What the Rich Invest In, That the Poor and Middle Class Do Not!
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Guide to Investing What the Rich Invest In, That the Poor and Middle Class Do Not! If you purchase this book without a cover, or purchase a PDF, jpg, or tiff copy of this book, it is likely stolen property or a counterfeit. In that case, neither the authors, the publisher, nor any of their employees or agents has received any payment for the copy. Furthermore, counterfeiting is a known avenue of financial support for organized crime and terrorist groups. We urge you to please not purchase any such copy and to report any instance of someone selling such copies to Plata Publishing LLC. This publication is designed to provide competent and reliable information regarding the subject matter covered. However, it is sold with the understanding that the author and publisher are not engaged in rendering legal, financial, or other professional advice. Laws and practices often vary from state to state and country to country and if legal or other expert assistance is required, the services of a professional should be sought. The author and publisher specifically disclaim any liability that is incurred from the use or application of the contents of this book. Copyright © 2012 by CASHFLOW Technologies, Inc. All rights reserved. Except as permitted under the U.S. Copyright Act of 1976, no part of this publication may be reproduced, distributed, or transmitted in any form or by any means or stored in a database or retrieval system, without the prior written permission of the publisher. Published by Plata Publishing, LLC CASHFLOW, Rich Dad, Rich Dad Advisors, and ESBI are registered trademarks of CASHFLOW Technologies, Inc. E B are registered trademarks of CASHFLOW Technologies, Inc. S I Plata Publishing, LLC 4330 N. Civic Center Plaza Suite 100 Scottsdale, AZ 85251 (480) 998-6971 Visit our websites: PlataPublishing.com and RichDad.com Printed in the United States of America 062014 First Edition: 1998 First Plata Publishing Edition: January 2012 ISBN: 978-1-61268-020-0 Guide to Investing What the Rich Invest In, That the Poor and Middle Class Do Not! ® A Father’s Advice on Investing Years ago, I asked my rich dad, “What advice would you give to the average investor?” His reply was, “Don’t be average.” v The 90 / 10 Rule of Money Most of us have heard of the 80/20 rule. In other words, 80% of our success comes from 20% of our efforts. Originated by the Italian economist Vilfredo Pareto in 1897, it is also known as “The Principle of Least Effort.” Rich dad agreed with the 80/20 rule for overall success in all areas but money. When it came to money, he believed in the 90/10 rule. Rich dad noticed that 10% of the people had 90% of the money. He pointed out that in the world of movies, 10% of the actors made 90% of the money. He also noticed that 10% of the athletes made 90% of the money as did 10% of the musicians. The same 90/10 rule applies to the world of investing, which is why his advice to investors was, “Don’t be average.” An article in The Wall Street Journal recently validated his opinion. It stated that 90% of all corporate shares of stock in America are owned by just 10% of the people. This book explains how some of the investors in the 10% have gained 90% of the wealth and how you might be able to do the same. vii Acknowledgments On April 8, 1997, Rich Dad Poor Dad was published. We printed 1,000 copies, thinking that that quantity would last us for at least a year. Tens of millions of copies later, with very little spent on traditional advertising, the success of Rich Dad Poor Dad and Rich Dad’s CASHFLOW Quadrant continues to amaze us. Sales have been driven primarily by word of mouth, the best kind of marketing. Rich Dad’s Guide to Investing is a thank you for helping to make Rich Dad Poor Dad and Rich Dad’s CASHFLOW Quadrant so successful. We have made many new friends through this success and some of them have contributed to the development of this book. We would like to personally thank you for your contribution. We especially want to thank the incredible team members we have at The Rich Dad Company. —Robert and Kim Kiyosaki ix Contents INTRODUCTION What You Will Learn from Reading This Book .............................................1 PHASE ONE Are You Mentally Prepared to Be an Investor? Chapter One Investor Lesson #1 What Should I Invest In? .............................................................................17 Chapter Two Investor Lesson #2 Pouring a Foundation of Wealth ..................................................................33 Chapter Three Investor Lesson #3 The Choice ..................................................................................................41 Chapter Four Investor Lesson #4 What Kind of World Do You See? ..................................................................... 45 Chapter Five Investor Lesson #5 Why Investing Is Confusing ........................................................................51 Chapter Six Investor Lesson #6 Investing Is a Plan, Not a Product or Procedure ..........................................59 Chapter Seven Investor Lesson #7 Are You Planning to Be Rich, or Are You Planning to Be Poor? ...................65 Contents Chapter Eight Investor Lesson #8 Getting Rich Is Automatic, If You Have a Good Plan and Stick to It ...........73 Chapter Nine Investor Lesson #9 How Can You Find the Plan That Is Right for You? .....................................83 Chapter Ten Investor Lesson #10 Decide Now What You Want to Be When You Grow Up ............................89 Chapter Eleven Investor Lesson #11 Each Plan Has a Price ..................................................................................97 Chapter Twelve Investor Lesson #12 Why Investing Isn’t Risky .................................................................................. 105 Chapter Thirteen Investor Lesson #13 On Which Side of the Table Do You Want To Sit? ....................................109 Chapter Fourteen Investor Lesson #14 Basic Rules of Investing .............................................................................119 Chapter Fifteen Investor Lesson #15 Reduce Risk Through Financial Literacy ...................................................135 Chapter Sixteen Investor Lesson #16 Financial Literacy Made Simple .................................................................153 Contents Chapter Seventeen Investor Lesson #17 The Magic of Mistakes ..............................................................................175 Chapter Eighteen Investor Lesson #18 What Is the Price of Becoming Rich? ........................................................185 Chapter Nineteen The 90/10 Riddle.......................................................................................195 PHASE TWO What Type of Investor Do You Want to Become? Chapter Twenty Solving the 90/10 Riddle ...........................................................................209 Chapter Twenty-One Categories of Investors ....................................................................................... 213 Chapter Twenty-Two The Accredited Investor .............................................................................221 Chapter Twenty-Three The Qualified Investor ...............................................................................225 Chapter Twenty-Four The Sophisticated Investor .........................................................................241 Chapter Twenty-Five The Inside Investor ....................................................................................255 Chapter Twenty-Six The Ultimate Investor ...............................................................................261 Contents Chapter Twenty-Seven How to Get Rich Slowly ...........................................................................265 Chapter Twenty-Eight Keep Your Day Job and Still Become Rich ................................................275 Chapter Twenty-Nine The Entrepreneurial Spirit .........................................................................279 PHASE THREE How Do You Build a Strong Business? Chapter Thirty Why Build a Business?...............................................................................285 Chapter Thirty-One The B-I Triangle ................................................................................................. 289 Chapter Thirty-Two Cash Flow Management ...........................................................................307 Chapter Thirty-Three Communications Management .................................................................313 Chapter Thirty-Four Systems Management ................................................................................323 Chapter Thirty-Five Legal Management .................................................................................331 Chapter Thirty-Six Product Management ................................................................................335 Contents PHASE FOUR Who Is a Sophisticated Investor? Chapter Thirty-Seven How a Sophisticated Investor Thinks .........................................................345 Chapter Thirty-Eight Analyzing Investments ...............................................................................363 Chapter Thirty-Nine The Ultimate Investor ........................................................................................ 375 Chapter Forty Are You the Next Billionaire? .....................................................................399 Chapter Forty-One Why Do Rich People Go Bankrupt? ..........................................................425