Book Review: Rich Dad’s Guide to Investing

For Money, there is a 90-10 rule. 90% of the population only has 10% of the money, while 10% of the population has 90% of the money. This is because most people don’t fall into eligibility (1m dollar net worth/$200,000 annual income) to make the investments that make rich people rich. The book is about how to get into that top 10%.

U.S. Stock Market. Image Credit: Bloomberg

The rich approach financial gain through procuring businesses and investing. They never stick with one job throughout their lives because a simply “stable income” is not what they are after. Employees of any company are actually systematically set up to stay middle class/poor thanks to the tax system in the United States. 

If an employee wants to invest, he must budget his investment money after it is gutted by taxes. When a business owner wants to invest, he is actually investing first, and paying taxes later. This is how the tax system is set up. 

It may seem like taking the chance of putting yourself out there as a business owner and investor is financially much less safe in comparison to an employee’s stable income, but the investing route is actually safer than this employee route. As an example: Employees get fired all the time. This is often financially crippling to them. Business owners however, can fire employees and even be financially rewarded by doing so through share prices rising. 

Another reason that 90% of people only own 10% of the country’s wealth is due to lack of financial literacy. People are not familiar with how to accurately envision financial terms. I didn’t know that assets can’t be considered assets unless they actively make you money. For example: Buying a house may seem like procuring an asset to those unfamiliar with accurate financial terminology, but really you have no guarantee of selling it at some point for more than you bought it for, so such an item is actually a liability. Things like “debt-to-equity ratios, returns on equities, cash-on-cash returns and financial leverage” are basically Greek to 90% of Americans, so they get intimidated and don’t feel comfortable taking the “risk” of investing and would rather stick with their stable income, A.K.A. not get rich. 

There is actually a diversity in the types of investors that exist in our financial system. An accredited investor is someone who meets the 1 million dollar net worth/$200,000+ annual income requirement and becomes eligible for the “rich people” variety of investments. Qualified investors also meet this requirement, but they specialize in analysis of a business’s financial situation and try to capitalize on market movements. Rich Dad calls these investors “outside investors” because they buy shares and profit, yet do not have much control over their own assets. An “inside investor”, however, creates his own assets instead of buying them, for example: a tech company, a clothing line, etc. As they create assets they can keep them generating income/eventually sell them. 

Rich Dad points out one investor type as the greatest, most unmatched kind. The “sophisticated investor”. This investor is a combination of inside and outside investors. He uses his own experience with building assets to aid his judgment regarding other companies and their financial movements. These investors also can use tax and law to their advantage thanks to their familiarity on these subjects. This is the ultimate way to get rich and stay rich. 

Starting a business is the absolute best way to get rich. Starting a business only requires creativity. Rich Dad’s childhood is a good example. He persuaded a local comic shop to let him take the discarded comics for free, and then he opened up a private comic library, charging his friends a membership fee and profiting. The 90% believe they can’t spare the time or money to make such moves, but Rich Dad points out that some of the most successful businesses ever started out as secondary projects. Dell and Amazon both were started as part-time projects. The takeaway: Everyone can start a business.

Robert Kiyosaki, author of the Rich Dad books, with an estimated net worth of $80 million as of 2020. Image Credit: Dymocks


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