Robert Kiyosaki Blog

Financial Education Portal inspired by Robert Kiyosaki


What do the wealthy invest in?

The title to this post is a little off in that most times people invest in things in order to get wealthy.  Either way you look at it, there is much research on this subject.  Funny thing, it is not primarily mutual funds or even individual stocks that make up the portfolios of the wealthy. First, lets define wealthy.  There are three generally agreed upon categories.  The mass affluent which has a net worth outside of their primary home of $100,000- $999,999.  The wealthy which has a net worth outside of their primary home of $1,000,000- $9,999,999.  And the super wealthy which has a net worth outside of their primary home above $10,000,000. Interestingly, the investment strategy is basically the same between the wealthy and the super wealthy. And the higher you go in net worth for the mass affluent the more they look like the other two classes. So how do they invest?  What financial instruments do they use?  Well, the truth is they use all sorts of financial instruments, but there are two main strategies which set them apart from those that have less than them. First, is real estate.  The largest categories of investments for the wealthy is real estate and it only gets larger as you go up the wealth ladder.  Of course they all own a primary home.  But a second home is the next largest category of real estate investment.  And as you go up the scale they own 3,4 or more homes.  Next category is income producing real estate.  The wealthy own apartment buildings, commercial buildings, duplexes, etc. that will produce income for multiple generations.  REIT’s (real estate investment trusts) are favored by the wealthy. Raw land is bought and sat on until the investment blooms. The next largest category is businesses. Usually they control or own large blocks of a business that can be best called creative or niche businesses.  The wealthy have been able to identify unique ways to satisfy needs.  Many times the discovery has come out of a industry that they worked in for years, first as a employee. They also own some of the traditional investment classes like stocks, bonds, mutual funds.  However, it is at much smaller percentages than the non-wealthy.  For example, the super wealthy own individual stock and mutual funds, but the median ownership is around $1,000,000 for individual stocks and $500,000 for mutual funds.  Now remember, the super wealthy category starts at $10,000,000.  So their stock ownership percentage is very small compared to their overall assets.  They own cash value life insurance at about the same percentages as their stock ownership. Their overall startegies suggest an understanding of the tax laws, so that they legally avoid high outlays to government.  It also tells us they understand history.  The greatest investments,...

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Your Enemies Towards Financial Freedom

Your journey towards financial freedom isn’t complete without these obstacles which you must learn to face and conquer. The sooner you take action against them, the sooner you achieve wealth. Impulse Buying Through the years, I have changed from an impulsive buyer to a frugal shopper. It took some time and a lot of personal motivation but I was finally able conquer this bad habit. If I was able to do it, I don’t see any reason why you can’t. Whenever I’m faced with an urge to buy something unplanned, I usually pause and ask myself several questions first. These simple dialogue with myself has become a powerful tool for me and I hope it will be for you too. Inflation Inflation hurts people particularly those in fixed incomes like the elderly and those whose income isn’t indexed to inflation. They lose a part of their purchasing powers because their cashflow remains constant while their cost of living increases. Employed individuals, despite receiving constant salary increments, are hurt because there is a time lag in compensation adjustments. By the time they receive higher nominal income, it has already been months since the prices of commodities went up. Procrastination Procrastination simply refers to the habit of putting off doing something for a later time. Filipinos are more familiar to the term mañana habit, which is often translated to Tagalog as “mamaya na” (much later). Aside from the definition, it is also necessary to learn why we often choose to procrastinate. Is it simply because we are too lazy to act or is it something much deeper? More importantly, how do we get rid of this bad habit? What is the best way to really overcome procrastination? Fear of Taking Risks A simple video which tells the story of my first burn (a term that refers to the first time a person will spin a fire poi). I can still vividly remember that night when I learned how to face my fears and got the courage to take the risk. I hope that this will inspire you to likewise do the same in your life. Wrong Beliefs About Money If you think about it, money is simply defined as a tool that we use to acquire the things that we need or want. It is a non-living thing that is void of emotion or bias. Take a bill out of your wallet right now and look at it. Would you agree with me if I say that you’re simply holding a piece of paper? ~ View post:Your Enemies Towards Financial...

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How To Get Ahead

We all want to get ahead. You hear people say it all the time. But what exactly does that mean? It’s kind of a vague statement, but it sounds good. Basically, it means that you want to have more money?maybe get your earnings ahead of your cash depletion. Maybe it means you want to be able to save enough to send your kids to good universities, or be able to take your family on annual vacations. It could mean that you want to squirrel away a retirement fund. Whatever your particular idea of getting ahead, it does imply some sort of motion movement from where you are now to where you want to be. That means you must figure out exactly where you are now and where you should be going. Once you start to think about it, though, you may find those places are a little more difficult to determine than you had originally thought. You may find yourself beginning to struggle with just what your particular concept of getting ahead is. Robert Kiyosaki, who authored the popular Rich Dad series of books, has mapped out a way for you to tell where you are and where you should be, if building wealth is your goal. He also gives you a plan on how to get there. In his book “Cash Flow Quadrant”, he introduces readers to a concept that the man he called his “rich dad” introduced to him years ago.  This quadrant is an illustration of where your money is coming from and subsequently how you think about money.  Believe it or not, the two things go together. For instant, if you are in the E quadrant, you are an employee in search of security.  Someone in the S quadrant is self-employed and likes to be in control, to do things their way. A B quadrant person is a business person. (This is very different from an S-quadrant person because the B has a system that can work without their direct input, thereby freeing them for other, wealth-building, pursuits.) The I quadrant person is an investor. According to Kiyosaki, that quadrant not only tells you where you are, but where you should be. If you are on the left side, in either the E or S quadrant, you should be making plans that will move you to the right side?first to the B quadrant then into I. In order to do that, you need to increase your wealth by taking a job that affords you the money to invest or the time to build a business system. The system will take care of your personal needs,...

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When Pessimism Prevails, It?s Time to Get Rich

~ by Robert Kiyosaki If you’re serious about getting rich, now is the time. We’ve entered a period of mass-produced pessimism, when bad news is everywhere, and the best time to invest is when optimists become pessimists. The Weird Turn Pro Journalist Hunter S. Thompson used to say, “When the going gets weird, the weird turn pro.” That’s true in investing, too: At the height of every market boom, the weird turn into professional investors. In 2000, millions of people became professional day traders or investors in dotcom companies. Mutual funds had a record net inflow of $309 billion that year, too. In an earlier column, I stated that it was time to sell all nonperforming real estate. My market indicator? A checkout girl at the local supermarket, who handed me her real estate agent card. She was quitting her job to become a real estate professional. As a bull market turns into a bear market, the new pros turn into optimists, hoping and praying the bear market will become a bull and save them. But as the market remains bearish, the optimists become pessimists, quit the profession, and return to their day jobs. This is when the real professional investors re-enter the market. That’s what’s happening now. Pessimism vs. Realism In 1987, the United States experienced one of the biggest stock market crashes in history. The savings and loan industry was wiped out. Real estate crashed and a federal bailout entity known as the Resolution Trust Corporation, or the RTC, was formed. The RTC took from the financially foolish and gave to the financially smart. Right on schedule 20 years later, Dow Industrials and Transports struck their last highs together in July 2007. Since then, nothing but bad news has emerged. In August 2007 a new word surfaced in the world’s vocabulary: subprime. That October, I appeared on a number of television shows and was asked when the market would turn and head back up. My reply was, “This is a bad one. The worst is yet to come.” Many of the optimistic TV hosts got angry with me, asking me why I was so pessimistic. I told them, “The difference between an optimist and a pessimist is that a pessimist is a realist. I’m just being realistic.” As we all know, things only got worse in early 2008, with the demise of Bear Stearns and the Federal Reserve stepping in to save investment bankers. In February, many of those optimistic TV (and print) reporters became pessimists — and when journalists become pessimists, the public follows. By March, mutual funds had a net outflow of $45 billion as...

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How to Find the Best Mentor for Your Needs

When someone is just setting out on a business venture, it is imperative that they find a mentor. A mentor can escalate your business, boost your self-development and improve your business know-how. To be truly effective you should look for mentors with various types of expertise so that you can learn from all of them and use the knowledge to make yourself a better person and run a more successful business. Before embarking on your quest to find a mentor you first need to examine your life and business. Figure out in which areas you need help. Once you know the focus areas, you can begin your search for a mentor. Look for experts in the field of expertise you want to develop. After all, as entrepreneurs and business owners, you will want to achieve some level of success or acquire and learn certain skills that you may lack in. A truly successful person always has a mentor who has helped him or her shape their path and pave the way for a better future. There are many places to find a great mentor such as networks meetings, industry events and conferences, through the recommendation of a trusted colleague and even through online groups you belong to. Once you have identified the mentor, take some time to watch them in action. If you feel this person is someone you can really learn from contact them to set up a time to talk.  Make sure you inform the person why you want to talk with them. You should be very clear why you want that person to mentor you, for how long, and what you hope to gain during the mentorship. If the person agrees, you now have a mentor. Having a mentor will increase the speed at which you can learn new skills. It is essential that you respect your mentor enough to implement their ideas as appropriate. There will be times you will need to get out of your comfort zone based on a mentor’s recommendations. And yet, isn’t growth the reason you wanted a mentor in the first place? See more here: How to Find the Best Mentor for Your...

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Teaching dollars and sense

~ ~ Salem High School has graduated some otherwise well-educated and well-rounded seniors who weren’t capable of deciphering their first paycheck or of understanding the pitfalls of the credit card come-ons popping up in their mailboxes. Until recently, Salem was no different than most high schools across Virginia or the United States. Then the school board decided that every student needs a crash course in personal finance before being eligible to receive a diploma. In the academic world, it’s called financial literacy. In the real world, where knowledge about the rules of cosign come in more handy than the cosine rule, it’s called staying out of trouble. The better equipped teens are in understanding how money works, the better prepared they will be in young adulthood to head off financial disasters. Economic principles have long been taught in high schools, but they haven’t been mandatory. There is an acknowledgment at both the federal and state levels that public schools need to teach students at least the basics about taxes, investments, credit and such. Virginia in 2005 established financial literacy goals for middle and high school students, but as to how they will be taught and applied is still under development. The Salem School System isn’t waiting. It is the first in what hopefully will become a quickly growing list of schools to require a semester-long personal finance course as a graduation requirement. At the start of the course, students take a pretest to determine what they already know. Most fail. By the end of the course, most students can earn at minimum a C-plus on the test. It’s a good start as long as students also learn that this course is really just a beginner’s primer. Far too many adults don’t understand how markets or budgets work or about filing taxes, applying for credit and building savings; they take out mortgages and loans with negative amortization or sharply increasing payments that they don’t understand at the outset; they borrow much more than they can realistically pay or turn to payday lenders to make ends meet. The personal bankruptcy courts are full of people who at young ages became trapped in debt because they didn’t understand what they were doing. Salem intends to make sure its graduates are smarter than that. Teaching dollars and...

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Your Kid Thinks He’ll Make $173,000 A Year

If you need a reason to set up a plan to teach personal finances to your children, a new survey from Charles Schwab Financial Services should give you the motivation. They recently gave a survey to 1000 teenagers between the ages of 13 and 18 and came away with some findings that show that teenagers today have high expectations on what they believe they will be earning in the future: Teenagers today think that they are going to make quite a bit of money. The average teenager believes that they will be earning an salary of $145,000 a year. Boys believe that they will be earning a salary of $173,000 per year while girls believe they will be earning $114,000 per year. This despite the fact that the average annual salary for a worker in the US is about $40,000 today. According to the survey, teenagers in the US get most of their money from gifts given to them (54%) while over half (52%) say that they get their money by simply asking their parents for it when they need something. Close to one-third (29%) of teenagers already have some type of debt with the average amount being $300. This is a 23% increase from 2006 when the average debt owed by teenagers was $230. Another findings from the survey was that teenagers say that they do want to learn more about personal finances so that they can make better decisions when they are living on their own. Obviously, the schools are not teaching these fundamental lessons to the children and so it is up to the parents to help educate their children about finances.   See the rest here: Your Kid Thinks He’ll Make $173,000 A...

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Generating passive income

Economics is about how you realise your dreams and achieve financial freedom. Can you get up in the morning, decide not to go for work and yet generate income? One of my friends in his thirties has already retired from active employment. He travels around Canada, educates teenagers on how to live life, enjoys his time on the beaches and leads a rich life-style. You can do so too, if you can generate what economists call “passive income”. What is it? Passive income is income generated without you sweating for it! If you invest wisely in stocks or mutual funds, you can expect to generate income periodically. Income from Internet-related businesses is passive. Writing books and receiving royalty is another example of such income. Why should you generate passive income? If you want to improve your life-style, you need to generate more income. This would mean asking your boss for a raise, which you are unlikely to get. The alternative is to look for other ways of generating income. With a full-time job, you will have to generate such income without spending much time on it. Setting up streams of passive income is the most effective way to improve life-style. Robert Kiyosaki, author of the best-selling book Rich Dad Poor Dad advocates buying house properties and generating positive cash flows. That is, the rent that you earn from the property should be more than the mortgage and other expenses that incur on the property every year. You should have three-four different streams of income other than your salary. That way, you can achieve your financial freedom faster — just as my friend did at a young age of 35. B. Venkatesh (The author is a Chennai-based financial analyst.) More here: Generating passive...

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Leverage – Do the work once and get paid forever

I was having coffee with my business partner Mun Hoe today. We were talking about property investments and went onto the subject of leverage. I was talking about leveraging the bank’s money in property when Mun Hoe shared with me that he read an alternative definition by Bradley Sugars, in his book Instant Success: The Real Estate Coach. Brad Sugars defines Leverage as “Do the work once and get paid forever“ I was blown away. I was stunned at how true this definition was! Mun Hoe went on to share that Brad Sugars gave a few examples of Leverage:- You write a book once and get paid royalty forever … You write an advertisement for your business once and test it to see that it works and then, you can run it for as long as it keeps working. You train someone once and then they do it for you long term … You buy an investment property once and collect rent and capital gain forever … You get a new customer for your business and keep them coming back for a long period of time You build a network of distributors and they keep distributing for you forever … Brad’s perspective changed my view of leverage forever, even though I have used the concept of leverage to achieve my own financial freedom. ~ Willy Lim ~   Read the original post: Leverage – Do the work once and get paid...

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Slight Reprieve in Oil Prices Won’t Last Long

I observed an interview of Robert Kiyosaki this week in regards to oil/fuel prices and the long term forecast. Kiyosaki claims that the primary reason for our current oil price situation is the devaluation of the dollar.  Oil is purchased in dollars and as the United States continues to print more dollars the value declines which directly results in escalating oil prices.  There are obviously other factors that cause the price of oil to rise including demand and oil speculators, however, the primary culprit is the declining value of the dollar. Kiyosaki also says to enjoy the slight reprieve we’ve observed over the past couple of weeks because in the long term, if the dollar continues to decline in value, we can expect to see gas prices well over $6.00 or $7.00 a gallon. Posted by Glenn Crawford of Project Liberty Originally posted here: Slight Reprieve in Oil Prices Won’t Last...

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