Famed author, speaker, entrepreneur and self-made millionaire Tony Robbins has plenty of advice for both beginning and expert investors. In a nutshell, though, he believes
investing isn’t all that complicated
. By simply sticking to the basics consistently in the short term, Robbins says becoming a millionaire is within reach in the long run.
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According to Robbins, “The most important thing is to get started with whatever you have,” as opposed to developing a complicated strategy aimed at trying to beat the stock market. Here are the three best investment tips Robbins has to offer, along with some examples based on both
his advice and his personal experiences
.
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Capitalize on Compound Interest
To Robbins — and pretty much all certified financial planners — compound interest is the key to
long-term investment success
with mutual funds, individual stocks and bonds. It takes a long time to reap the full benefits of compound interest, so as Robbins endorses, the earlier you can start on your time horizon, the better.
Robbins, for example, made his first investment at age 18, buying a triplex in California. Although that specific investment didn’t work out too well for the future millionaire, it fueled his interest in investing at a young age. As Robbins said, “It got me in the game. If you don’t invest early on, you lose.”
There are many financial examples showing how sound this advice is, but Robbins refers to the example of two 19-year-olds who take different investment paths.
The first one begins investing at age 19 and continues socking away $300 per month until age 27 only. At that point, the money is simply left in the account to compound, with no further contributions made. If the market returns 10% per year, which is in line with its long-term average, the $28,800 this person invested over those eight years would be worth nearly $2 million by age 65.
The second one, on the other hand, doesn’t start investing until age 28 but keeps putting away $300 per month until age 65, for a total contribution of $133,200. Which investor do you think will end up with more money? Perhaps surprisingly, it’s investor No. 1, as investor No. 2, even with an additional $104,400 in contributions, amasses a nest egg of only about $1.4 million, around 30% less than investor No. 1.
Robbins urges young investors to contribute as much of their income as possible and to get in the habit of increasing their contributions regularly. A 401(k) plan is the simplest way to start.
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Diversify Your Portfolio
Another popular investment principle that Robbins finds critical is diversification. As Robbins said, “You have to diversify. You can’t put all of it in one place.”
Owning a mix of stocks, bonds, real estate investment trusts (REITs) and non-correlated asset classes like precious metals can help cut down the volatility of your portfolio. This is because varying investments like these don’t always move up or down in tandem like the S&P 500 can. As a result,
diversification smooths out the ups, downs
and potential losses in your portfolio.
In other words, diversification helps ensure that you won’t lose all your money because of one bad investment. While it can’t guarantee wins either, it can prevent you from torpedoing your whole account value all at once when buying and selling.
One good place to start if you don’t have enough money to buy numerous diversifying assets is a simple index fund. With one purchase, your money could be spread out among tens or even hundreds of companies. You should also consider working with a fiduciary financial advisor who understands your means and your needs and is required to work in your best interest.
Automate Everything
Robbins’ third investment tip is to automate everything. This is primarily a psychological tactic, but it’s also practical and comes with fewer management fees.
According to Robbins, if you set up your accounts to automatically transfer money into savings and investments, you won’t have the opportunity to talk yourself out of socking it away. It then becomes a habit that you don’t even have to think about — you’ll just be automatically
building your wealth
without even lifting a finger.
Robbins acknowledges that this is a difficult first step for many, but as he says, “It’s hard to do, but if you start to automate it and you do it regularly, oh, my God, you will have financial freedom that most people never have. More importantly … [you’ll have] peace of mind, you’ll have inner strength. You’ll know that you’ve mastered this area of your life. And it’s not complex.”
However, it is a necessary step if you want to make investing for your future a habit you don’t have to think about.
Caitlyn Moorhead
contributed to the reporting for this article.
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Tony Robbins’ 3 Best Investment Tips for Becoming a Millionaire