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Legal Disclosure: Tony Robbins is the Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity based on increased business derived by Creative Planning from his services. Accordingly, Mr. Robbins has a financial incentive to refer investors to Creative Planning. This commentary is provided for general information purposes only and should not be construed as investment, tax or legal advice.
“Superficially, I think it looks like entrepreneurs have a high tolerance for risk. But one of the most important phrases in my life is ‘protect the downside.” – Richard Branson
Many people within the investment world will tell you that you have to risk a lot to make a lot. Or even that the only way to become financially free is to take great risks! But savvy investors like Kyle Bass and Paul Tudor Jones use ratios of 6:1 and 5:1 respectively – risking a little to leverage a lot. This is called asymmetrical risk/reward.
Remember Warren Buffett’s top two rules of investing? Rule 1: don’t lose money! Rule 2: see rule number 1. These money masters understand that losing money is the quickest way to financial defeat because it takes you twice as long to get back to where you started.
So, defy conventional wisdom and look for small investments to return disproportionate rewards.
To learn more about this second principle of the Tony Robbins Core 4, please see our feature article in Fortune Magazine.