You may know Tony Robbins from his life strategy books and infomercials that are running somewhere in the world at this very moment. But in his last two books he’s tacked away from the self-help world, and is now focusing on your portfolio. He’s polled the biggest names in finance—billionaires, hedge fund managers, portfolio strategists, and the like—to get their best advice and most important tips.
His latest book, Unshakeable: Your Financial Freedom Playbook, is a handbook for investors in any stage of life, from millennials to baby boomers. In the video above, he lays out his four most important rules for investors, dubbed the “Core Four.”
Robbins’ four tips for investors
Extreme loss avoidance: “Every one of the people I’ve interviewed—fifty of them, all self-made billionaires—they’re obsessed with not losing money. The average investor is trying to figure out how to make money; their focus is how much can I earn. [The billionaires] know, ‘If I lose 50%, I’m going to need to make 100% to make it up, just to get even, which might take me five or 10 years.'”
Asymmetrical risk/reward: “The idea that most people who are investors who are getting in the game think, ‘In order to get huge rewards like these billionaires, I gotta take huge risks.’ That’s the kiss of death. You take too many huge risks, you’re not going to succeed. Most of the time, you’re going to lose everything you’ve got. [The billionaires] do not take giant risks. The vast majority of them are asymmetrical risk/reward, which means, ‘How we take the least risk for the most upside.’ Then you ask, is it a five-to-one, am I my risking a dollar where I think I can make five? So, if I’m wrong I’ll lose that dollar, but I can invest another dollar and still win. You could be wrong four times out of five and break even.”
Tax efficiency: Robbins is a fan of compounding, but when you add taxes to the mix, and are not smart about it, any investment and its returns can get hit significantly if you pay taxes at the wrong time. “We know that investments compound if they grow, but so do taxes and so do fees.”
Diversification: “It’s the only free lunch [left in the investing world]. Every [billionaire] investor talked about it, and that whole theory of if you can find 15 uncorrelated bets, then you reduce your risk 80%, and your risk/reward goes up five times.”
Which rules do you follow? What are your investing rules? Let us know in the comments section below.
Pras Subramanian is a reporter/producer at Yahoo Finance. Follow him on Twitter @Pras_S