Rich Dad’s Guide to Investing By Robert Kiyosaki

Rich Dad’s Guide to Investing is the third book in Robert Kiyosaki’s

Rich Dad series.  It deals with the mindset required,

and the actions you need to take to become

what the author calls “The Ultimate Investor.”

The book reveals various types of investors that exist,

as well as the investor controls you need to practice in order

to get to a point where you are financially free –

a point where you stop working for money and, instead,

have money work for you.

The following are three of the best lessons

I took away from reading the Rich Dad’s Guide to Investing.

The most important investment in the whole wide world for you –

the one investment that will yield the best returns for you –

is none other than an investment in YOU.

That’s right! It all begins with you.

Robert Kiyosaki’s advice to the average investor is this:

Don’t Be Average!

Average investors are more often speculators and traders,

rather than sophisticated investors.  There’s nothing wrong

with these types of ‘investors’, but that is not the kind of philosophy promoted in Rich Dad’s Guide to Investing. 

Robert wants you to become a sophisticated investor. 

To become a sophisticated investor you must possess the three Es:

• Education

• Experience

• Excessive Cash

You may obtain these things from intense personal development and only through the passage of time.  One who only possesses excessive cash will soon lose most of his fortune through speculative trades, unless he educates himself and becomes financially literate.

Robert claims that investing is not risky, but that the ignorance of the uneducated and inexperienced investor is the only risk.  This is why the first order of business, and the most important investment you will ever make, is an investment in your financial education and acquiring the necessary experience.

It is important to note that investing in yourself is not only about learning to read the numbers on a financial statement. 

It’s also about taking charge of your emotions and your beliefs around the subject of money and wealth.  Kiyosaki argues that the number one control an investor needs to have is control over himself and his emotions.  He says, “Emotions like fear and doubt lead to low self-esteem and a lack of confidence.” He goes on to say, “Whatever your reality is about money inside of you is the reality of money outside of you.  You cannot change your outside reality until you change your inside reality about money.”

So the lesson is this: A person’s financial reality will not change until he or she is willing to go beyond the fears and doubts of his own self-imposed limits.  You can choose to live in a world of not enough money, or a world of too much money.  That choice is up to you.”

 “In order to be a good investor, you first need to be good at business,” Robert explains, “and the best way to invest is to have your business buy your investments.  The main reason you build a business is so that your business will buy all your assets.”

Running a business helps you understand accounting,

tax laws, and corporate law.

The author says that the ultimate investor is someone who builds a company and sells shares in this company. Here’s some sage advice from him about how to do this successfully, “Build or buy assets that can be handed down to someone else.  You need to be both an investor who buys assets and an investor who creates assets.  It is the people who don’t have assets who work for, or are controlled by, those people who create, acquire, or control assets.”

The business skills you learn and the experience you acquire from running your own business is where the money really comes from.  Minding your own business will give you the three E’s discussed earlier: Education, Experience and Excessive Cash.

Rich Dad’s Guide to Investing also contains a business-building system known as the B-I Triangle.  Robert gives some insights into how you can use this system to build a profitable and sustainable business.

To become an ultimate investor you need to constantly develop

your financial literacy.  When you become financially literate,

investing will cease to be risky for you.

“Investing is not risky,” he exclaims,

“It’s the lack of education and experience that makes it so.”

“Don’t worry about money,” he declares,

“If we do the right things right, there will always be plenty of money.”

Some people misunderstand the concept of investing.  Their limited knowledge makes them think of it as an individual product or procedure. This limited view results in limited returns or even major losses.  Robert Kiyosaki unravels the mystery.

He says, “Investing is a plan, not a product or procedure. 

The plan will consist of several products and vehicles,

including real estate, shares, bonds, etc. Getting rich is automatic if you have a good plan and stick to it.  You don’t need a lot of money to be an investor; you need a rich financial vocabulary.”

The basic formula for investing is simple: convert earned income

into passive or portfolio income as efficiently as possible

-Increase your ability to evaluate risk and reward –

and spend your life acquiring assets instead of liabilities.

An asset is something that puts money in your pocket,

or it can be sold for more than you paid for or invested in it.

You must also learn to guard your cash flow. 

Robert warns that most people and businesses struggle

financially because they are out of control of their cash flow.

It is critically important to realize that every one

of your expenses is someone else’s income,

and each one of your liabilities is someone else’s asset. 

So the question is:

Who are you making rich – yourself or the other guy?

This is the essence of financial literacy:

“Who are you making rich – yourself or the other guy?”

Share your thoughts in the comments below:

With your current financial habits and practices,

who are you making rich – yourself or the other guy?