TLDR; Section 5 of Money Master the Game is centered around building your portfolio, getting a paycheck for life, and private placement life insurance.
—
Note: This article is part of a section-by-section break down of the book Money Master the Game by Tony Robbins. Click here to start at the introduction to this series: The Journey to Financial Freedom.
—
I finished Money Master The Game (affiliate link) last week and I have some overall thoughts about the book. But before I share those, I want to summarize Section 5. It’s the final piece to the investment puzzle.
Here’s a quick recap of what we’ve covered so far:
- Section 1 is about making the decision to save and invest.
- Section 2 covers the pitfalls of the game that you’d want to avoid
- Section 3 helps you calculate your number for financial security, vitality, independence, freedom, and absolute freedom
- Section 4 is a deep dive into your security/risk temperament and the assets that fall into each class
Now onward to Section 5 which is about:
- Choosing the balance of assets in your portfolio that aligns with your security/risk temperament
- Using income insurance to receive a paycheck for life
- Private placement life insurance, a tool of the ultra-rich
The “All Seasons” Portfolio
The goal of having different assets in your portfolio is to reduce the risk of losing money. You want to own asset classes that offset each other—when one goes up the other goes down and vice versa—so your portfolio remains stable. Section 5 details the four economic environments and which asset classes do well in each. See the table below for a summary.
| Environment | Investments that thrive |
| Higher than expected inflation | Inflation-linked bonds (TIPs), commodities/gold) |
| Lower than expected inflation | Treasury bonds and stocks |
| Higher than expected economic growth | Stocks, corporate bonds, commodities/gold |
| Lower than expected economic growth | Treasury bonds, inflation-linked bonds (TIPs) |
In MMG Tony Robins interviews Ray Dalio, billionaire investor and founder of one of the largest hedge funds in the world, Bridgewater Associates. The above table is what Ray Dalio uses as the bases for his famed All Weather portfolio. Ray doesn’t reveal the funds in his All Weather portfolio but he does list the asset classes and the percentages of each held in his hedge fund. Tony dubs this the All Season portfolio:
Ray Dalio’s All Season Portfolio
- 40% long term bonds
- 30% in stocks
- 15% in intermediate bonds
- 7.5% in gold
- 7.5% in commodities
Other Portfolios
If the All Season Portfolio doesn’t appeal to you, here are the other portfolio breakdowns mentioned in MMG:
David Swensen, Yale University’s institutional investor
- 20% US Total Stock Index
- 20% Developed (Foreign) Markets Index
- 20% US REIT Index (Real Estate)
- 15% Long-term US Treasuries Index
- 15% US TIPS Index
- 10% Emerging Markets Stock Index
Burton Malkiel, author of A Random Walk Down Wall Street
- 33% US Total Bond Index
- 27% Use total Stock index
- 14% Developed (Foreign) Markets Index
- 14% Emerging Markets Stock Index
- 12% US REIT Index
John “Jack” Bogle, founder of Vanguard
- 65% US Total Stock Index
- 35% Intermediate-Term Us Bond Market
The performance of each portfolio is recorded in the book with Ray Dalio’s being the one that has lost money the fewest times in the last 30 years. If none of these jump out as the right option for you, you can browse other portfolios along with their performance here.
Income for life
According to MMG a way to get a paycheck for life is through Annuities. Annuities are insurance products that ensure your income and/or investments. You can use these products to get income for life without losing your principal investment. There are conditions depending on the details of the annuity product. Below are the annuity products that are described in the book.
Types of annuity products
- Immediate annuity – give your money to an insurance company. They pay you until you die and keep the balance. The payout is determined by the initial deposit.
- Deferred annuities – pay a large lump sump deposit today and you will have a guaranteed income that kicks in on the date much later in life. The payout is determined by the initial deposit and the date in the future you choose.
- Fixed index annuities – insurance on your principal balance. If the market goes down. your portfolio doesn’t. If the market is up, you share the gains with the insurance company.
- Hybrid Annuity (aka Contingent annuity) – insurance on your principal balance + income insurance if you run out of money during retirement
- Variable annuities – expensive and should be avoided (no more information is provided in the book)
After doing some additional research on annuities, I’ve come to the conclusion that it is best for people that are of retirement age. Annuities are not investment vehicles they are insurance policies and you have to be very careful when selecting the one that’s right for you. As for me, I’m going to hold off on thinking about annuities until I reach my financial security number.
Private Placement Life Insurance
The last topic of this Section 5 is Private Placement Life Insurance (PPLI). Technically it’s a life insurance policy but it’s used as the ultimate tax-sheltered account. The benefits include:
- Unlimited deposit amounts (with no income limitations)
- No tax on the growth of your investments
- No tax when accessed (if structured correctly) and
- Any money left over for your heirs cannot be taxed
The only set back is that PPLI for the ultra-rich people who are accredited investors—those who invest at least 250k a year for at least four years. There supposedly is a TIAA-CREF insurance product that is similar but I couldn’t find it online. The closest I’ve come to finding anything about it is this forum with links to the prospectuses of three TIAA-CREF life insurance products (look under “life insurance”) that might be similar to a PPLI. The thought of trying to read through those prospectuses was enough to send me running. If any of you dive into this please report back with your findings. This is another product that I have to circle back to when I have millions in assets.
Back to setting up your portfolio
Chapter 5 of MMG is packed with a lot of information. I can’t act on two-thirds of it but the first third (selecting an asset allocation and applying it) is a handful and has been keeping me busy. I struggle with getting the initial state of my portfolio to my ideal allocation because of the number of accounts I have to juggle (401k, IRA, etc.). I’m open to suggestions for an easy way to do this. I found sometools but haven’t tried them out yet.
This is the final piece of the investment puzzle. Once you have the allocations in your portfolio set, you have to set up automatic deposits and check in (at least) annually to rebalance. Of course, this is easier said than done but everyone here can get it done. So do it!
I mentioned in the begin that I have thoughts on the book Money Master the Game as a whole. I have to save that for a later post because this one is already super long.
PS — this is off topic but aligns with financial planning. Get Your Shit Together is a site with a checklist for the things you need to create a will and plan your estate for your family after you’re gone. Once my finances are in order I’m going to get this done next
Update: I’ve completed summaries for all sections of MONEY Master the Game and wrote a book review. Find the links to it all below.