Cash Richdad

Rich dad series changes our perceptions about simple things we know and we think we know. It’s the knowledge everyone should have because finances and money touches every life in some way or the other and also because all these concepts can e applied universally. Money has a universal language which is understood by everyone across the globe.

Words have the power to make you rich — or keep you poor. For example, you have to know the difference between an “asset” and a “liability.” An asset is something that puts money in your pocket, and a liability takes money from it. A simple and powerful understanding of assets and liabilities will affect your financial decisions through out your life.

Let’s take an example of a house. Most of us would consider it as an asset but kiyosaki says it’s not an asset but a liability the reason being that every month it took money from his pocket via mortgage payments, utilities, and upkeep. But his Rich Dad who owned many houses made them work as an asset. Instead of depleting his wallet, those homes were rented out. They generated enough income to cover his expenses — with money left over.

In addition to “asset” and “liability,” there are two other very important concepts you need to understand: “Cash flow” and “capital gains.”

There is a difference between the two. A cash flow is when you have money coming in every month and a positive cash flow implies that you have more money coming in than money going out on your expenses.

A capital gain in a broader sense would mean selling your investments for a profit. Suppose I buy a house for 10000$ and sell it after some time for 20000$, that would be considered as a capital gain.

Kiyosaki states that one of the reasons people do not become financially free is because most of them are focusing on capital gains rather than cash flow. Chasing capital gains alone is gambling — not investing. There is a powerful line by kiyosaki that sums up everything “When you invest for cash flow,” my rich dad said, “you’re investing in a money-back guarantee. If you invest for capital gains, you invest in hope. The biggest thief of all is hope.”

The key to financial intelligence is how to use both cash flow and capital gains to grow wealthy. So many people are not successful, because they’re generally focusing on only one of the two. The majority is focusing on capital gains.

According to Kiyosaki, one of the primary reasons people invest in tomorrow, rather than today, is simply because they think they cannot find or afford an investment that pays them today. As a result, they often become believers in tomorrow. These are the people who often fall prey to financial predators selling dreams of the future.

“Your future is created by what you do today, not tomorrow” Robert Kiyosaki
Learn from Robert Kiyosaki and other world’s best gurus…..on your way to success and financial freedom, inspired…

Your partner in success…
Gagan.

I have been writing my thoughts over investments inspired by RICH DAD and I think if a person is not an expert in judging the right opportunity or is not able to distinguish between a good investment and a bad one he always goes for an investment advice. This advice is what affects his decision to a great extent. But we should always be careful about taking advice that who are we taking it from..?

Many of Wall Street’s elite firms were being required to pay tens of millions of dollars in fines to investors, according to media reports. The penalties are for alleged bad investment advice, courtesy of New York State Attorney General Eliot Spitzer.

Warren buffet , the famed investor says” Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway.”

Kiyosaki says, I have been highly critical of the standard financial planning advice — “work hard, save money, get out of debt, invest for the long term, and diversify” — for a long time. Such guidance is often more a financial advisor’s (subway rider’s) sales pitch than a solid investment guide.

An investor should be smart and responsible enough to distinguish between a good and bad investment advice.

The Difference between Investing and Shopping
Kiyosaki says the problem is, most investors don’t know how bad the standard investment advice is. This mantra of “work hard, save money, get out of debt, invest for the long term, and diversify” is followed by millions of investors — who lost $7 trillion to $9 trillion between 2000 and 2004. Many are still following this bad advice today.

However, investors should realize it’s “buyer beware.” Investing is different from shopping. Kiyosaki gives a very thoughtful line about it that when we go shopping, we expect value for our money. But when we invest, we do so in the hopes of making more money — and knowing that we risk making losses.

What would happen to the financial industry if brokers were sued every time a client lost money? The wheels of world commerce would grind to a halt. So even those big brokers are playing on the risk, if there was no risk involved every one would jump in. Investors take up every word of those brokers but they should clearly be aware of their actions and the risk involved.

According to Rich Dad Kiyosaki , The world is filled with honest people handing out bad advice. An example of honest bad investment advice is the standard one of “work hard, save money, get out of debt, invest for the long term, and diversify”.
The world is full of biased advices; those biases can be due to hundreds of unknown reasons. There are a number of crooks and con artists as well, who intentionally promote dishonest ventures. So an investor has to be aware.

Kiyosaki says, in my opinion that means each of us needs to be responsible for our own financial education so we can tell the difference between good advice, biased advice, and crooked advice. If you can educate yourself to know the differences between those three types of advice, getting rich is easy.

It’s just the financial education that will help you find out the good advice and then make good investments out of your hard earned money.

Learn from Robert Kiyosaki and other world’s best gurus…..on your way to success and financial freedom, inspired…

Your partner in success…
Gagan.

Going through rich dad series has been a great experience and I learn a new thing every time I go through any book or article, it just makes me think over it.

Kiyosaki says it’s important to take your investment decisions seriously and treat your investments as if you will be buying over the business. This does not mean that you really have to buy the business, this is about having a clear understanding of your investments, what are you investing in, what is the business model , what are the risks involved, how the company makes its profits and so on. These are the basic facts and figures you should know before making your investments.

To give an example if I was to buy some shares of a company, I would be one of the many share holders of the company owning a very small portion of the company. I should not treat my investment decision lightly just because I am a small investor. Kiyosaki says we should treat our investments as though we are going to buy over the business and take it very seriously.

For this we have to think like business owners first and when we think like that, we get to know the pros and cons of various kinds of businesses and will be able to identify and manage the risks involved. This will help us to make a better investment decision.

Kiyosaki says, “As a business owner, I definitely want my business to be profitable. Thus, the first thing that I want to do is to find out whether the business that I am interested to invest is profitable. If it is not profitable, then I will not want to invest in it”.

The second concern that I have is whether the business can continue to be profitable in the long run. For that, there are a few factors to keep in mind.

1. Does the business have a competitive advantage over the others in the same industry? If the answer is yes, then the chance of the business continues to make profit in the long run is more.

2. Is there a barrier to entry for that particular industry? If the answer is yes, then there is little or no risk of copycat businesses that will come into play and steal away the profits.

3. Does the business need to reinvent itself frequently? If the answer is yes, then there is a risk that it will lose its competitive.

4. Does the business need to spend a lot of money to reinvent itself? If the answer is yes, then it may not be a good business to invest in since there is a lot of wastage. A large portion of the profits is used for reinventing itself. And there is little left to build the cash reserve.

Then there are other things that should be considered as well. Like return on investments and that whether the business is rich in cash reserve. It is important to think like a business owner to make good investments and financial education helps you doing so. Good investments go a long way in making a passive income source.

“You have to be smart. The easy days are over.” Robert Kiyosaki

Learn from Robert Kiyosaki and other world’s best gurus…..on your way to success and financial freedom, inspired…

Your partner in success…
Gagan.

RICH DAD says, to make money work for you, you have to learn how money works. Making investment is the best way you can put your money to use. If it’s lying idle with you in any form, it will not work instead will loose its purchasing power as the time passes by. So smart investments make up a positive cash flow and are very essential, if we really want to be financially free.

Kiyosaki says it takes some financial intelligence to make money out of your investments as there are good chances of loosing it as well, if you are bad at recognizing the right opportunity.

This advice may sound simple, but if you think about it, millions of investors invest their hard-earned money every day and receive little to nothing in return. In other words, their investment costs them money rather than makes them money.

And millions of people put a little money aside, either in a bank or under the mattress, and receive little to nothing in return. They all pay to invest rather than getting paid to invest.

Kiyosaki says the lesson he learnt from his RICH DAD was that investing should make him richer every month, not poorer. It should put money in his pocket every month, not take money out. To him, it was a miracle that so many financial services salespeople could convince financially naive people that it was smart to pay money to invest.

Once you understand this lesson and start finding investments that make money, your life is never the same. In my opinion, grasping this distinction is one of the biggest differences between the rich and everybody else.

According to Kiyosaki, he invests primarily for cash flow, not capital gains. Most people invest for capital gains, which is why they buy a stock, mutual fund, or piece of real estate and hope the price will go up. Not him. While he occasionally invests for capital gains, but prefer to invest for cash flow. It is always harder to investments for cash flow.

Knowing the difference between investments that cost you money and ones that make you money is what separates rich investors from naive investors.

In this post, I will share something about investments, on a thought given by RICH DAD Robert  Kiyosaki that whether we should diversify our investments or be focused .