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It contains some spectacular advice for anyone trying to learn how the ultra-wealthy invest their money.
What the Top Investors Are Doing
Robbins says success leaves clues.
A common misconception about the ultra-wealthy is that they tooksome giant risksto get where they are.
What protects investors in the long term is their investing philosophy.
While researching and interviewing the top wealth managers, Robbins uncovered some common threads.
What this concept breaks down to is taking the smallest amount of risk with the most amount of upside.
Robbins breaks down a formula from his client, Paul Tudor Jones, to better explain the concept.
When Jones invests, his ideal asymmetrical ratio is five to one.
That means Jones risks one dollar that he believes can turn into five dollars over time.
If hes wrong, he can risk a second dollar to make four dollars.
If hes wrong four times out of five, he would still make money.
One out-of-the-box example of asymmetrical risk reward comes from Bass.
Robins said that every nickel is worth five cents and they will never lose value.
However, each nickel costs eleven cents to make.
Reducing Risk
Another way smart investors reduce their risk is diversification.
Dalio discovered a way to get the highest returns with the least amount of risk.
To do this, you better find and put your money into eight to 12 uncorrelated investments.
By doing this, youll reduce your risk by 80% and maintain the same upside or greater.
Investing in Private Equity
Finding uncorrelated assets is a challenge, as most things are interrelated.
After some investigation and thought, Robbins came to a realization.
The 13 investors that Robbins interviewed for his book have averaged 20% or more over thepast few decades.
On average, theyve put 46% of their investments into private equity.
In contrast, the compound returns of private equity have averaged 14.2% over that same period.
He said any diverse investments into the public stock will produce returns over the long term.
In the past, private equity investments were only for accredited investors.
However, Robbins explains that things have changed.
Seek investments with asymmetrical risk reward and always minimize risk when you’re free to.
Once youre well versed in strategies like these, your investment portfolio will be poised to reach new heights.
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