good morning believe nation today we’re
going to talk about the how and the why
investing many years ago a man named
Classen wrote a book called the richest
man in Babylon this book became a
worldwide bestseller sold millions and
millions of copies in every language and
it has one basic principle in the book
which is not very large which says pay
yourself first resolved today that you
are going to save and invest at least 10
percent of your income throughout your
working life take ten percent of your
income off the top of your paycheck each
time you receive one pay yourself first
and put it into a special account for
financial accumulation the fact is that
if you save just one hundred dollars per
month throughout your working lifetime
and you invest that money in an average
mutual fund that grows at eight to ten
percent per annum you will be worth more
than 1 million dollars by the time you
retire my good friend David Bach wrote a
book – it said that if you simply spend
one latte less 5 dollars a day and he
call it the latte factor and saved that
money $25 a week you’ll save $100 a
month and you’ll become financially
independent
he’s been on half the television shows
in America explaining that by saving a
few dollars each day and saving it you
can achieve all your financial goals
what this means is that anyone even a
person earning minimum wage if he or she
starts earning enough and saves long
enough can become a millionaire over the
course of his or her working lifetime
and that includes you
most people think that savings is smart
but my Rich Dad told me years ago that
savers are losers now I know this goes
against the grain what most people tell
you you know save money save money save
money but the reason savers are losers
began back in 1971 and in 1971 President
Nixon took the u.s. off the gold
standard and made the US dollar the
reserve currency of the world one of the
reasons we have so much economic
volatility in our economies today high
gas prices high food prices stock market
booms and busts as housing values going
down all can be attributed back to 1971
plus there are other changes so what
makes a Rich Dad company different is
that we do not really subscribe to the
idea of being a saver we think it’s more
important you learn to being an investor
you know like if you had invested in oil
ten years ago you’d be a rich person
today even though savers are losses if
they invested in gold ten years ago you
would been a lot better off if you had
invested in rental real estate ten years
ago it would been way ahead of the
savers so if you want to get ahead you
need to not be a saver but learn should
be an entrepreneur or an investor and I
remembered a story and it really
affected me years ago my mother was born
in Montreal worked at a company called
Kitty’s hogs and she used to come home
and tell my brother and I cuz they pay
them every week on Thursday morning
she’d always invest a third of her
paycheck into bail bonds with coupons
she’d always say to me boys never spend
the principle just the interest and
never ever ever ever buy a security that
doesn’t pay a dividend and you know back
in those days
stocks paid higher dividends than the
bonds so example you know Bell Canada
had a 6% yield on its five-year of paper
and bonds the stock yield at seven to
entice people to take the risk to own an
equity and we got lost somewhere between
the 50s and the 60s and 70s and we
actually thought that it was a good
investment to buy a stock that didn’t
pay a dividend which to me is insane so
anyways I I wanted to found a firm on
that my mother’s basic concept because
you know she died a few years ago and I
was executive for her state and I looked
at the portfolio which she never shared
with anybody
but 40 years compounded dividends and
bonds you know 73% of the markets
returns over the last 40 years came from
dividends not capital appreciation and
she knew that intuitively so that’s how
we built the foundation of O’Leary funds
we listened to mom we don’t own a single
security that doesn’t pay a dividend I
will never buy a stock in my life that
doesn’t pay a dividend it’s not
returning cash to me it’s a speculation
and if a manager can’t send me cash I’m
not interested if you have a 401k match
you don’t do it for as much as you can
possibly force yourself to do you’re an
idiot if you don’t have a 401k then
there’s so many esoteric dumbass banking
rules right where you can’t just put ten
dollars or 20 dollars into the bank
because of all the service fees they’re
gonna crush you right and so there’s a
variety of new things and opportunities
that are coming up where if you can get
yourself to put in $10 a week $20 a week
$100 a month if you’re 21 and you put in
a hundred dollars a month and you put it
into a vanguard index fund let’s say
hopefully you’ll be able to increase
those amounts and so literally if you
can train yourself to save a hundred
bucks a month and grow it as you earn
more you’re gonna be a millionaire by
the time you retire if you don’t you’re
gonna be in the same boat I was at 27
and broke or trying to figure it out or
you know others at 50 or 60 will have
nothing the opportunities exist and if
you can invest in just a you know a
stock index fund SPX bond and guard I
mentioned because it’s the lowest cost
do it do it do it do it do it do it –
les Pierce know these days one less be
one less fireball shot and you can be
rich have those first five fireballs but
that was last – for the private
investors especially in the venture
capital industry what would you think is
the most important thing the key
evaluating a company it’s we’re not I’m
not asking about doing mediocre and not
asking about being average but about
excellent remarkable just name one thing
the
the most important thing is to the side
is to be able to define which ones you
can come to an intelligent decision on
and which ones are beyond your capacity
to evaluate you don’t have to be right
about thousands and thousands of
thousands of competition you only have
to be right about a company couple I met
Bill Gates on July 5th 1991 we arrived
Seattle and Bill said you’ve got to have
a computer and I said why and he said
well he said you can do your income tax
on it I said I don’t have any income
Bircher doesn’t pay a dividend yeah he
said well you can keep track of your
portfolio I said I only have one stock I
said I did I mean he says it’s gonna
change everything and I said well will
it change whether people chew gum and he
said well probably not and I said what
will change what kind of gum they show
and I said well then I’ll stick to
chewing gum and you stick to computers
how bad I don’t have to understand all
kinds of but there’s all kinds of
business I don’t understand but there’s
thousands of opportunities there I
didn’t understand the Bank of America
you know and and I’ll be able I’m able
to do that I’m able to understand some
given percentage but Ted Williams wrote
a book called the science of hitting and
in science of hitting he’s got a diagram
shows him at the plate and he’s got the
strike zone divided in the seventy-seven
squares each the size of a baseball and
he says if I only swing it pitches in my
sweet zone which he shows there and he
has what his batting average would be
which is 400 if he had to swing at low
outside pitches but still in the in the
strike zone
his average would be 230 he said the
most important thing in hitting is
waiting for the right pitch now he was
at a disadvantage because if the count
was oh and two or one and two or and so
on even if that ball was down where he
was only going about 230 he had to swing
at it in investing there’s no called
strikes people can throw Microsoft that
man you know you name it any any stock
General Motors
and I don’t have to swing yeah nobody’s
gonna call me out on calls
I only get a strike called if I swing at
a pitch and miss so I can wait there and
look at thousands of companies day after
day and only when I see something I
understand and when I like the price of
which is selling then if I swing if I if
I had it fine if I miss it it’s it’s
it’s a strike but it’s an enormous ly
advantageous game and it’s a terrible
mistake
that think you have to have an opinion
on everything you only have to have an
opinion on a few things in fact I’ve
told students if when they got out of
school they got a punch card with 20
punches on it and that’s all the
investment decisions they got to make in
their entire life they would get very
rich because they would think very hard
about each one and you don’t need 20
right decisions to get very rich you
know four or five will probably do it
over time so I don’t worry too much
about the things I don’t understand if
you understand some of these businesses
that are coming along and can spot
things on if you can spot on Amazon for
example I mean it’s a tremendous
accomplishment what Jeff Bezos has done
and I tip my hat to me is a wonderful
businessman he’s a good guy too but
could I have anticipated that he would
be the success and ten others wouldn’t
be I’m not good enough to do that but I
done fortunately I don’t have to you
know I don’t have to form an opinion on
on Amazon and I did I did form an
opinion on the Bank of America and I
form an opinion on coca-cola
I mean coca-cola has been around since
1886
there’s 1.8 billion 1.8 billion 8 ounce
servings of coca-cola products sold
every day now if you take one penny and
get one penny extra that’s 18 million
dollars a day and 18 million times 365
is 7 billion 3 less 730 billion or 6
billion 570 million dollars so annually
6 billion 570 million dollars from one
penny do you think coca-cola is worth a
penny more than you know Joe’s Cola I
think so so you know and I’ve got about
127 years of history they would indicate
it so those are the kind of
decisions I like to make and you may
have an entirely different field of
expertise then I would have and probably
much more up to date in terms of the
kind of businesses that we’re seeing
about and you can get very rich if you
just understand the feel of them and
understand their future
well the freedom fund is this idea
nobody wants to save right and
Millennials right now are do the worst
job of it a long time and it’s not
because they don’t care they’re
irresponsible to Frank Lee they don’t
trust the market you know they saw what
happened in 2008 they don’t know where
to really to go and so they’re being
stimulated like crazy and they’re
spending like crazy but if you really
want to have freedom that what you have
to do is you’ve got to take that
percentage aside like Theodore Johnson
dead and you got to just say this is for
me this is my friend there’s a part of
what I earn as basic as it is we all
know there’s some investing it’s a part
of what I earned that it’s mine and my
family’s to keep and no one’s going to
touch it I’m going to grow it and but I
also believe that where you put that
really matters and so indexing is the
most basic way to do it for sure but
what all these investors showed me is
asset allocation is where the difference
is in business right in life if you look
at it the fourth key we talk about and
the four steps is you got to really
understand asset allocation because when
I was with David Swensen David said Tony
I said what are the dials you can move
there’s a limited number of dollars you
can move to increase your returns to get
to your financial freedom faster he says
there’s really only three he said you
can make a better choice selection of
the actual investments of the securities
you can have better timing or you got a
better asset allocation so let me give
you a clue the first two will never
happen he said because they cost money
if you get them from somebody else and
everybody’s wrong on timing everybody’s
wrong in the stocks this is where all
your money is made is that this leads to
what sound goes against all the
conventional wisdom what you call
all-weather allocation yeah well let’s
talk about that that’s which stocks only
30 percent yes explain yes well I sat
down with the famous Ray Dalio
right right and I prepared for 18 hours
for that interview because he’s a genius
and there’s not that much on him I
wanted to absorb it all so I got every
little bit of it sat down with it turned
out ray was a fan of my work which I was
touched by 20 years ago I guess he
listened to my programs he was very
generous with his time and we spent
these three hours and in the three hours
when I got to the end I said
and said listen I really want help the
average person so I got a question for
you I did this with everyone I said if
you couldn’t give your money to your
children any of it and all you could do
would be give them a portfolio or a set
of investment strategies or instructions
and they were going to start over and
build it what would it be nice to Tony
I spent a decade figuring that out all
my money is already there my kids money
is there my money philanthropy when i’m
gone is there cuz i’m not gonna be here
and i want something that’ll do well in
the future and i don’t know what the
future is gonna be markets are gonna
always change i need something they
could work in any mark and I call it my
all weather fund most of us in the
business are familiar with it a little
bit and so he explained it to me and I
have a good understanding and I said I
get it so what you’re saying is the
reason why this was obsessed him why is
he defined the balance portfolio in 2008
I got nailed on both sides why did that
happen in 2000 everybody says portfolio
theory this is supposed to protect me
and it didn’t work but he said as soon
as things get better no one talks about
it we just forget about it happens again
happened in 2000 happened in 2008 he
said I figured it out
when you have a 50/50 portfolio right
that’s 50/50 of where you put your money
in assets 6040 5050 however you look at
balanced portfolio right but he said the
problem is that’s not balanced risk this
is where people are crazy I’ve seen
people write things up they see this in
the book and say Tony Robbins is
promoting first I’m not promoting
anything every word in this book is from
the best investors on earth anything
it’s from me is about the emotions that
I know for 36 years that’s been my
expertise these are their views but I’ll
tell you what’s amazing
he’s a Tony when you have stocks and
bonds half and half you’re not equal
because equities are three times more
volatile so your risk is ninety five
five he said so that’s why people get
killed in 2008 he said I try to get this
through to people he said but all of our
people handle it you know you manage
money for countries the largest you know
pension funds on earth he said but
people don’t listen they look at it go
oh this is bond heavy the bond days are
over because inflation is going forward
he said it’s not true Tony this fund in
the 1970s it was the worst time for
bonds it was an extraordinary time for
all weather because it isn’t it looks
over balanced because we already get the
same level of risk you have to go for
more long-term bonds or you have to use
more leverage on the bond side and so
when he was all done it was you know for
the average person complex I’m seeing
financial people look at this and write
things up that are just silly saying
says this is never gonna work as we’re
in the you know interest rates you know
the only place to go if he treats go up
it’s a balance fund the other areas kick
in but here’s what’s interesting I think
told the whole thing to me I said to him
I said look I said this is wonderful you
give me something that very few people
understand on the planet I think I
really got it and I played it back to he
said you got it
I said there’s the problem the average
person is never gonna know what to do
with this and I said I’m trying to help
somebody that needs to know what to do I
said tell me you’re telling me to make
this beautiful chocolate cake and you’re
saying Tony here’s how to do it here’s
some sugar right use some chocolate use
some dairy products I need know the
amounts you know give me the amounts
egos tell me that’s my secret sauce and
that’s when he told me he said look 10
years ago for you to even get into talk
to me it was 5 billion net worth a
hundred million dollars of getting it
Michael and he said and now for 10 years
I haven’t taken anybody’s money and she
answered your own question I said you’re
not taking money anyway it’s not gonna
compete with you the average guy he says
never gonna make it talking to a wealth
manager tell me what to do and he is so
generous you know he’s giving up half
his net worth like many other people and
and in the end he said ok said of but
it’ll be complex I said I can make it
simple he said well I don’t want
leverage and I said design without
leverage because it won’t be perfect I
said I don’t care if it’s not perfect
your idea of unperfect somebody else
idea is the best thing they could do and
they lane up the numbers we ran the
numbers and use the same back-testing so
you saw year by year how it really did
over the last 75 years in modern
investing and here’s what’s amazing like
all weather similar in 75 years
it’s been right 85 percent of the time
what’s even more extraordinary is the 15
percent what it wasn’t doing well what
it knew well it’s average loss was 1.6
percent not 50 40 30 20 think in the
last ten years the to 50 percent hits
his biggest loss in 75 years was less
than 4% minus three point nine five and
that was 2008 when the market exploded
you know down to 51 percent here here in
the allocations yes in the book which
would make it a normal person gag
initially the stocks only 30 percent
that’s right even though it’s their
stocks on average supposed to gain what
I’m presenting yes nine point to
long-term Treasuries 40 percent yeah
intermediates 15 gold seven-and-a-half
commodity seven and a half yeah
absolutely counter wisdom I know it’s
amazing
you know
interviewed David Swensen he said he
wrote a book and when he said the whole
secret to success is to be contrary to
what else believes but the math on this
is what works here’s what’s interesting
that looks like your heavy bronze forty
and fifteen fifty five percent bonds and
it looks that way visually in terms of
volume you are panned in terms of risk
you’re not you’re still you’re making us
you’re equally way to think of it this
way what triggers things to grow is
inflation or deflation in terms of price
certain things do really well in
inflation certain to deflation growing
economy shrinking economy he’s figured
out which quadrant you need to put each
to actually have equal risk and that’s
why it’s not well this year this formula
has done it’s one percent better than
the markets in thirteen and the third
right now and but more importantly three
weeks ago in the market drop two gave up
all of its entire benefits for the
entire year and everybody’s guts were
checking there was no gut check because
they went up a quarter of a point so the
beauty of this is I’m sure you know
there’s Studies on the last twenty years
and the studies from 1993 to 2013 and
spied Albar and they found that the
market is sp500 during that time did
nine point two percent on average just
as you said but you know what the
average mutual fund men now owner dot
invested two point five percent that’s
before tax why because we as investors
always do the wrong thing emotionally
that’s right we sell we should hang on
we buy when we shouldn’t so the greatest
thing that I think that Ray offers
somebody the opportunity to do is
actually stay in the hood because if you
go yeah if you got one point six percent
as your big here they’re four percent
was the biggest hit you’ve ever seen at
seventy five years I think you could
stay in and you can do a jack talks
about will just stay in that market
through time
this means resetting each year it’s a
reset once a year that’s the one
recalibration so fifteen minutes a year
and you’re in the game thank you for
watching we made this video because
Fatih for you asked us to so there’s a
topic you’d like us to cover in the next
edition of believe life leave it below
and we’ll see what we can do thanks for
watching have an amazing day and
continue to believe mo sees
going to talk about the how and the why
investing many years ago a man named
Classen wrote a book called the richest
man in Babylon this book became a
worldwide bestseller sold millions and
millions of copies in every language and
it has one basic principle in the book
which is not very large which says pay
yourself first resolved today that you
are going to save and invest at least 10
percent of your income throughout your
working life take ten percent of your
income off the top of your paycheck each
time you receive one pay yourself first
and put it into a special account for
financial accumulation the fact is that
if you save just one hundred dollars per
month throughout your working lifetime
and you invest that money in an average
mutual fund that grows at eight to ten
percent per annum you will be worth more
than 1 million dollars by the time you
retire my good friend David Bach wrote a
book – it said that if you simply spend
one latte less 5 dollars a day and he
call it the latte factor and saved that
money $25 a week you’ll save $100 a
month and you’ll become financially
independent
he’s been on half the television shows
in America explaining that by saving a
few dollars each day and saving it you
can achieve all your financial goals
what this means is that anyone even a
person earning minimum wage if he or she
starts earning enough and saves long
enough can become a millionaire over the
course of his or her working lifetime
and that includes you
most people think that savings is smart
but my Rich Dad told me years ago that
savers are losers now I know this goes
against the grain what most people tell
you you know save money save money save
money but the reason savers are losers
began back in 1971 and in 1971 President
Nixon took the u.s. off the gold
standard and made the US dollar the
reserve currency of the world one of the
reasons we have so much economic
volatility in our economies today high
gas prices high food prices stock market
booms and busts as housing values going
down all can be attributed back to 1971
plus there are other changes so what
makes a Rich Dad company different is
that we do not really subscribe to the
idea of being a saver we think it’s more
important you learn to being an investor
you know like if you had invested in oil
ten years ago you’d be a rich person
today even though savers are losses if
they invested in gold ten years ago you
would been a lot better off if you had
invested in rental real estate ten years
ago it would been way ahead of the
savers so if you want to get ahead you
need to not be a saver but learn should
be an entrepreneur or an investor and I
remembered a story and it really
affected me years ago my mother was born
in Montreal worked at a company called
Kitty’s hogs and she used to come home
and tell my brother and I cuz they pay
them every week on Thursday morning
she’d always invest a third of her
paycheck into bail bonds with coupons
she’d always say to me boys never spend
the principle just the interest and
never ever ever ever buy a security that
doesn’t pay a dividend and you know back
in those days
stocks paid higher dividends than the
bonds so example you know Bell Canada
had a 6% yield on its five-year of paper
and bonds the stock yield at seven to
entice people to take the risk to own an
equity and we got lost somewhere between
the 50s and the 60s and 70s and we
actually thought that it was a good
investment to buy a stock that didn’t
pay a dividend which to me is insane so
anyways I I wanted to found a firm on
that my mother’s basic concept because
you know she died a few years ago and I
was executive for her state and I looked
at the portfolio which she never shared
with anybody
but 40 years compounded dividends and
bonds you know 73% of the markets
returns over the last 40 years came from
dividends not capital appreciation and
she knew that intuitively so that’s how
we built the foundation of O’Leary funds
we listened to mom we don’t own a single
security that doesn’t pay a dividend I
will never buy a stock in my life that
doesn’t pay a dividend it’s not
returning cash to me it’s a speculation
and if a manager can’t send me cash I’m
not interested if you have a 401k match
you don’t do it for as much as you can
possibly force yourself to do you’re an
idiot if you don’t have a 401k then
there’s so many esoteric dumbass banking
rules right where you can’t just put ten
dollars or 20 dollars into the bank
because of all the service fees they’re
gonna crush you right and so there’s a
variety of new things and opportunities
that are coming up where if you can get
yourself to put in $10 a week $20 a week
$100 a month if you’re 21 and you put in
a hundred dollars a month and you put it
into a vanguard index fund let’s say
hopefully you’ll be able to increase
those amounts and so literally if you
can train yourself to save a hundred
bucks a month and grow it as you earn
more you’re gonna be a millionaire by
the time you retire if you don’t you’re
gonna be in the same boat I was at 27
and broke or trying to figure it out or
you know others at 50 or 60 will have
nothing the opportunities exist and if
you can invest in just a you know a
stock index fund SPX bond and guard I
mentioned because it’s the lowest cost
do it do it do it do it do it do it –
les Pierce know these days one less be
one less fireball shot and you can be
rich have those first five fireballs but
that was last – for the private
investors especially in the venture
capital industry what would you think is
the most important thing the key
evaluating a company it’s we’re not I’m
not asking about doing mediocre and not
asking about being average but about
excellent remarkable just name one thing
the
the most important thing is to the side
is to be able to define which ones you
can come to an intelligent decision on
and which ones are beyond your capacity
to evaluate you don’t have to be right
about thousands and thousands of
thousands of competition you only have
to be right about a company couple I met
Bill Gates on July 5th 1991 we arrived
Seattle and Bill said you’ve got to have
a computer and I said why and he said
well he said you can do your income tax
on it I said I don’t have any income
Bircher doesn’t pay a dividend yeah he
said well you can keep track of your
portfolio I said I only have one stock I
said I did I mean he says it’s gonna
change everything and I said well will
it change whether people chew gum and he
said well probably not and I said what
will change what kind of gum they show
and I said well then I’ll stick to
chewing gum and you stick to computers
how bad I don’t have to understand all
kinds of but there’s all kinds of
business I don’t understand but there’s
thousands of opportunities there I
didn’t understand the Bank of America
you know and and I’ll be able I’m able
to do that I’m able to understand some
given percentage but Ted Williams wrote
a book called the science of hitting and
in science of hitting he’s got a diagram
shows him at the plate and he’s got the
strike zone divided in the seventy-seven
squares each the size of a baseball and
he says if I only swing it pitches in my
sweet zone which he shows there and he
has what his batting average would be
which is 400 if he had to swing at low
outside pitches but still in the in the
strike zone
his average would be 230 he said the
most important thing in hitting is
waiting for the right pitch now he was
at a disadvantage because if the count
was oh and two or one and two or and so
on even if that ball was down where he
was only going about 230 he had to swing
at it in investing there’s no called
strikes people can throw Microsoft that
man you know you name it any any stock
General Motors
and I don’t have to swing yeah nobody’s
gonna call me out on calls
I only get a strike called if I swing at
a pitch and miss so I can wait there and
look at thousands of companies day after
day and only when I see something I
understand and when I like the price of
which is selling then if I swing if I if
I had it fine if I miss it it’s it’s
it’s a strike but it’s an enormous ly
advantageous game and it’s a terrible
mistake
that think you have to have an opinion
on everything you only have to have an
opinion on a few things in fact I’ve
told students if when they got out of
school they got a punch card with 20
punches on it and that’s all the
investment decisions they got to make in
their entire life they would get very
rich because they would think very hard
about each one and you don’t need 20
right decisions to get very rich you
know four or five will probably do it
over time so I don’t worry too much
about the things I don’t understand if
you understand some of these businesses
that are coming along and can spot
things on if you can spot on Amazon for
example I mean it’s a tremendous
accomplishment what Jeff Bezos has done
and I tip my hat to me is a wonderful
businessman he’s a good guy too but
could I have anticipated that he would
be the success and ten others wouldn’t
be I’m not good enough to do that but I
done fortunately I don’t have to you
know I don’t have to form an opinion on
on Amazon and I did I did form an
opinion on the Bank of America and I
form an opinion on coca-cola
I mean coca-cola has been around since
1886
there’s 1.8 billion 1.8 billion 8 ounce
servings of coca-cola products sold
every day now if you take one penny and
get one penny extra that’s 18 million
dollars a day and 18 million times 365
is 7 billion 3 less 730 billion or 6
billion 570 million dollars so annually
6 billion 570 million dollars from one
penny do you think coca-cola is worth a
penny more than you know Joe’s Cola I
think so so you know and I’ve got about
127 years of history they would indicate
it so those are the kind of
decisions I like to make and you may
have an entirely different field of
expertise then I would have and probably
much more up to date in terms of the
kind of businesses that we’re seeing
about and you can get very rich if you
just understand the feel of them and
understand their future
well the freedom fund is this idea
nobody wants to save right and
Millennials right now are do the worst
job of it a long time and it’s not
because they don’t care they’re
irresponsible to Frank Lee they don’t
trust the market you know they saw what
happened in 2008 they don’t know where
to really to go and so they’re being
stimulated like crazy and they’re
spending like crazy but if you really
want to have freedom that what you have
to do is you’ve got to take that
percentage aside like Theodore Johnson
dead and you got to just say this is for
me this is my friend there’s a part of
what I earn as basic as it is we all
know there’s some investing it’s a part
of what I earned that it’s mine and my
family’s to keep and no one’s going to
touch it I’m going to grow it and but I
also believe that where you put that
really matters and so indexing is the
most basic way to do it for sure but
what all these investors showed me is
asset allocation is where the difference
is in business right in life if you look
at it the fourth key we talk about and
the four steps is you got to really
understand asset allocation because when
I was with David Swensen David said Tony
I said what are the dials you can move
there’s a limited number of dollars you
can move to increase your returns to get
to your financial freedom faster he says
there’s really only three he said you
can make a better choice selection of
the actual investments of the securities
you can have better timing or you got a
better asset allocation so let me give
you a clue the first two will never
happen he said because they cost money
if you get them from somebody else and
everybody’s wrong on timing everybody’s
wrong in the stocks this is where all
your money is made is that this leads to
what sound goes against all the
conventional wisdom what you call
all-weather allocation yeah well let’s
talk about that that’s which stocks only
30 percent yes explain yes well I sat
down with the famous Ray Dalio
right right and I prepared for 18 hours
for that interview because he’s a genius
and there’s not that much on him I
wanted to absorb it all so I got every
little bit of it sat down with it turned
out ray was a fan of my work which I was
touched by 20 years ago I guess he
listened to my programs he was very
generous with his time and we spent
these three hours and in the three hours
when I got to the end I said
and said listen I really want help the
average person so I got a question for
you I did this with everyone I said if
you couldn’t give your money to your
children any of it and all you could do
would be give them a portfolio or a set
of investment strategies or instructions
and they were going to start over and
build it what would it be nice to Tony
I spent a decade figuring that out all
my money is already there my kids money
is there my money philanthropy when i’m
gone is there cuz i’m not gonna be here
and i want something that’ll do well in
the future and i don’t know what the
future is gonna be markets are gonna
always change i need something they
could work in any mark and I call it my
all weather fund most of us in the
business are familiar with it a little
bit and so he explained it to me and I
have a good understanding and I said I
get it so what you’re saying is the
reason why this was obsessed him why is
he defined the balance portfolio in 2008
I got nailed on both sides why did that
happen in 2000 everybody says portfolio
theory this is supposed to protect me
and it didn’t work but he said as soon
as things get better no one talks about
it we just forget about it happens again
happened in 2000 happened in 2008 he
said I figured it out
when you have a 50/50 portfolio right
that’s 50/50 of where you put your money
in assets 6040 5050 however you look at
balanced portfolio right but he said the
problem is that’s not balanced risk this
is where people are crazy I’ve seen
people write things up they see this in
the book and say Tony Robbins is
promoting first I’m not promoting
anything every word in this book is from
the best investors on earth anything
it’s from me is about the emotions that
I know for 36 years that’s been my
expertise these are their views but I’ll
tell you what’s amazing
he’s a Tony when you have stocks and
bonds half and half you’re not equal
because equities are three times more
volatile so your risk is ninety five
five he said so that’s why people get
killed in 2008 he said I try to get this
through to people he said but all of our
people handle it you know you manage
money for countries the largest you know
pension funds on earth he said but
people don’t listen they look at it go
oh this is bond heavy the bond days are
over because inflation is going forward
he said it’s not true Tony this fund in
the 1970s it was the worst time for
bonds it was an extraordinary time for
all weather because it isn’t it looks
over balanced because we already get the
same level of risk you have to go for
more long-term bonds or you have to use
more leverage on the bond side and so
when he was all done it was you know for
the average person complex I’m seeing
financial people look at this and write
things up that are just silly saying
says this is never gonna work as we’re
in the you know interest rates you know
the only place to go if he treats go up
it’s a balance fund the other areas kick
in but here’s what’s interesting I think
told the whole thing to me I said to him
I said look I said this is wonderful you
give me something that very few people
understand on the planet I think I
really got it and I played it back to he
said you got it
I said there’s the problem the average
person is never gonna know what to do
with this and I said I’m trying to help
somebody that needs to know what to do I
said tell me you’re telling me to make
this beautiful chocolate cake and you’re
saying Tony here’s how to do it here’s
some sugar right use some chocolate use
some dairy products I need know the
amounts you know give me the amounts
egos tell me that’s my secret sauce and
that’s when he told me he said look 10
years ago for you to even get into talk
to me it was 5 billion net worth a
hundred million dollars of getting it
Michael and he said and now for 10 years
I haven’t taken anybody’s money and she
answered your own question I said you’re
not taking money anyway it’s not gonna
compete with you the average guy he says
never gonna make it talking to a wealth
manager tell me what to do and he is so
generous you know he’s giving up half
his net worth like many other people and
and in the end he said ok said of but
it’ll be complex I said I can make it
simple he said well I don’t want
leverage and I said design without
leverage because it won’t be perfect I
said I don’t care if it’s not perfect
your idea of unperfect somebody else
idea is the best thing they could do and
they lane up the numbers we ran the
numbers and use the same back-testing so
you saw year by year how it really did
over the last 75 years in modern
investing and here’s what’s amazing like
all weather similar in 75 years
it’s been right 85 percent of the time
what’s even more extraordinary is the 15
percent what it wasn’t doing well what
it knew well it’s average loss was 1.6
percent not 50 40 30 20 think in the
last ten years the to 50 percent hits
his biggest loss in 75 years was less
than 4% minus three point nine five and
that was 2008 when the market exploded
you know down to 51 percent here here in
the allocations yes in the book which
would make it a normal person gag
initially the stocks only 30 percent
that’s right even though it’s their
stocks on average supposed to gain what
I’m presenting yes nine point to
long-term Treasuries 40 percent yeah
intermediates 15 gold seven-and-a-half
commodity seven and a half yeah
absolutely counter wisdom I know it’s
amazing
you know
interviewed David Swensen he said he
wrote a book and when he said the whole
secret to success is to be contrary to
what else believes but the math on this
is what works here’s what’s interesting
that looks like your heavy bronze forty
and fifteen fifty five percent bonds and
it looks that way visually in terms of
volume you are panned in terms of risk
you’re not you’re still you’re making us
you’re equally way to think of it this
way what triggers things to grow is
inflation or deflation in terms of price
certain things do really well in
inflation certain to deflation growing
economy shrinking economy he’s figured
out which quadrant you need to put each
to actually have equal risk and that’s
why it’s not well this year this formula
has done it’s one percent better than
the markets in thirteen and the third
right now and but more importantly three
weeks ago in the market drop two gave up
all of its entire benefits for the
entire year and everybody’s guts were
checking there was no gut check because
they went up a quarter of a point so the
beauty of this is I’m sure you know
there’s Studies on the last twenty years
and the studies from 1993 to 2013 and
spied Albar and they found that the
market is sp500 during that time did
nine point two percent on average just
as you said but you know what the
average mutual fund men now owner dot
invested two point five percent that’s
before tax why because we as investors
always do the wrong thing emotionally
that’s right we sell we should hang on
we buy when we shouldn’t so the greatest
thing that I think that Ray offers
somebody the opportunity to do is
actually stay in the hood because if you
go yeah if you got one point six percent
as your big here they’re four percent
was the biggest hit you’ve ever seen at
seventy five years I think you could
stay in and you can do a jack talks
about will just stay in that market
through time
this means resetting each year it’s a
reset once a year that’s the one
recalibration so fifteen minutes a year
and you’re in the game thank you for
watching we made this video because
Fatih for you asked us to so there’s a
topic you’d like us to cover in the next
edition of believe life leave it below
and we’ll see what we can do thanks for
watching have an amazing day and
continue to believe mo sees
Please follow and like us: