Monthly Archives: March 2015

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[Book Review] Money – Master the Game by Tony Robbins

Category : Uncategorized

The book is a 600 page guide and declares in the title page : 7 Simple steps to financial freedom. The book came to my reading lens after a friend of mine loaned me and praised the book, till half read. I was hesitant but the word ‘freedom’ pulled me to read the book.

The purpose of this review is not to rate / comment / refer / critique / rebut but to do something what most people will thank me for : encapsulation of 600 pages into 500 words. Incomplete but the alternative is reading 600 pages * 500 words = 3,00,000 words and not less easier than earning the same – $ 3,00,000 !

1. The author argues that each one can achieve financial freedom.

2. Financial freedom is defined by the author as : If you need $ x per month to maintain your current lifestyle (with aspirations), then one needs to build a Freedom Fund and invest in such a way that this $ x comes each month for next 20-30-40 years.

3.  Freedom Fund is elusive because most of the people are not good investors, they do not save, they do not understand tax and inflation, do not understand active manager fee (mutual fund portfolio), do not diversify, do not balance their diversified portfolios, do not understand sequencing (timing and order) and do not take the issue of financial future seriously.

4. For a freedom fighter, 3 things are crucial : a) allocation of assets b) diversification of assets c) anticipating the future – especially inflation and tax rates  d) achieving tax efficiency. e) respecting compound interest.

5. Loosely speaking, diversification may imply for a specific individual : 30% in stocks, 40% in secured return assets, 10% in long term annuities, 10% in long term bonds, 7% in gold, 3% in commodities

6. These percentages need to be ;’balanced’ – sold and re-invested in course of time.

7. One important aspect he teaches is to associate with a fiduciary. A fiduciary is a person who has no conflict of interest in providing you financial advice. He gives a nice metaphor. If you go a meat-seller and say what is good for health, he will say : meat. If you go to a nutritionist, he will evaluate and may not say meat all the time. The meat-seller is a general financial adviser and a nutritionist is a fiduciary.

The book is a good read and authoritative because of the author is a self made millionaire and he has interviewed and relayed advice from the topmost investors and financial experts of the world.


——————————-    My experiment with the book’s core model ————-

I am of the opinion that in financial matters, one should immediately put all advice into test, through a model. This is not difficult because money can be quantified and the problem (with some assumptions) becomes a mathematical equation, a rough and simplistic equation but a good model. Remember Bohr’s atomic model which was simplistic but was a useful starting model for as complex thing as atom. I asked a friend of mine and built a model :

Income needed per month = MI

Rate of return = 7% ( considered averaged over next 15 years)

Rate of stock growth = 10% (averaged over 15 years, conservative estimate. This includes the entry-exit points and to eliminate this, considered  to be  kept constant)

If he liquidates his business, then valuation should be  (MI + 30% MI ) * 5 = 1.3 * 5  * 12 =  78 * MI. Here, the 30% is the tax, 5 stands something like a valuation constant (depending on profit) and 12 for the months in a year. So, I get around 75* MI less debt (which is some 6 years of income and in theory can go on reading books and fishing for next 6 years)

Hence the Freedom Fund Looks like (FF)  = 75 * MI + current value of all all liquid investments + current value of all fixed assets

I do some calculation and find that FF at this moment for this friend with liquidation looks like = 75 * MI + 20 * MI + 40 * MI = 135 * MI  – debt = 132 * MI (virtually no debt)

It means that if this happens, the friend will be able to live without working for next 10 years. Why does not he do so ?

This can be explained by the following factors

a) Fixed assets are needed because we are an embodied being. We need shelter and place to work (home and office or home-office)

b) It is not easy to liquidate a business easily.

c) Even if this can happen, the return per month for 10 years need to be above inflation and principal needs to overcome crisis like 2008.

How ?

The books explains this. This I cannot do and you need to read and absorb and act.

As for myself, my advice to you :

Do get your financial advice from your grandparents who thought long term investment as annuity, liquid investment as FD, securing future in gold, insurance as only life insurance which you do because you love not hedge funds but your family, save for a rainy day, do not take debts, living below your means as if next crisis is around the corner, live in a such a way that what you need, you will have and you will not feel the absence of those you cannot  afford. In short, you become a philosopher and money and its thought at the highest level of refinement tells you this :

The energy called Money, like all the energies of the Cosmos belong to the Supreme Lord. He creates it, distributes it and at the end it comes back to Him. No one can own or hold money indefinitely. Either the money leaves him (stock-crash) or he leaves the money ( death). However, since money is a very powerful and isotropic and pervasive energy, it is to be respected and used judiciously.  Money itself cannot teach this, had it been so, all moneyed man could have been happy and enlightened.

If you are really interested in financial freedom, then the energy called money is capable of providing that. But the process cannot be brought by money.

This realization – the execution comes from practice and discipline which again money cannot give.

In summary : the book touches sometimes and remains, justifiably busier most of the time with the technicalities and I am not qualified to judge and test these processes and models.