Tony Robbins knows a lot about starting with a little. The best-selling author grew up “dirt poor” in California and once worked as a janitor to help pay the bills. Today, he’s worth an estimated half-a-billion dollars.
Now Robbins—whose personal and business development seminars and books have reached an estimated 50 million people—is focused on helping others build their fortunes, too. He interviewed more than 50 of the world’s top investors for his last book “Money: Master the Game,” a New York Times best-seller that’s sold more than a million copies. (You can read our earlier interview with Tony Robbins here.)
His latest book, “Unshakeable,” which came out last year and has since become a best-seller, was written with Peter Mallouk, Barron’s top-ranked independent advisor for three years and president of Creative Planning, whose board Robbins has joined. Robbins describes it as “a financial playbook that dispels fear with facts,” and has been donating proceeds to Feeding America, a nationwide hunger-relief organization.
He spoke with us about how to “lock in” financial success and keep fear from sabotaging our efforts.
Why write this book?
This is the second longest bull market in history and everyone knows it’s going to have a correction at some point. I started seeing so much fear out there. And I thought…I want to protect people, but I also want them to see how this could be an opportunity for the greatest growth.
What's the significance of the book's title: “Unshakeable”?
Because that’s my goal. The only way to have a quality life is to be unshakeable. It doesn’t mean you don’t get fearful, but you don’t stay there.
For most people investing is stressful. But anyone can become unshakeable. You just need to educate yourself…It’s like the old metaphor: You’re walking late at night and you see a snake so you walk the other way. Then during the day, you see it’s not a snake at all. It’s a rope, and you have nothing to be afraid of.
How do you convince nervous investors they have nothing to fear?
With education. On average, we’ve had a correction (when the market falls 10 percent from its peak) once a year since 1900. Everybody gets scared to death. But the average one lasts less than two months and out of all of them, 80 percent never become a bear market (meaning the market falls 20 percent from its peak).
We get a bear market on average every three to five years and they usually last a year. And every single bear market in history has turned into a bull market. Every single one.
What’s the biggest mistake investors make?
Failing to take advantage of compounding. Take someone who invests eight years till he’s 27 and invests a total of $28,800, or $300 a month, and then just leaves it there—doesn’t add another penny. He’ll have nearly 2 million when he retires at 65 if the market continues to compound like it has (at 10 percent or more annually on average).
If his buddy doesn’t start till he’s 28 and he invests $300 a month, he’ll have invested $140,000 by the time he retires at 65. But his compounding returns will end up at almost $300,000 less than his friend. He’ll be investing longer and more—and he’ll end up with less. Compounding is the ticket.
Starting late allows less time for compounding, true. Investors can also miss out by selling when the market is down and buying after it rises again, locking in losses. How do you avoid mistakes like that?
The first thing to do is to stop trying to time the market. No one can do that successfully.
One of the most startling statistics that blows people’s minds is that in the last 20 years we’ve seen about an 8.2 percent compounded annual return for the S&P 500. But if you missed the 10 best trading days in that 20-year period, your returns drop to 4.5 percent. If you missed the top 20 days, you only made 2.1 percent (based on an analysis by the Schwab Center for Financial Research).
What are your chances of getting that timing right? The most important thing is to just be in the market.
How do you guard against the temptation to sell when the market drops?
You need to automate it and take yourself out of it. And you need to have the right asset allocation. That’s the way you protect yourself.
What’s the right asset allocation?
The most basic thing is diversification. You can’t just say, I like real estate or I like stocks, and that’s it.
I talk about different asset allocation strategies in the book… But you need to diversify across asset classes and within asset classes and across economies and time. (Investing, for example, in stocks, bonds and real estate—and in small, large and U.S. and foreign companies, and corporate and government bonds with different payout dates.)
What’s the main message you want readers to take away from this book?
I want them to know financial freedom is not only possible, but it’s something you can lock in. It isn’t that complex. People in the finance business try to make it as complex as possible. But it’s not.
Literally anyone can start with very little and achieve financial freedom over time. You just have to get into the game, and not get overtaken by fear.
This interview has been edited and condensed.