My Main 20% Takeaways from “Rich Dad’s Guide to Investing”
An investing book that won’t teach you investing but guide you to build a sophisticated investor’s mindset.
Before reading Kiyosaki’s “Rich Dad’s Guide to Investing,” I thought he would share some of his investing “secrets” and how to earn profit through some of his known “blue chip stock lists.”
However, as I read through the book’s main 20% content, I knew the book aimed to guide the readers on how to build the right mindset to approach investing. Just like Kiyosaki summarizes his Rich Dad’s series:
- “Rich Dad Poor Dad” documents his childhood’s financial educational path, where he learned to “Never work for money,” “Learn to spot opportunities, not job,” and “Learn to read financial statements.”¹
- “CASHFLOW Quadrant” explains the importance of understanding both the inflow and outflow of cash and the four types of personas he learned as a teenager to see which quadrant to aim for: “employee,” “self-employed,” “business owner,” and “investor.”²
- “Rich Dad’s Guide to Investing” levels up the concepts learned from the other two books and wraps them into 3E’s that a sophisticated investor should acquire: Education, Experience, and Excessive Cash.³
In Kiyosaki’s perspective, the 3E’s are the keys for the 10% of the individuals to make 90% of the money, compared to 90% of people competing for the 10% of capital.
Education
Do you have the “right” terminologies to navigate your financial journey?
One of Kiyosaki’s main arguments is that “it does not take money to make money.” Instead, it takes the proper “vocabulary” to acquire wealth because our words shape our minds, and our minds lead to potential action.
As our financial vocabulary increases, there are two byproducts. First, we have a broader view of what we don’t know and acknowledge it to improve our actions. We could also lower the investment risks because investment is neutral, and only the investing individual could make it risky if they lack knowledge about what they are doing and what they want to aim for.
Do you have the “right” mindset for investing?
Building the “right” mindset requires us to understand what “investing” is and why we “invest.”
Through his rich dad, Kiyosaki learns that different people see investing differently. Some may think investing is purchasing stocks, while others are biased toward other financial products. However, Kiyosaki and his rich dad see “investing” as a “personal plan that drives an individual from point A to point B.”³
Point A is the individual’s current stance, while point B is the individual’s preferred destination. This destination revolves around three fundamental life priorities:
- Security
- Comfortable
- Rich
Only we could figure out our top priorities. Only we have the power to determine our lens, either seeing the world with “not enough money” (people who focused primarily on seeking security) or seeing the world with “too much money” (people who can see all the dimensional array across each priority).
Experience: “How can we build the asset column without buying the asset?”
The author’s answer is to become an inside investor who could create an asset instead of buying the asset.
To an extent, Kiyosaki’s investing guide is a handbook for becoming an entrepreneur because he understands that regardless of which financial vehicle we choose to align with our investing plan, we are ultimately “investing” in business. Either we become proficient in evaluating a business’s financial performance, or we mind from the inside to gain relevant experience of what it takes to operate a profitable business.
Again, “it does not take money to make money” because as our financial vocabularies increase, we see the opportunity through our ideas. The system Kiyosaki introduces to turn an idea into an asset is the “B-I Triangle.” A collaborative system that emphasizes the importance of being a team player and a team leader.
Excessive Cash: Can you afford to lose while still profiting from it?
Kiyosaki was determined to further his financial education when he found out it was “illegal” for those who lacked excess cash to invest in certain investments. The SEC intended to protect people with a lack of money in a safe spot, but Kiyosaki recognizes the intention also had its downside, such that those “in search of money” lose out on the potential gain.
The logic behind such lawmaking is whether we can afford to lose based on what we have. One implication I had is if we don’t have excess cash to start, our education and experience are the determinators to evaluate what we can afford.
To conclude, one of the main effects this book had is inspiring me to acquire my most important asset — financial words. He inspires me to learn a financial word per day and use it in my daily language to reshape my mindset to see the world from a different lens.
References
- Kiyosaki, Robert T. Rich Dad Poor Dad. 2nd ed., Plata Publishing, 2017.
- Kiyosaki, Robert T. Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom. 2nd ed., Plata Publishing, 2011.
- Kiyosaki, Robert T. Rich Dad’s Guide to Investing: What the Rich Invest in, That the Poor and the Middle Class Do Not! Plata Publishing, 2015.
