The Rich Invent Money

Hello people! Here's the fifth lesson- The Rich Invent Money, taught by rich dad to Robert and Mike. In summary, Robert explains how investing in financial education is more valuable than investing in stocks, real estate or other markets. In case, if you aren't aware of who rich dad or Robert or Mike is, make sure to read the blogs under the 'Recent Posts' section. (This lesson is narrated by Robert Kiyosaki)

I have been teaching professionally since 1984. I see one thing in common in all of us, myself included. We all have tremendous potential, and we all are blessed with gifts. Yet, the things that hold all of us back are excessive fear and self-doubt. Some are more affected than others. In my personal experience, your financial genius requires both technical knowledge as well as courage. If fear is too strong, the genius is suppressed. Often in the real world, it's not the smart that gets ahead but the bold. I have to field questions such as: Why take risks? Why should I bother developing my financial IQ? Why should I become financially literate? And I answer, “Just to have more options.” Land was wealth 300 years ago. So the person who owned the land owned the wealth. Then, it was factories and production, so the industrialist owned the wealth. Today, it is information, so the person who has the most timely information owns the wealth. The problem is, information flies all around the world at the speed of light. The new wealth cannot be contained by boundaries and borders as land and factories were. There will be a dramatic increase in the number of new multimillionaires. There also will be those who are left behind. As young boys, Mike and I were constantly told by my rich dad that “money is not real. “The rich make money. The more real you think money is, the harder you will work for it. If you can grasp the idea that money is not real, you will grow richer faster.” “What is it?” was a question Mike and I often came back with. “What is money if it is not real?” “What we agree it is,” was all rich dad would say.

The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth in what seems to be an instant.

I will give you an example of creating money- how fast gains can be made is 100,000 shares purchased for 25 cents each before the company goes public. Six months later, the company is listed, and the 100,000 shares now are worth $2 each. If the company is well managed, the price keeps going up, and the stock may go to $20 or more per share.

It is not gambling if you know what you’re doing. It is gambling if you’re just throwing money into a deal and praying.

There are two kinds of investors:

1. The first and most common type is a person who buys a packaged investment. They call a retail outlet, such as a real estate company, or a stockbroker, and they buy something. It could be a mutual fund, a REIT, a stock or a bond. It is a clean and simple way of investing. An analogy would be a shopper who goes to a computer store and buys a computer right off the shelf.
   

2. The second type is an investor who creates investments. This investor usually assembles a deal in the same way a person who buys components builds a computer. I do not know the first thing about putting components of a computer together, but I do know how to put pieces of opportunities together or know people who know how.

It is this second type of investor my rich dad encouraged me to be.

It is what you know that is your greatest wealth. It is what you do not know that is your greatest risk.

So which one sounds harder to you? Work hard. Pay 50% in taxes. Save what is left. Your savings then earn 5%, which is also taxed. OR

Take the time to develop your financial intelligence Harness the power of your brain and the asset column. I hope you learnt something through reading this blog. If Yes, then make sure to like the blog, comment, share and subscribe to the email newsletter if you haven't yet. I post a blog every Monday at 7 pm IST, until then Happy Reading!