Tony Robbins: How To Invest Like a Multibillionaire
Written by
Kellan Jansen
Edited by
Jenna Klaverweiden
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Tony Robbins is an expert on building wealth. Throughout his career, he’s worked with some of the most financially successful people on the planet, including Paul Tudor Jones and Richard Branson.
But what can these multibillionaires teach the average person about investing?
According to Robbins, there’s one philosophy that incredibly wealthy investors share. It’s a strategy called asymmetrical risk-reward, and you may be able to benefit from using it too.
Asymmetrical Risk-Reward
In a video on Robbins’ website, he says most people who invest use the wrong risk-reward profile. They put most of their money into safe growth assets that may rise 10% to 20% in a good year. In other words, they risk a lot to make a little.
Asymmetrical investing flips that. It’s a strategy that focuses on risking a little to make a lot. Robbins says every multibillionaire he’s worked with uses asymmetrical investing and credits it as one of the main reasons they’ve become so wealthy.
The 5-to-1 Investment Strategy
Paul Tudor Jones is worth upward of $8 billion and has a firm that manages $13 billion in assets. His famous investment approach is the 5-to-1 strategy. It’s a great teaching point for asymmetrical investing.
The philosophy boils down to this: For every $1 Jones risks, he expects to earn $5. This means Jones can be wrong about his investment thesis 4 times out of 5 and still break even.
The 5-to-1 approach impacts how Jones approaches investing in two key ways. He buys only assets that he believes have significant room to increase in value, and he doesn’t sell them until they reach his target.
A Real-World Example of Successful Asymmetrical Investing
Risking a little to earn a lot sounds great in theory, but you’re probably wondering whether it’s realistic. Although these investment opportunities are harder to find, there are plenty of real-world examples that show their potential.
David Tepper’s story is a great illustration of this. He’s worth about $20 billion and owns the NFL’s Carolina Panthers.
Tepper’s biggest trade happened during the 2008 banking crisis. He invested heavily in Bank of America stock at a time when it looked like the bank could fail. Tepper bet that the U.S. government would not let that happen, and he was right.
When the government approved a bailout for the banks, Bank of America’s stock price soared, and Tepper’s firm made $7 billion. He risked relatively little and made a fortune.
How To Start Investing Asymmetrically
Robbins says investing in asymmetric opportunities is the secret to getting wealthy. But he doesn’t offer advice for getting started in the video. And these opportunities are hard to find. If you could easily identify them by looking for a shared characteristic, everyone would do it.
So how do you actually embrace this philosophy and begin investing like a multibillionaire? Here are a few tips.
Set Cash Aside
Asymmetric opportunities are rare. When you identify one, you have to be prepared to invest in it. The easiest way to ensure that is by setting aside some cash to use for these opportunities. You could put the funds in a high-yield savings account to earn interest while you wait.
Let Your Winners Run
The next key to a successful asymmetric investing strategy is holding on to your winners long term. It takes time to turn $1 into $5, as no asset increases its value in a straight line. You may need to sit through multiple drawdowns before reaching your target.
Know What Invalidates Your Thesis
Finally, make sure that you have a concrete thesis for any asymmetric bet you place. This is the reason you believe the asset you’re purchasing has the potential to significantly increase in price.
For example, people who bought Tesla stock early thought the company could become a major player in the growing electric vehicle space. If the company pivoted away from EVs, that thesis would be invalidated, and it would probably be time to sell the stock.
You need to know when your thesis is invalidated so you know when to cut your losers.
Final Take
Robbins’ main point is that multibillionaires make financial bets only when the odds are heavily in their favor. They don’t necessarily pick stocks correctly more consistently than the average investor. They instead follow an approach that lets them make money while being wrong more often. Still, this is just one angle to consider as you work to increase your wealth.
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