if we chose the wrong stock? Then we lose money. That sounds very risky to me. Because it is really hard to predict which companies would be successful in the future. Even experts are wrong most of the time. This is why Tony Robbins recommends a very different investing strategy. It’s the same simple strategy billionaires like Warren Buffett, Peter Lynch and Ray Dalio recommend to their family members. Instead of buying individual stocks, invest in index funds. An index fund is like a collection of ALL the stocks on the market. When you put money into an index fund, you’re not just picking one stock—you’re picking them all! That’s right, you’re putting an equal bit of money into EVERY stock on the market. The most famous index fund is the S&P 500 which includes the 500 biggest US companies like Amazon, Apple, Google, and others. So when you buy S&P 500, you invest equally into all 500 of these company stocks at the same time. Index funds are great because they make investing safer and more predictable. Although individual stocks have always been risky and companies can always go out of business, the stock market as a whole has always gone up over the long term.
Key Lesson #2: Forget big gains and focus on avoiding losses
Warren Buffett has only two rules for investing. Rule #1 is to never lose money. And Rule #2 is to never forget Rule #1. That’s why Warren makes so few investments. He needs to be 100% sure he won’t lose money. But why? The math is simple but shocking. Let’s say you invest 1000$ and lose 50%, you’ll end up with 500$. Now you might think that you only need to gain 50% to get back to your initial 1000$. But that 50% gain will only get you to the midway and you’ll have only 750$. To get back to your starting point, you’ll have to double your money, meaning you need a staggering 100% gain. That’s why you should first focus on how not to lose money, rather than on how to make it. Just make sure to focus on investment options with limited downside and you’ll be fine. And remember that no one, even the most experienced investors cannot predict the future. But they know that they should avoid losses, so they make investments that are robust in the face of unexpected market events.
Key Lesson #3: Have a checklist for investing and don’t follow your instincts
The human brain hinders our ability to make rational investment decisions because of how it has evolved. The way your ancient ancestors reacted to a hungry tiger approaching them, your brain reacts the same way when the stock market is crashing and taking all your money with it. Your brain thinks both are dangerous for your livelihood and the natural response is to immediately withdraw and escape. But when it comes to investing, this is the worst response. Because often the best response when the stock market is crashing, is to invest more. Remember, when prices are low, it’s the perfect time to invest in an undervalued stock that is sure to rebound in no time at all. This is why having a checklist for investing is so important. It can prevent you from reacting and help you make a rational decision. A good checklist is a way of protecting you from yourself; it turns your decision-making process into a strict and reliable discipline.
So in summary, financial success is within your reach – no matter what job you have or how much money you make. With the right knowledge and an action plan in place, anyone can make good investments. Just make sure to have a checklist that prevents you from being reactive to the short changes in the market and focus on minimizing the losses. It turns out that investing in an Index fund has all the criteria and is the best option for long-term investing.