A $2 million study with a "host of flaws" brought these TDFs into almost every 401(k) option plan.
If the concept of TDFs are appealing, look into low-cost TDFs such as those offered by Vanguard.
**Asset allocation, where to park your money and how to divide it up, is the single most important skill of a successful investor.
-"Fed Chairman Bernanke's Personal Finances Are No Frills," USA Today, July 21, 2008
There are indeed ones you should "hate," but to lump all annuities into one category is to be thoughtlessly discriminate against the only financial tool that has stood the test of time for over 2,000 years.
"An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."
"Superficially, I think it looks like entrepreneurs have a high tolerance for risk. But one of the most important phrases in my life is 'protect the downside.'"
Risk a little, make a lot.
Taking a swing for the fences with no downside protection is a recipe for disaster.
Some of these offer a greater return for taking more risk. For example, one note available right now offers 140% of the upside if you are willing to absorb a loss beyond 25%--so the market has to drop more than 25% for you to lose. But, say the market was up 10% over the term, you would get 14% in return.
Downsides? 1)A guarantee is only as good as its backer. So it's important to choose one of the strongest/largest banks in the world with a very strong balance sheet. 2) Your timing could be off. Say you hold a 5-year note and for the first 4 years the market goes up, only to tumble in the final year. You would be unable to reap the profits of the first 4 years. 3) Limited liquidity. 4) Not all notes are created equal. Most big retail firms will sell you notes that have substantial commissions and fees attached.
M-L CDs give you some small guaranteed return if the market goes up, but you also get to participate in the upside. But if the market falls, you get back your investment (plus your small return), and you had FDIC insurance the entire time. Typically, your money is tied up for one or two years (whereas structured notes can be as long as five to seven years). Rates on these vary according to how needy banks are for capital. Again, accessing these through traditional banks often comes with commission and fees.
3. Fixed Indexed Annuities. A properly structured fixed annuity offers the following characteristics:
- 100% principal protection, guaranteed by the insurance company. This is why we have to pick an insurance company with a high rating and a long history of making good on its promises.
- Upside without downside--like structured notes and market-linked CDs, a fixed indexed annuity allows you to participate when the market goes up but not lose if the market goes down. All gains are tax deferred, or if it's owned within a Roth IRA, you won't pay taxes on the returns.
- Some FIAs offer the ability to create an income stream that you can't outlive. A paycheck for life! Think of this investment as your own personal pension. For every dollar you deposit, the insurance company guarantees you a certain monthly income payment when you decide to trigger, or turn on, your lifetime income stream.
4. An annuity without the annuity. You invest in a portfolio of low-cost index funds and carry on growing your wealth. The insurance company monitors your portfolio and you pay an annual fee (<1%) for this "protection."
So long as your portfolio continues to be rebalanced, the insurance company will guarantee that if you run out of money during retirement, an income stream will kick in and provide income payments for the rest of your life!
***This does not imply that all versions of these products and strategies are great.
*Insiders are not helpless, nor are you. In every area of life, you get what you tolerate. And it's time to raise the standard.
Myth 9: "The Lies We Tell Ourselves."
*The ultimate thing that stops most of us from making significant progress in our lives is not somebody else's limitations, but rather our own limiting perceptions or beliefs.
*Everyone has a fear of failure at some level; at times we've all been fearful that perhaps we are not enough. Rather than face our natural fears, what do we do? We come up with stories. Stories about why we're not where we want to be. Why we're not smart enough, successful enough, thin enough, rich enough, loved or loving enough. Our stories almost always relate to something outside our control, or our lack of some natural talent or ability. But talent and skill are two key elements to success attainable by anyone truly committed. You can get the skill if you can get beyond mental limits of how hard, difficult, or "impossible" it may be to master something.
True transformation happens in a moment.
***There are three steps to creating a breakthrough: three forces that, together, can massively change any and every aspect of your life. If you want to change your life you have to change your
strategy, change your
story, and you have to change your
state.
So to find a strategy that works, you go to the best; those who have proven results for the long term.
*If you start with a
proven plan, the right strategy, you can literally convert decades of struggle into days of achievement. You can avoid the inevitable frustration that comes with learning something for the first time by trial and error. Instead, you can get results in days, instead of years, by learning from people who have achieved success already. Why reinvent the wheel?
"However beautiful the strategy, you should occasionally look at the results."
-Winston Churchill
*80% of success in life is psychology and 20% is mechanics.
*When someone has the right strategy in front of her, and she still doesn't succeed, it's because she's missing the second key to a breakthrough: the power of story. With a disempowering story, failure is nothing less than guaranteed.
"I will not be one of the many who can't, I will be one of the few who do."
You can use your story, or your story can use you.
*Science has now proven that how you think about stress matters--the story you attach to stress. Telling yourself it's good for you instead of harmful could mean the difference between a stress-induced heart attack at 50 or living well into your 90s.
*Money is nothing more than a reflection of your creativity, your capacity to focus, and your ability to add value and receive it back.
Change your story, change your life. Divorce the story of limitation and marry the story of the truth, and everything changes.
Remember, you know the answer, and the secret is simple: change your story, change your life. Divorce your story of limitation and marry the truth. You can make anything happen.
Your mental and emotional state colors your perception and experience of everything in life.
In a nutshell, you can immediately and radically change how you feel by learning that by changing your body first, you can change your mind.
Emotion is created by motion. Massive action is the cure to all fear.
*That's how you create a real breakthrough--a new state with a new story and a proven strategy.
*Great strategies can surround you but the will be invisible to you unless you put yourself in a strong, determined, and empowered state.
Let your disappointment drive you to find new answers; discipline your disappointments.
What's the Price of Your Dreams? Make the Game Winnable.
There are five different levels of financial dreams that will set you free.
When you seek significance, you're always comparing yourself with someone else. While there's nothing wrong with significance, if you make it your number one need, you'll never be fulfilled.
Certainty is the first human need that influences our behavior or actions.
*We blur large numbers, and if you get down to the facts, an extraordinary lifestyle probably costs less than you think it does.
Always remember the ultimate truth: life is not about money, it's about emotion.
"You can have it all. Just not all at once."
-Oprah Winfrey
*You can't manage your health if you can't measure it. And the same goes for your finances.
"It takes as much energy to wish as it does to plan."
-Eleanor Roosevelt
Dream 1: Financial Security
Your home mortgage, utilities, food, transportation, and insurance paid for without ever working another day in your life.
- Jot down what you pay for these five items on a monthly basis
Average US annual consumer spending = $63,091
US average basic annual expenses: $34,668
These five items, on average, represent 65% of most people's expenses.
*You need an emergency/protection fund. According to a Princeton University-University of Chicago study in 2014, 40% of Americans say they couldn't come up with $2,000 if they needed it. You need some money to cover yourself for somewhere between 3 to 12 months.
Dream 2: Financial Vitality
Dream 3: Financial Independence
Dream 4: Financial Freedom
Dream 5: Absolute Financial Freedom
*What makes most people just dreamers versus those who live the dream is that dreamers have never figured out the price of their dreams.
"There is only one thing that makes a dream impossible to achieve: the fear of failure."
-Paulo Coelho
I want you to know that you're the creator of your life, not just a manager.
Step 1: Unleash your hunger and desire, and awaken laser-like focus.
Step 2: You take massive and effective action.
- In your heart you know massive action is the cure-all. But there's one caveat, of course: you need to put effective execution behind all that effort.
Step 3: Grace! The acknowledgement that there's more in this world than just ourselves, and that perhaps a higher power gives us both the privilege of this life as well as the gifts of insight and guidance when we're open to them. Gratitude connects you to grace, and when you're grateful there is no anger. When you are grateful, there is no fear.
"If you don't know where you're going, every road will get you nowhere."
Henry Kissinger
It doesn't matter where you stand in relation to your friends, your family, your colleagues, or clients. All that matters is your personal journey.
"What you get will never make you happy; who you become will make you very happy or very sad."
-Jim Rohn
Most people overestimate what they can do in a year, and they massively underestimate what they can accomplish in a decade or two.
The fact is: you are not a manager of circumstance, you're the architect of your life's experience.
Speed it up: Save More and Invest the Difference
"He who gains time gains everything."
-Benjamin Disraeli
Home mortgages: You want to know the banker's secret? Your interest payments will take on an additional 100% or more to your loan value.
- If you have a traditional fixed-rate mortgage, all you have to do is make early principal payments over the life of the loan.
Money Power Principle 3. Cut your mortgage payments in half! The next time you write your monthly mortgage check, write a second check for the principal-only portion of next month's payment.
*I don't want to be put on a budget and my guess is you don't either. But what I do believe in is a spending plan. I like the idea of planning how to spend my money so that it gives me the most joy and happiness but also ensures my financial freedom long term.
Upromise.com helps you earn cash back for college from your everyday spending (other non-tuition-focused cash-back sites include Extrabux, Ebates, and Mr. Rebates).
The question to ask yourself is this: Do my expenses, big and small, bring me the thrill they once did?
Speed it up: Earn More and Invest the Difference
"Try not to become a man of success, but rather try to become a man of value."
-Albert Einstein
"The key is to understand how to become more valuable in the marketplace.
"To have more, you simply have to become more.
"Don't wish it was easier; wish you were better.
"For things to change, you have to change.
"For things to get better, you have to get better!"
-Jim Rohn
How do you truly become more valuable? Learn to work harder on yourself than you do on your job. All you have to do to earn more money in the same amount of time is simply become more valuable.
If you wish to become great, learn to become the servant of many.
*If we're going to make a radical shift and take you from where you are today to where you want to be--to financial freedom--then this path is the most powerful one I know to get you there.
If you employ yourself, your raise becomes effective when you are.
The real limitation in our earnings is never our job--it's our creativity, our focus, and our contribution.
*One of the key secrets if you really want to become wealthy: get in front of a trend.
Speed it up: Reduce Fees and Taxes (and Invest the Difference)
It's not what you earn that matters, it's what you keep.
The average American pays more than half of his or her income to an assortment of taxes: income tax, property tax, sales tax, tax at the pump, and so on. After another 17.25% of each dollar going to interest and fees, you're left with just 28.5% of your hard-earned income to pay for everything else in life.
I learned from those I interviewed that tax efficiency is one of the most direct pathways to shorten the time it takes to get from where you are now to where you want to be financially.
Money Power Principle 4. Tax efficiency is one of the simplest ways to continuously increase the real returns of your portfolio. Tax efficiency equals faster financial freedom.
- Make sure that whenever possible, you invest in a way that allows you to defer your taxes (401(k), IRA, annuity, defined benefit plan) so that you compound tax free and pay tax only at the time you sell the investment. Or set up a future tax-free environment by growing your investments in a Roth.
"So although their marketing material encourages investors to buy and hold, the managers certainly don't practice what they preach. What they really mean is buy and hold their mutual fund, while they trade your retirement savings like crazy."
Speed it up: Change Your Life--and Lifestyle--for the Better
"My favorite things in life don't cost any money. It's really clear that the most precious resource we all have is time."
-Steve Jobs
One single move could give you a 10% to 30% increase in your income.
Why wait until retirement? Why not change your zip code today? Why not find a place to raise your family that allows you to reduce your cost of living and elevate your quality of life at the same time, while you're young enough for both you and your children to reap the rewards?
howmoneywalks.com
*Seriously consider the seven states where there's no state income tax at all: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.
- Tennessee and New Hampshire only dividend and interest income are taxed at the state level.
- There are huge opportunities all over the world to improve your lifestyle and lower your expenses, in such places as Bali, Fiji, Uruguay, Costa Rica--if you have the courage and the freedom to go for it!
- You can rent an extraordinary apartment in the mountains outside of Buenos Aires, Argentina, for a fraction of what it would cost for a studio walk-up in a major US city.
"Life is like a bicycle. To keep your balance, you must keep moving."
-Albert Einstein
*There are only three tools for reducing your risk and increasing your potential for financial success:
- Security selection--stock picking;
- Market timing--short-term bets on the direction of the market;
- Asset allocation--your long-term strategy for diversified investing.
*Overwhelmingly, the most important of the three is asset allocation.
It means dividing up your money among different classes, or types, of investments (such as stocks, bonds, commodities, or real estate) and in specific proportions that you decide in advance, according to your goals or needs, risk tolerance, and stage of life.
What goes up will come down! Ray Dalio: "It's almost certain that whatever you're going to put your money in, there will come a day when you will lose fifty percent to seventy percent."
Security / Peace of Mind Bucket
Eight basic types of assets that might belong:
1. Cash / Cash Equivalents [US Treasury money market with checking privileges].
- Increase in value when interest rates go down, and decrease in value when rates go up.
3. CDs.
- We shouldn't be "spending our home"!
- Nobel Prize-winning economist Robert Shiller found that when he adjusted for inflation, US housing prices have been nearly flat for a century!
- Owning your home with a fixed-rate mortgage is a hedge against inflation, and there's a tax advantage.
5. Your Pension.
- They're like private pensions if done right.
7. At least one life insurance policy belongs in your Security Bucket, and you don't mess with it.
- One type of life insurance policy can provide you with an income for life, tax free, while you're still alive.
8. Structured Notes.
"Boredom comes from a boring mind."
"The Struggle Within," Metallica
Jack Bogle, founder of Vanguard, suggests buying into low-cost, low-fee bond index funds that spread out your risk because you'll own every part of the bond market.
The Risk / Growth Bucket
1. Equities (stocks/mutual funds/ETFs).
*When you buy shares of an ETF, you are not buying the actual stocks, bonds, commodities, or whatever else is bundled in the fund--you are buying shares in an investment fund that owns those assets.
2. High-Yield (Junk) Bonds.
3. Real Estate.
4. Commodities. Gold, silver, coffee, cotton, etc.
5. Currencies.
6. Collectibles. Art, wine, coins, automobiles, and antiques, to name a few. This asset class requires very special knowledge or a lot of time on eBay.
7. Structured Notes. Ones that offer a high return but not 100% principal protection belong in the Risk / Growth Bucket.
*Diversify across securities, across asset classes, across markets--and across time.
*Speculation should be 5% or less of your total assets or portfolio.
David Swensen, Yale's $23.9 billion-plus man, portfolio:
Asset Class (Index Funds)
Domestic Stock 20%
International Stock 20%
Emerging Stock Markets 10%
REITs 20%
Long-term US Treasuries 15%
TIPS 15%
*Even though this portfolio might do better and be more stable than the general market, it is still an aggressive portfolio that requires a strong gut. If you're a young person, you might be very interested in this kind of mix.
"In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing."
-Theodore Roosevelt
Risk assessment quiz: http://njaes.rutgers.edu/money/riskquiz
Motivational bias: Thinking you're untouchable after a few successful investments.
*Putting all of your money in the Risk / Growth Bucket is the kiss of death.
You can't have someone in a perfect asset allocation unless it's perfect for them.
Once you know your own personal Security to Risk Bucket ratio, you don't want to alter it until you enter a new stage of life, or your circumstances change dramatically. You've got to stick with it and keep your portfolio in balance.
The Dream Bucket
Think of items you're saving for in your Dream Bucket as strategic splurges.
Many people have a lot of money but not much lifestyle. They spend their lives watching numbers accumulate in a bank account and miss out on the joy and enjoyment they can create and share along the way.
Your dreams are not designed to give you a financial payoff, they are designed to give you a greater quality of life. But you've got to practice some restraint here, too.
"Dreams are the touchstones of our character."
Henry David Thoreau
If you want to take the island, you have to burn your boats!
Grace comes when you commit to doing something that will serve more than just yourself--some would call it luck or coincidence. When you give your all, the rewards are infinite.
The key to creating wealth is to unleash your creativity and find a way to do more for others than anyone else is doing. If you find a way to add more value than anyone else, you can also find a way to prosper personally.
Timing is Everything?
If you're an investor, a mistake in timing can destroy your nest egg. So we need a solution that doesn't require us to be psychic.
If you think you can time the markets, you're wrong. But this does not mean you can't take advantage of the concept behind market timing--the opportunities of rising and falling markets--by applying a couple of simple but powerful principles.
Dollar-cost averaging allows you to diversify across time. Asset allocation is the theory; dollar-cost averaging is how you execute it.
Remember, the goal is to take emotion out of investing because emotion is what so often destroys investing success, whether it's greed or fear.
When you invest on a set schedule, with the same amount of money invested each month or week in exact accordance with your asset allocation plan, the fluctuations of the market work to increase your gains, not decrease. Volatility through time can become your friend.
*To be a successful investor, you need to rebalance your portfolio at regular intervals.
Just like dollar-cost averaging, you've got to take your emotions out of the picture. Portfolio rebalancing make you do the opposite of what you want to do. In investing, that's usually the right thing to do.
If your investments are not in a tax-deferred environment, and you rebalance an asset you have owned less than a year, you'll typically pay ordinary income taxes instead of the lower long-term investment tax rate!
*There's a perfectly legal way for you to lower those taxes while keeping your portfolio balanced: tax-loss harvesting. You reduce your taxes, and that increases your net return! In essence, you use some of your inevitable losses to maximize your net gains.
***Just remember four things from this section of the book:
1. Asset allocation is everything! You want to diversify across asset classes, markets, and time.
2. You don't want to hesitate to get in the market trying to have perfect timing; instead, use dollar-cost averaging and know that volatility can be your friend.
3. Have a Dream Bucket that gives you emotional juice and excitement so you can experience the benefits of your investing prowess in the short term and midterm instead of just someday in the future.
4. Use rebalancing and tax harvesting to maximize your returns and minimize losses.
Invincible, Unsinkable, Unconquerable: The All Seasons Strategy
"Invincibility lies in the defense."
-Sun Tsu, The Art of War
What do you focus on most often? What's your life's obsession? Finding love? Making a difference? Learning? Earning? Pleasing everyone? Avoiding pain? Changing the world?
Are you aware of what you focus on most; your primary question in life? Whatever it is, it will shape, mold, and direct your life.
*This book answers the question, "What do the most effective investors do to consistently succeed?"
"What kind of investment portfolio would one need to have to be absolutely certain that it would perform well in good times and in bad--across all economic environments?"
It is not a questions of whether or not there will be another crash, it is a question of when.
www.economicprinciples.org
Timing the market is basically playing poker with the best players in the world who play round the clock with nearly unlimited resources.
"The secret of all victory lies in the organization of the nonobvious."
-Marcus Aurelius
*By dividing up your money in 50% stocks and 50% bonds (or some general variation thereof), you are taking much more risk than you think. Stocks are three times more risky (aka volatile) than bonds.
- "Tony, by having a fifty-fifty portfolio, you really have more like ninety-five percent of your risk in stocks!" -Ray Dalio
There is one thing we can see with absolute certainty: every investment has an ideal environment in which it flourishes. In other words, there's a season for everything.
***Ray then revealed the most simple and important distinction of all. There are only four things that move the price of assets:
- Inflation
- Deflation
- Rising Economic Growth
- Declining Economic Growth
*Ray's view boils it down to only four different possible environments, or economic seasons, that will ultimately affect whether investments go up or down.
- Higher than expected inflation (rising prices)
- Lower than expected inflation (or deflation)
- Higher than expected economic growth
- Lower than expected economic growth
You should have 25% of your risk in each of these four categories.
*Complexity is the enemy of execution.
[$$$]
All Seasons Portfolio
30% Stocks
15% Intermediate [7-10 year] US Bonds
40% Long Term [20-25 year] US Bonds
7.5% Gold
7.5% Commodities
The portfolio must be rebalanced, at least annually.
*If you are younger, or can stomach more risk, you can use the All Seasons foundation and slightly change the bond-to-stock ratio for the potential for higher returns.
A few points of caution:
The low-cost index funds or ETFs you choose will change the performance. It's crucial to find the most efficient and cost-effective representations for each percentage.
The portfolio will need to be monitored continually and rebalanced annually.
The portfolio is
not tax-efficient at times. It's important to use your qualified accounts (IRAs / 401[K]s) or other tax-efficent structures to maximize tax efficiency appropriately.
[$$$]
33% US Total Bond Index
27% US Total Stock Index
14% Developed (Foreign) Markets Index
14% Emerging Markets Stock Index
12% US REIT Index (Real Estate)
Freedom: Creating Your Lifetime Income Plan
Always remember that income is the outcome.
Achieving critical mass without having a plan and strategy for how to turn it into income that will last the rest of your lifetime will leave you like George Mallory: dead on the back side of a mountain.
No matter what anyone tells you, or sells you, there isn't a single portfolio manager, broker, or financial advisor who can control the primary factor that will determine if our money will last. Luck.
The earliest years of your retirement will define your later years.
When was the last time your broker talked to you about creating a lifetime income plan?
"Americans should convert at least half of their retirement savings into an annuity."
-US Treasury Department
Dr. Jeffery Brown: Annuities are one of the most important investment vehicles we have.
Time to Win: Your Income is the Outcome
There are really only two general categories of traditional annuities: immediate annuities and deferred annuities.
- Immediate are best used for those at retirement age or beyond.
- Deferred: You give the insurance company money either in one lump sum or over a period of years, and instead of receiving an immediate income, your returns are reinvested in a tax-deferred environment so that when you're ready you can, at will, turn on the income stream you want for the rest of your life.
There are 3 types of deferred annuities:
- Deferred Income Annuity: Also known as longevity insurance, this is where you make a lump sum deposit today and you will have a guaranteed income that kicks on at a date much later in life.
- Fixed Index Annuity: This is where your rate of return is tied to how the stock market does, but you get a percentage of the upside of the market (not all) with no downside and no possibility of loss.
- Hybrid Annuity: This is also known as a "Continent" Annuity, which allows you to keep control of your capital and not have to send your money to an insurance company. Instead, we simply invest in a tax efficient portfolio of low cost index funds but if the market doesn't cooperate, and we run out of money in retirement, the insurance company will step in and begin sending us a guaranteed income for the remainder of life.
Variable annuities should be avoided.
Fixed income annuities:
- It offers the potential for significantly higher annual returns than other safe-money solutions such as CDs or bonds.
- It provides a 100% guarantee of your principal--you can't lose money.
- Your deposits remain in your control and you aren't giving up access to your cash.
- The growth is tax-deferred and compounds annually.
- It provides income insurance, or a guaranteed income for life, when you select an optional income rider.
- Each and every year, any gains or upside are locked in, and now this becomes our new floor.
Okay, so what's the downside of a fixed indexed annuity?
- As we have discussed all along, the impact of taxes is important to consider. It's what you keep, not what you make, that matters. So although the growth of an FIA is tax-deferred, much like an IRA or 401(k), when it comes time to withdraw, the income is taxable (beyond the portion that is a return of your initial deposit). The only way around this is using a Roth IRA.
- Although an FIA does allow for partial withdrawls, it's not as liquid or accessible as a typical portfolio investment in the early years. The insurance company typically has "surrender charges" for a period of time but keep in mind this is a self-imposed penalty meaning you decided you wanted your money early.
- Just like an IRA / 401(k), when the government grants you the benefit of a tax deferral, they assess a 10% penalty if you choose to withdraw before 59 and a 1/2.
- Advisers Excel established a website to educate and empower you when it comes to finding and selecting the right annuity products for your situation: www.lifetimeincome.com
Secrets of the Ultrawealthy (That You Can Use Too!)
Life insurance = an IRS-sanctioned vehicle that allows you to grow your investments tax free.
Private placement life insurance (PPLI) has been called "the secret of the affluent" by the NYT.
Benefits include:
- unlimited deposit amounts (with no income limitations)
- no tax on the growth of your investments
- no tax when accessed (if structured correctly)
- any money left over for your heirs cannot be taxed
Never again will you pay tax on growth of your investments or the money you access within this structure. This is why the media sometimes calls PPLI the "rich man's Roth."
By taking taxes out of the equation, the time it takes to reach your critical mass and financial independence will be massively accelerated.
Please note that there are very strict rules around the investment management, which must be done by a third-party investment professional, not the policy owner.
In order to access PPLI, you must be what's called an accredited investor and the typical minimum annual deposits are $250,000 for a minimum for four years.
- HOWEVER, TIAA-CREF's unique not-for-profit structure allows it to offer a life insurance product with no sales or surrender charges, and the tax benefits are no different from what we have learned regarding PPLI. Visit www.tiaa-cref.org/public
One of the simplest things you can do to protect your family is to establish a living revocable trust. Unlike a will, a living trust can also protect you and your family while you are alive.
Don't let experts tell you that a living trust costs thousands. You can get a template document for free by visiting http://getyourshittogether.org.
Meet the Masters
Even though each of these financial legends has a distinct approach, I found that they share at least four common obsessions:
1. Don't lose. All of these masters, while driven to deliver extraordinary returns, are even more obsessed with making sure they don't lose money. If you lose 50%, it takes 100% to get back to where you started--and that takes something you can never get back: time.
2. Risk a little to make a lot. They live to uncover investments where they can risk a little to make a lot--they call it asymmetrical risk-reward.
3. Anticipate and diversify. "A lot of brilliant people are terrible investors. The reason is that they don't have the ability to make decisions with limited information. By the time you get all the information, everyone else knows it, and you no longer have the edge."
4. You're never done. They're never done learning, they're never done earning, they're never done growing, they're never done giving! No matter how well they've done or how well they've continued to do, they never lose their hunger--the force that unleashes human genius.
*20% US Stocks, 20% US Treasury Bonds, 20% TIPS, 10% Emerging Markets, 10% Foreign Markets, 10% REITs, 10% Gold [Bitcoin!]
David Swensen's Unconventional Success
- "The fundamental reason that individuals don't have the types of choices they should have is because of the profit orientation in the mutual fund industry."
- "There are only two organizations where that conflict doesn't exist, and they're Vanguard and TIAA-CREF. Both operate on a not-for-profit basis. They're looking out for the investor's interest, and they're strong fiduciaries."
- "You should take every opportunity to invest in a deferred way."
Jack Bogle's Portfolio Core Principles
- Asset allocation in accordance with your risk tolerance and your objectives.
- Diversify through low-cost index funds.
- Have as much in bond funds as your age. A "crude" benchmark, he says. [Exceptions: the very young can be 100% in stocks, and the old can cap their percentage anywhere from 40-60%, depending on risk tolerance and objectives.]
Paul Tudor Jones
- "You don't need to go to business school; you've only got to remember two things. The first is, you always want to be with whatever the predominant trend is. You don't ever want to be a contrarian investor."
- "My metric for everything I look at is the 200-day moving average of closing prices."
- The second thought: "Five to one." Asymmetric risk/reward. "I'm risking one dollar to make five."
- "One principle for sure would be get out of anything that falls below the 200-day moving average. Investing with a five-to-one focus and discipline would be another."
