After listening to a Tim Ferris podcast with Tony Robbins, I decided to read his latest book “Money: Master the Game”. I was skeptical of Tony Robbins and his style of motivation speaking. The book has a very informal speaking style with lots of bold text where you feel Tony is waving his hands frantically. But the content of the book is superb if a little long winded. I have read a few books about finance and investing, but this was the first to take a full life time look at saving, investing and retiring.
The first part is about saving regularly, starting early and avoiding excessive fees which are usually hidden. I feel my family is doing well here, but making saving automatic is a good reminder that saving is against our basic nature. Money finds ways to get spent.
The next part was making the case that we probably require less money than we think to sustain the retirement lifestyle we think we want. There were three levels of lifestyle and each had a worksheet that required estimates of how much we currently spend. I should have filled out these worksheets, but I did not because I have this fantasy of managing our finances with something like hledger which will provide these answers. When I imagine my retirement, it isn’t filled with high expense activities like travelling the world on a yacht or having a private jet. Imaging retirement is something I want to do more of with my family. It will make this kind of planning easier.
The part about investing had some real gems. I was aware of the importance of asset allocation and having investments that are not correlated, but the Ray Dalio “all weather” portfolio was fascinating. It was the first time I had heard of a portfolio that had so little downside risk with such substantial upside. I always assumed that any investment with high return required accepting extra risk. This is an investment strategy that outperformed the “market” or S&P 500 over decades with almost no loss in capital (maximum loss was less than 4%). The “secret” is a large allocation of long term bonds with a small allocation in gold and commodities. The logic that the economy has four seasons which are the combination of growth and inflation. Having assets that do well in each “season” has finally shown me what proper diversification looks like. Since stocks and bonds are correlated, the classic advice of stock and bond diversification is problematic. Right now the world economy is in a period of low inflation and low growth. When it switches (and it will) to higher inflation and “negative” growth (what a silly term), the standard advice for asset allocation will cause big problems.
For me the action item from this has been to look very carefully at the current asset allocation of my portfolio. Right now I am following a very contrarian style and my largest holding are real return bonds, short US equities and long commodities like gold and energy. But this is very short term focused and hopefully a longer focus will expose me to less risk and volatility.
The next part focused on what Tony referred as the “back of investment mountain”. I have spent a lot of time thinking about how to invest, but not what to do with that investment. I assumed I would retire at some point and spend the rest of my retirement managing my pile of investments. The book again showed me options that I was not aware of. Apparently there are “hybrid” annuities that provide payments for life while growing with the equity market but with full capital preservation! Frankly it sounds too good to be true, but I have made a note to investigate this further. The possibility of “getting out of the game” by having an income without having to worry about it is very appealing. I am skeptical because I don’t understand why an insurance company would take on this much long term risk. At least I think the premium must be very high to offset the risk, but Tony insists this plan is now available to all US citizens and I intend to see if I can find something similar in Canada.
There is a section with interviews of some of the greatest investors ever like Charles Schwab, Ray Dalio, Warren Buffet, etc. This part was nice, but did not contain helpful specific advice that wasn’t mentioned in other parts of the book. There was one brief mention of technical trading which I found strange because it actually goes against most of the advice in the book. Technical trading assumes the past stock price behavior can be used to predict the future stock price. It is true that some people have become very rich that way, but to me it is too much like gambling without any acknowledgment that the stock represents a company or group of companies with assets and revenue and people. On the other hand technical trading increases volatility which can be useful to contrarian investors like myself.
The last chapter is about the power of giving. I am very motivated to give my time and energy to my family and friends but the giving of money is complicated. All things being equal, I would like any donations to do the most good possible. Even defining what I mean by good is difficult: less suffering?, more education?, more opportunity? more equality? less disease? Maybe whatever makes me feel the happiest is the simplest approach and I need to accept that it will probably not be the most efficient. If my money isn’t making me happy, why even bother working so hard to accumulate it in the first place? My action item is to manage our finances better and look for ways to give more money in ways that will make me and my family happier.
I learned a lot from this book. It has also changed my opinion of Tony Robbins. The book was a real gift to me and I am planning my future differently because of it.
Rating: Highly Recommended