In late 2010, Tony Robbins used his massive social platform to provide some well-intended investment advice. The motivational speaker and life performance coach has encouraged millions of Americans to get the most out of life. With the right mindset, he says, they can even walk on fire. But his 2010 investment tip didn’t just miss the mark; it floats in outer space.
In his video, An Important Note of Caution, Robbins said that he “personally coaches one of the 10 top financial traders in the history of the world.” Robbins then asked, “Is this  the time to take some stuff, that you’ve made investments with, off the table if they’re in the stock market? Especially, obviously, if they’re in manufacturing or retail or banking or God forbid, if they’re in the area of homebuilding or housing… I would feel bad if I didn’t warn you.”
But market forecasting is never a good idea. Those who think otherwise usually get burned. iShares offers ETFs that represent each of the sectors that Robbins warned about. From the the time he made his video until November 27th, 2015, those indexes gained 87 percent, 154 percent, 75 percent and 150 percent respectively.
|Fund||Investment Sector||Performance Since Tony Robbins’ Warning|
|iShares U.S. Industrials ETF (IYJ)||Manufacturing and Construction||+87%|
|iShares U.S. Consumer Services ETF (IYC)||Retail, Food, Drugs,||+154%|
|iShares U.S. Financial Services (IYG)||Banking and Financial Services||+75%|
|iShares U.S. Home Construction ETF (ITB)||Residential Home Construction||+150%|
Last year, Tony Robbins published a bestselling investment book, Money Master The Game. Great investment books teach consistent, evidence based strategies. William Bernstein’s book, The Investor’s Manifesto is a masterful call to action. Bill Schultheis’ CoffeeHouse Investor beats a jolt of espresso. Anything written by John Bogle, Rick Ferri, Dan Solin or Burton Malkiel also gets my vote.
Tony Robbins’ book is different. If it were a health food store, it would sell organic foods between stacks of cigarettes. He praises low-cost index funds, suggesting that actively managed funds can’t overcome their fees. But then he says we can learn from some hedge fund wizards who have, he says, thrashed the market by making special forecasts. This is bad for readers who won’t know where to turn. As I’ve pointed out in another column, the evidence suggests that hedge fund managers, on average, aren’t any good at all.
Warren Buffett agrees. He said nobody could pick a collection of hedge funds that, after fees, would beat the S&P 500 over a 10 year period. He offered a $1 million bet to anyone who could prove him wrong. In 2008, a firm called Protégé Partners actually took the bait. As Fortune reports, that firm’s picks are lagging. After 7 years of the ten year bet, the S&P 500 was up 63.5 percent compared to a 19.6 percent gain for the hedge funds.
But let’s focus on the good. Tony Robbins’ book explains a diversified, low-cost strategy. He calls it The All Seasons Portfolio, a name that reflects the Holy Grail of portfolio construction---to provide a good return all the time. It calls for 30 percent stocks, 55 percent bonds, with the remainder split between gold and commodities. But it’s just another portfolio.
Tony Robbins’ All Seasons Portfolio
- 30% Stocks
- 40% Long-term bonds
- 15% Intermediate bonds
- 7.5% Gold
- 7.5% Commodities
Hedge Fund manager, Ray Dalio of Bridgewater Associates, created the All Seasons portfolio. It’s similar to Dalio’s All Weather fund, which reportedly has more than $80 billion in assets.
Between 1984 and 2013, the All Seasons portfolio averaged a compound annual return of 9.7 percent per year. This return is solid. But considering the climate, it’s certainly not surprising. During this 30 year period, U.S. stocks averaged a compound return of 11.1 percent per year. Long-term government bonds averaged 9.4 percent.
The portfolio’s main advantage, however, might be its stability. Robbins says it would have lost money just three times in the past 30 years. “Its worst down year was -3.93 percent in 2008.” By investing in a portfolio that they hope won’t jump around, fewer investors could end up trying to time the market.
But there are possible problems. Past returns are…well, history. With 55 percent in bonds, if fixed income drags, returns will be poor. If investors have a bad year or two, many could bail—especially if they expect to earn solid, consistent profits.
Many would have been tested in 2013. Vanguard’s S&P 500 index fund gained 32.18 percent while the All Seasons portfolio dropped 4 percent. Big difference.
Perfect portfolios don’t exist—unless we’re looking through a rearview mirror. Instead, investors need to do just three things well. They need to diversify, preferably with low-cost index funds. They need to collar their emotions and leave forecasting to chumps.
Robbins has more marketing oomph than twenty authors combined. A consistent investment message would be read by millions. So this is where I mourn the opportunity lost and dream of a better future.
I dream that he writes a second investment book, using his marketing genius to, once again, sell to millions of people. I dream that the new book will shun speculation. In true Robbins style, it could show how to best harness fears.
Here’s a man who can convince people to walk on burning coals. The same powers of persuasion could convince millions to avoid investment speculation and stay on course.
Andrew Hallam is a Digital Nomad. He’s the author of the bestseller, Millionaire Teacher and The Global Expatriate's Guide to Investing: From Millionaire Teacher to Millionaire Expat.