016-2020 Guide to investing

Title: Rich Dad’s Guide to Investing (what the rich invest in that the poor and middle class do not)

Author: Robert T. Kiyosaki

It’s been quite a few hectic weeks on my side, but every day offers an opportunity to learn and grow.

I have a grand book that I cannot wait to share with you today.

This is another installment to the Rich Dad Poor Dad franchise, and I am still hooked to them. One of these days I would wish they might send me a free copy to read and review. Fingers crossed, because then I could maybe get you to read it as well, and step up your financial education. 🙂

This is probably the first investment book where I took notes (outside of the book) and keep them close around to make applications to my financial planning. Yes, it was so convincing I took an active step to develop a financial plan for myself after it was suggested in the story.

I wish I could break down all the lessons from the book into a few small paragraphs for you to read, but I don’t think it would serve it justice since many things could possibly be lost in translation, or otherwise the moral of the story not understood. Hence, I have decided to mention some of the most relevant topics that I felt have a strong lesson behind them for everyone.

1…Changing your mindset

Half of the book is dedicated to make it clear that you need to adopt the right mentality if you want to become rich, not just financially secure or comfortable, but rich.

Investing is a plan, not a product or procedure. An investment product /vehicle simply takes you from where you are financially, to where you want to be sometime in the future, financially. Trading is a profession, but is not to be mistake for investing.

Develop a financial plan, refine it and stick with it. You need to develop three financial plans (to become rich, comfortable and secure)

  • First, write down a financial plan for lifetime financial security
  • Then discuss it
  • Second, write a financial plan on how to become financially comfortable
  • Then discuss it
  • Third, write a financial plan to become financially rich
  • Then discuss it

By writing down these plans you become visually aware in what position you are presently, and what it would take for you to move into a new position. Once you become aware what it takes from you you can focus your attention to achieve small goals that build on to that ultimate goal. However, it is very important to note that these plans might require some fine-tuning in the future since many things can happen in between that won’t enable us to stick to the old plan.

In order to achieve a secure or comfortable level one mainly needs to invest their money properly. However, to reach the next level, the rich level, requires something more. It requires from an investor to dedicate their time. Time to learn financial literacy, tax laws, company laws, etc. to understand how to develop a business or how to use those laws to build a strong investment portfolio. Invest your time efficiently.

How do you start your journey on investing like the rich?

…1… Always know what kind of income you are working for (earned income/ portfolio income / passive income)

…2…Convert earned income into portfolio income or passive income as efficiently as possible

…3…Keep your earned income secure by purchasing a security you hope converts your earned income into portfolio income or passive income

…4…it is the investor who is the asset or the liability

…5…a true investor is prepared for whatever happens (train your brain to look for bargains and be prepared to take on an opportunity when it presents itself)

…6…if you are prepared and you find a good deal, the money will find you, or, you will find the money

…7…having the ability to evaluate risk and reward (to be able to evaluate risks properly you need to have the 1) Education, 2) Experience, and 3) Excess Cash)

https://www.richdad.com/six-basic-rules-of-investing

2…Knowing what kind of investor you want to become

When you enter into an investment there are different positions you can hold. However, ultimately we would want to know as much as possible and have much control. Yet, not all investors have the same position and therefore you need to familiarize yourself with the different classes of investors and see how you reach the investor class that you would most comfortable in.

3…What you should keep in mind if you want to start a business

If you have no experience how to run a business, and even less how to start one off, then a good intro of what you should include as important considerations for your foundation lie in the BI Triangle.

https://www.richdad.com/business-systems

Each aspect can serve a valuable purpose in building a strong foundation for a business that should last you for a long period of time. The best thing you can do is read the chapters behind these topics and take great notes.

4…What is a sophisticated investor

A sophisticated investor is simply someone that has attained sufficient Education, Experience and Excess Cash to make more money and hold on to that wealth by evaluating new investments for their risks and rewards.

He has considered how he can obtain control over most of the following areas:

…a Control over oneself

…b Control over the income- and expense ratios, as well as the asset- and liability ratios

…c Control over the management of the investments

…d Taxes in the company

…e Control over when to buy/sell an investment

…f Brokerage transactions

…g Control over ETC (the entity, the timing of payments, characteristic within the firm)

…h Terms and Conditions of the agreements

…i Access to information of the invested company

…j Philanthropy

More on these you can get from the Rich Dad Poor Dad Company website https://www.richdad.com/sophisticated-investor

5…Also giving back

As much as the book teaches you how to grow wealth, it also stresses the importance on giving back. Yes, giving back is just as important. Some do it by giving donations to institutions, others build institutions. With Robert he sells his books at affordable prices, and hosts regular seminars. However, it remains for us to come and attend.

I have taken my time to read this book, and absorb as much as possible to reflect on the most important points. Even though I haven’t made a plan to start a business right away, the key points i have taken away as of today are the following:

  • drafting a financial plan
  • update my financial literacy
  • analyse investments efficiently, and don’t invest blindly

Summary:

This book is something that I would recommend to anyone who wants to have a guide to get their financial situation under control, and also develop a plan to work towards a strong financial goal. The book is written to be easy understandable, and elaborates in great depth the importance of each lesson.

Therefore, the book deserves a whopping 4.9/5

Keep it up everyone!

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