Investing means different things to different people and there is a huge difference between passive investing and becoming an active, engaged investor. Rich Dad’s Guide to Investing, one of the three core titles in the Rich Dad Series, covers the basic rules of investing, how to reduce your investment risk, how to convert your earned income into passive income plus Rich Dad’s 10 Investor Controls.
The Rich Dad philosophy makes a key distinction between managing your money and growing it and understanding key principles of investing is the first step toward creating and growing wealth. This book delivers guidance, not guarantees, to help anyone begin the process of becoming an active investor on the road to financial freedom.
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About the Author
Date of Birth:April 8, 1947
Place of Birth:Honolulu, Hawaii
Education:B.S., U.S. Merchant Marine Academy
Read an Excerpt
Rich Dad's Guide to Investing
By Robert T. Kiyosaki Sharon L. Lechter
Warner BooksCopyright © 2000 Robert T. Kiyosaki and Sharon L. Lechter
All right reserved.
Chapter OneWhat Should I Invest In?
In 1973, I returned home from my tour of Vietnam. I felt fortunate to have been assigned to a base in Hawaii near home rather than to a base on the East Coast. After settling in at the Marine Corps Air Station, I called my friend Mike and we set up a time to have lunch together with his dad, the man I call my rich dad. Mike was anxious to show me his new baby and his new home so we agreed to have lunch at his house the following Saturday. When Mike's limousine came to pick me up at the drab gray base BOQ, the Bachelor Officers' Quarters, I began to realize how much had changed since we had graduated together from high school in 1965.
"Welcome home," Mike said as I walked into the foyer of his beautiful home with marble floors. Mike was beaming from ear to ear as he held his seven-month-old son. "Glad you made it back in one piece."
"So am I," I replied as I looked past Mike at the shimmering blue Pacific Ocean, which touched the white sand in front of his home. The home was spectacular. It was a tropical one-level mansion with all the grace and charm of old and new Hawaiian living. There were beautiful Persian carpets, tall dark green potted plants, and a large pool that was surrounded on three sides by his home, with the ocean on the fourth side. It was very open, breezy, and the model of gracious island living with the finest of detail. The home fit my fantasies of living the luxurious life in Hawaii.
"Meet my son James," said Mike.
"Oh," I said in a startled voice. My jaw must have been hanging open as I had slipped into a trance taking in the stunning beauty of this home. "What a cute kid." I replied as any person should reply when looking at a new baby. But as I stood there waving and making faces at a baby blankly staring back at me, my mind was still in shock at how much had changed in eight years. I was living on a military base in old barracks, sharing a room with three other messy beer-drinking young pilots, while Mike was living in a multi-million-dollar estate with his gorgeous wife and newborn baby.
"Come on in," Mike continued. "Dad and Connie are waiting for us on the patio."
The lunch was spectacular and served by their full-time maid. I sat there enjoying the meal, the scenery, and the company when I thought about my three roommates who were probably dining at the officer's mess hall at that very moment. Since it was Saturday, lunch on the base was probably a sub sandwich and a bowl of soup.
After the pleasantries and catching up on old times was over, rich dad said, "As you can see, Mike has done an excellent job investing the profits from the business. We have made more money in the last two years than I made in the first twenty. There is a lot of truth to the statement that the first million is the hardest."
"So business has been good?" I asked, encouraging further disclosure on how their fortunes had jumped so radically.
"Business is excellent," said rich dad. "These new 747s bring so many tourists from all over the world to Hawaii that business cannot help but keep growing. But our real success is from our investments more than our business. And Mike is in charge of the investments."
"Congratulations," I said to Mike. "Well done."
"Thank you," said Mike. "But I can't take all the credit. It's dad's investment formula that is really working. I'm just doing exactly what he has been teaching us about business and investing for all these years."
"It must be paying off," I said. "I can't believe you live here in the richest neighborhood in the city. Do you remember when we were poor kids, running with our surfboards between houses trying to get to the beach?"
Mike laughed. "Yes I do. And I remember being chased by all those mean old rich guys. Now I'm the mean old rich guy who is chasing those kids away. Who would have ever thought that you and I would be living ...?"
Mike suddenly stopped talking once he realized what he was saying. He realized that while he was living here, I was living on the other side of the island in drab military barracks.
"I'm sorry," he said. "I ... didn't mean to ..."
"No apologies necessary," I said with a grin. "I'm happy for you. I'm glad you're so wealthy and successful. You deserve it because you took the time to learn to run the business. I'll be out of the barracks in a couple of years as soon as my contract with the Marine Corps is done."
Rich dad, sensing the tension between Mike and me, broke in and said, "And he's done a better job than I have. I'm very proud of him. I'm proud of both my son and his wife. They are a great team and have earned everything they have. Now that you're back from the war, it's your turn Robert."
May I Invest With You?
"I'd love to invest with you," I eagerly replied. "I saved nearly $3,000 while I was in Vietnam and I'd like to invest it before I spend it. Can I invest with you?"
"Well, I'll give you the name of a good stockbroker," rich dad said. "I'm sure he'll give you some good advice, maybe even a hot tip or two."
"No, no, no," I said. "I want to invest in what you are investing in. Come on. You know how long I've known you two. I know you've always got something that you're working on or investing in. I don't want to go to a stockbroker. I want to be in a deal with you guys."
The room went silent as I waited for rich dad or Mike to respond. The silence grew into tension.
"Did I say something wrong?" I asked finally.
"No," said Mike. "Dad and I are investing in a couple of new projects that are exciting but I think it is best you call one of our stockbrokers first and begin investing with him."
Again there was silence, punctuated only by the clinking of the dishes and glasses as the maid cleared the table. Mike's wife Connie excused herself and took the baby to another room.
"I don't understand," I said. Turning to rich dad more than Mike, I continued, "All these years I've worked right along side the two of you building your business. I've worked for close to nothing. I went to college as you advised and I fought for my country as you said a young man should. Now that I'm old enough and I finally have a few dollars to invest, you seem to hesitate when I say I want to invest in what you invest in. I don't understand. Why the cold shoulder-are you trying to snub me or push me away? Don't you want me to get rich like you?"
"It's not a cold shoulder," Mike replied. "And we would never snub you or not wish you to attain great wealth. It's that things are different now."
Rich dad nodded his head in slow and silent agreement.
"We'd love to have you invest in what we invest in," rich dad finally said. "But it would be against the law."
"Against the law?" I echoed in loud disbelief. "Are you two doing something illegal?"
"No, no," said rich dad with a chuckle. "We would never do anything illegal. It's too easy to get rich legally to ever risk going to jail for something illegal."
"And it is because we want to always remain on the right side of the law that we say it would be illegal for you to invest with us," said Mike.
"It's not illegal for Mike and me to invest in what we invest in. But it would be illegal for you," rich dad tried to summarize.
"Why?" I asked.
"Because you're not rich," said Mike softly and gently. "What we invest in is for rich people only."
Mike's words went straight through me. Since he was my best friend, I knew they were difficult words for him to say to me. And although he said them as gently as possible, they still hurt and cut like a knife through my heart. I was beginning to sense how wide the financial gap between us was. While his dad and my dad both started out with nothing, he and his dad had achieved great wealth. My dad and I were still from the other side of the tracks, as they say. I could sense that this big house with the lovely white-sand beach was still far away for me, and the distance was measured in more than miles. Leaning back in my chair and crossing my arms in introspective thought, I sat there nodding quietly as I summarized that moment in our lives. We were both 25 years old but in many ways, Mike was 25 years ahead of me financially. My own dad had just been more or less fired from his government job and he was starting over with nothing at age 52. I had not even begun.
"Are you OK?" asked rich dad gently.
"Yeah, I'm OK," I replied, doing my best to hide the hurt that came from feeling sorry for myself and for my family. "I'm just doing some deep thinking and some soul searching," I said, mustering a brave grin.
The room was silent as we listened to the waves and as the cool breeze blew through the beautiful home. Mike, rich dad, and I sat there while I came to terms with the message and its reality.
"So I can't invest with you because I'm not rich," I finally said as I came out of my trance. "And if I did invest in what you invest in, it would be against the law?"
Rich dad and Mike nodded. "In some instances," Mike added.
"And who made this law?" I asked.
"The federal government," Mike replied.
"The SEC," rich dad added.
"The SEC?" I asked. "What is the SEC?"
"The Securities and Exchange Commission," rich dad responded. "It was created in the 1930s under the direction of Joseph Kennedy, father of our late President John Kennedy."
"Why was it created?" I asked.
Rich dad laughed. "It was created to protect the public from wild unscrupulous dealmakers, businessmen, brokers, and investors."
"Why do you laugh?" I asked. "It seems like that would be a good thing to do."
"Yes, it is a very good thing," rich dad replied, still chuckling a little. "Prior to the stock market crash of 1929, many shady, slippery, and shoddy investments were being sold to the public. A lot of lying and misinformation was being put forth. So the SEC was formed to be the watchdog. It is the agency that helps make-as well as enforce-the rules. It serves a very important role. Without the SEC, there would be chaos."
"So why do you laugh?" I persisted.
"Because while it protects the public from the bad investments, it also keeps the public out of the best investments," replied rich dad in a more serious tone.
"So if the SEC protects the public from the worst investments and from the best investments, what does the public invest in?" I asked.
"The sanitized investments," rich dad replied. "The investments that follow the guidelines of the SEC."
"Well, what is wrong with that?" I asked.
"Nothing," said rich dad. "I think it's a good idea. We must have rules and enforce the rules. The SEC does that."
"But why the chuckle?" I asked. "I've known you too many years and I know you are holding back something that is causing you to laugh."
"I've already told you," said rich dad. "I chuckle because in protecting the public from the bad investments, the SEC also protects the public from the best investments."
"Which is one of the reasons the rich get richer?" I asked tenuously.
"You got it," said rich dad. "I chuckle because I see the irony in the big picture. People invest because they want to get rich. But because they're not rich, they're not allowed to invest in the investments that could make them rich. Only if you're rich can you invest in a rich person's investments. And so the rich get richer. To me, that is ironic."
"But why is it done this way?" I asked. "Is it to protect the poor and middle class from the rich?"
"No, not necessarily," Mike responded. "I think it is really to protect the poor and the middle class from themselves."
"Why do you say that?" I asked.
"Because there are many more bad deals than good deals. If a person is not aware, all deals-good and bad-look the same. It takes a great deal of education and experience to sort the more sophisticated investments into good and bad investments. To be sophisticated means you have the ability to know what makes one investment good and the others dangerous. And most people simply do not have that education and experience," said rich dad. "Mike, why don't you bring out the latest deal we are considering?"
Mike left the table for his office and returned with a three-ring binder that was about two inches thick filled with pages, pictures, figures, and maps.
"This is an example of something we would consider investing in," said Mike as he sat down. "It is known as a non-registered security. This particular investment is sometimes called a private placement memorandum."
My mind went numb as Mike flipped though the pages and showed me the graphs, charts, maps, and pages of written text that described the risks and rewards of the investment. I felt drowsy as Mike explained what he was looking at and why he thought it was such a great investment opportunity.
Rich dad, seeing me begin to fade away with the overload of unfamiliar information, stopped Mike and said, "This is what I wanted Robert to see."
Rich dad then pointed to a small paragraph at the front of the book that read "Exemptions from the Securities Act of 1933."
"This is what I want you to understand," he said.
I leaned forward to be better able to read the fine print his finger was pointing to. The fine print said, "This investment is for accredited investors only. An accredited investor is generally accepted to be someone who:
has a net worth of $1 million or more; or
has had an annual income of $200,000 or more in each of the most recent years (or $300,000 jointly with a spouse) and who has a reasonable expectation of reaching the same income level in the current year."
Leaning back in my chair, I said, "This is why you say I cannot invest in what you invest in. This investment is for rich people only."
"Or people with high incomes," said Mike.
"Not only are these guidelines tough, but the minimum amount you can invest in this investment is $35,000. That is how much each investment-unit,' as it is called, costs."
"$35,000!" I said with a gasp. "That is a lot of money and a lot of risk. You mean that is the least someone can invest in this deal?"
Rich dad nodded. "How much does the government pay you as a Marine Corps pilot?"
"I was earning about $12,000 a year with flight pay and combat pay in Vietnam. I really don't know what my pay will be here now that I am stationed in Hawaii. I might get some COLA, cost of living allowance, but it sure isn't going to be much, and it certainly will not cover the cost of living in Hawaii."
"So for you to have saved $3,000 was quite an accomplishment," said rich dad, doing his best to cheer me up. "You saved nearly 25% of your gross income."
I nodded yet silently I realized how very, very far behind I was from becoming a so-called accredited investor. I realized that even if I became a General in the Marine Corps, I would probably not earn enough money to be considered an accredited investor. Not even the president of the United States, unless he or she were already rich, could qualify on salary alone.
"So what should I do?" I finally asked.
Excerpted from Rich Dad's Guide to Investing by Robert T. Kiyosaki Sharon L. Lechter Copyright © 2000 by Robert T. Kiyosaki and Sharon L. Lechter. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
Introduction What You Will Learn from Reading This Book 1
Phase 1 Are You Mentally prepared to Be an Investor?
Investor Lesson #1 What Should I Invest In? 17
Investor Lesson #2 Pouring a Foundation of Wealth 33
Investor Lesson #3 The Choice 41
Investor Lesson #4 What Kind of World Do You See? 45
Investor Lesson #5 Why Investing Is Confusing 51
Investor Lesson #6 Investing Is a Plan, Not a Product or Procedure 59
Investor Lesson #7 Are You Planning to Be Rich, or Are You Planning to Be Poor? 65
Investor Lesson #8 Getting Rich Is Automatic-If You Have a Good Plan and Stick to It 73
Investor Lesson #9 How Can You Find the Plan That Is Right for You? 83
Investor Lesson #10 Decide Now What You Want to Be When You Grow Up 89
Investor Lesson #11 Each Plan Has a Price 97
Investor Lesson #12 Why Investing Isn't Risky 105
Investor Lesson #13 On Which Side of the Table Do You Want To Sit? 109
Investor Lesson #14 Basic Rules of Investing 119
Investor Lesson #15 Reduce Risk Through Financial Literacy 135
Investor Lesson #16 Financial Literacy Made Simple 153
Investor Lesson #17 The Magic of Mistakes 177
Investor Lesson #18 What Is the Price of Becoming Rich? 187
Chapter 19 The 90/10 Riddle 197
Phase 2 What Type of Investor do you want to Become?
Chapter 20 Solving the 90/10 Riddle 211
Chapter 21 Categories of Investors 215
Chapter 22 The Accredited Investor 223
Chapter 23 The Qualified Investor 227
Chapter 24 The Sophisticated Investor 243
Chapter 25 The Inside Investor 257
Chapter 26 The Ultimate Investor 263
Chapter 27 How to Get Rich Slowly 267
Chapter 28 Keep Your Day Job and Still Become Rich 277
Chapter 29 The Entrepreneurial Spirit 281
Phase 3 How Do You Build a Strong Business?
Chapter 30 Why Build a Business? 289
Chapter 31 The B-I Triangle 293
Chapter 32 Cash Flow Management 311
Chapter 33 Communications Management 317
Chapter 34 Systems Management 327
Chapter 35 Legal Management 335
Chapter 36 Product Management 339
Phase 4 Who is a Sophisticated Investor?
Chapter 37 How a Sophisticated Investor Thinks 349
Chapter 38 Analyzing Investments 357
Chapter 39 The Ultimate Investor 379
Chapter 40 Are You the Next Billionaire? 403
Chapter 41 Why Do Rich People Go Bankrupt? 429
Phase 5 Giving it Back
Chapter 42 Are You Prepared to Give Back? 445
Conclusion Why It No Longer Takes Money to Make Money 453
Most Helpful Customer Reviews
Kiyosaki is reviled by some for his Rich Dad series. Critics point out that he offers no specific plans for someone to become rich (ie. invest in this stock, or buy that property). Kiyosaki correctly notes that it would be impractical to give that sort of advice, and instead focuses on the mindset of the rich, and the skills that should be learned to get there. This volume, the third of the Rich Dad series, is by far the most detailed, and while it does build on the principles learned in the first two volumes (Rich Dad Poor Dad and Cashflow Quadrant) someone new to the series could read this without being completely lost. As usual, Kiyosaki is easy to read and he explains everything in great detail, although he sometimes repeats himself too much. Although I enjoyed this book and learned a lot, I will need a break before I read any more Rich Dad books. As a side note, Kiyosaki includes a suggested reading list in each volume that is very helpful, and he offers free online pre-recorded seminars for those who are interested (the website is in the book, and no I don't work for Kiyosaki).
This book tells you in great simple details almost everything important that you need to know about starting a business. There is no one better than Robert Kiyosaki when it comes to simplifying his explanations. This is a must for all Business Owners, Investors, and students alike.
Good read to understand some basic concepts of investment and get excellent inspiration to think differently than you are traditionally taught to or believed in. This is the 3rd book of Rich Dad series that I am reading and I know that I will never look at the world the same again. This book is better understood if one has read Rich Dad Poor Dad and Cash Flow Quadrant. I will recommend it anytime to anyone.
It is inspirational motivating the entrepreneurial spirit. I was searching more for technical information for decision making involved investing in stocks. Even still the book could have been half the length. States the same things on numerous occasions. I was seeking more meat from the book than it provided. It also makes attempts to sell you other products that he offers for the information that I probably was seeking. If I had the opportunity to have my money back for the book I would take it. I have it for sale!
If people take the lessons to heart of this book to become more aggressive in their investment strategies then they will have the opportunity to join the wealthy.
This book is one of the very few that has had influence on my life. I partially credit some of my own personal success to this book. - M. Cyrid.
What I took away from the book was if you want to be financially secure, work for yourself. A world of tax benefits opens up when you own your own business. Educate yourself on what you need to get started or seek out those people who can help you. Obviously, success is never guaranteed no matter what you do, but you must have the confidence to take the first step. This book will give you the inspiration to do just that.
I enjoyed reading the book. Mr. Kiyosaki does a good job in explaining why the rich continue to get ahead. I now have a lot of insight as to how the rich think, in regards to their investment choice. I also enjoyed the section of the book that explains the different ways a million dollars can be amassed and the problems associated with each. Furthermore, I found the last half of the book informative, especially the B-I Triangle and its components. This book is not a nuts-and-bolts kind of book. He really doesn't give you any particular strategy on investing, rather a philosophy. In addition to this, Mr. Kiyosaki is true to what he says on the back cover of the book: This is a guide, not a guarantee. I find that he repeats the story of when his rich dad purchased the expensive piece of land a lot. He's a little vague at times, but other than that, it's a good read.
A wonderful follow up to his first book. He expanded on his previous book and explained in simple language what we didn't know about investing and investments in general. I do, however, think he was a bit too repetitive and this made the book a little tedious to read, but it's well worth your time to read it.
This book shows you the different types of investors, and tells you why the rich are allowed to invest in the more riskier investments then the poor and middle class. The information in this book is very valuable for people who do not know much about investing, this book is greatly recommended for first time investors.
As in Rich Dad, Poor Dad, this book has the delightful story line of advice from the father of a friend who became a very wealthy man before his death -- leaving his family well set financially for 100 years! I think it's that base in reality that makes these books so interesting. One of the best ways to learn is to have a successful mentor who will guide us through the key challenges of getting started. This book is designed to duplicate the experiences that the author had his his rich Dad. For example, the key questions that rich Dad asked him are at the end of each section for you to answer for yourself. I found my answers to be revealing, even though I have been through a lot of similar sets of questions. Well done! The story line picks up after the author is coming out of the Marines in his twenties to find his boyhood friend already wealthy from his own efforts. The financial advice parts of the book are tied into helping you pick up a meaningful financial plan. You begin by deciding what you want money to do for you. That's an excellent thing to do. Some want security. Some want more income. Others want substantial wealth that keeps growing. You should decide. Some books make the mistake of pushing you to choose a goal that really isn't what you want. Rather than push you in a particular direction, the book emphasizes key principles (compound cash tax-free, create assets with your mind as well as with your money). The author notes that each of us has preferences that will take us in different directions for implementing whatever our goals are. I liked that approach a lot. You will recognize a lot of the diagrams from Rich Dad, Poor Dad. But it is good advice, so it doesn't hurt to have the repetition. This part is fairly compact, so you can skim through it if you feel confident about the material. This bo
This books explains clearly investing from all different sides. It didn't delve into one particular vehicle nor did it waste it's time on evaluating stock picking methods. This book really shows who true investors are and who there not. (traders, real estate agents, etc.)
This is THE book. The Nuts & Bolts of Investing. It provides you with a Blueprint that will help you achieve lasting wealth. If you are truly serious about building true wealth for yourself, and your children and their children, then buy this book.