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Robert Kiyosaki Why the Rich Get Richer

Robert Kiyosaki, Why the Rich Get Richer

Paying a High Price for Bad Advice

by Robert Kiyosaki

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Posted on Sunday, January 11, 2009, 12:00AM

At this time of financial crisis, people are seeking good, relevant advice.  But this can be hard to find.

The following is typical of a question you would see in a financial publication -- and its less-than helpful answer:

Q: What can someone whose 401(k) is down do to rebuild their retirement savings?

A: For anyone who is at least five years from retirement, there is probably time for their investments to right themselves.

Resist the urge to take money out of a 401(k) or to stop making contributions to it. Research has shown that dollar-cost averaging -- investing at given intervals -- pays off well in times of crisis.

Check whether the wild market swings have thrown off your asset allocation -- the specific mix of stocks and bonds that makes sense for an individual's financial goals and risk tolerance. If so, then rebalance it by selling shares that are overvalued and buying those that are below optimal levels. Focus on low cost....

Blah, blah, blah.

How naive do the so-called financial experts think people are? Well, obviously, many people are that naive because millions keep listening to the same old advice again and again.

The Same Old Story

So what is wrong with those giving the advice and those following it? Now that the markets have crashed and trillions have been lost, these so-called experts continue on like mindless parrots, saying over and over again, "Polly wants you to invest in a well-diversified portfolio of mutual funds."

Don't they know the market has changed? Don't they know the global economy is contracting, not expanding? Don't they know their advice is bad regardless of whether the market is expanding or contracting? Doesn't the general public realize that most financial "experts" are not professional investors? They're either sales people or journalists -- people who earn money via commissions or a paycheck. And even the people running our biggest investment banks -- or what use to be investment banks -- are compensated via commissions or a paycheck. They are not investors. They are employees working for banks.

So my advice is, be very careful whom you take financial advice from -- and that includes me. My guidance, after all, does not work for 80 percent of the people. My suggestions are not right for those who work for a paycheck or for commissions, nor do they work for those who save money in the bank or a retirement account.

The Right Advice for the Right Audience

My advice is for people who are entrepreneurs or professional investors. I have had a "real" job for only four years of my life, which means I only collected a traditional paycheck for that very short period of time. I do not have a retirement account. If my businesses or my investments are not profitable, then I don't eat. And I like to eat.

I chose to live my life this way because this financial lifestyle keeps me honest. It also keeps me wary and very suspicious of financial experts who offer inane advice. I personally cannot live on such advice. My businesses and investments need to be profitable monthly and pay me monthly, regardless of whether the economy is expanding or contracting.

I don't live in some fairytale world with the hope that the markets will right themselves in five years. I don't keep putting money into a losing venture such as a retirement plan filled with stocks, bonds, and mutual funds. I do not live on false promises. I cannot afford to live on bad advice.

Some Serious Questions

My questions to financial journalists and others who are doling out poor counsel: "What if your advice is wrong in five years? What happens if the markets don't come back? What happens if the markets just stay flat or crash even further? What happens if the markets recover and then crash when the person following your advice is in their late eighties?"

My advice for those seeking financial advice: Look for investments that pay you monthly or quarterly, regardless of whether the markets are up or down or whether the economy is expanding or contracting. Stop listening to those pseudo financial experts with crystal balls and journalism degrees.

The following are tidbits of information to keep in mind as you consider your financial options:

1. I learned my investment philosophy at the age of nine by playing Monopoly. In the game, if I had one green house, I was paid $8. If I had two green houses, then I was paid $16.

I began playing Monopoly for real when I was 26 years old. Today my wife and I have approximately 1,400 little green houses -- each paying us monthly. You do not have to be a rocket scientist or have a Harvard degree to play Monopoly for real. Today's depressed real estate market is the best time to start buying little green houses, even if credit is tight.

In 1987 the stock market crashed. That crash was followed by the crash of the Savings and Loan industry. Those two crashes led to the crash of the real estate market. The economy stayed down from 1987 to 1995. Even though my wife and I were strapped for cash and bankers did not want to lend to small investors, we found ways of putting deals together by using seller financing and creative financing, or simply taking over properties that the bank did not want on its books.

Most financial experts discourage people from doing what I do. They often say that it is risky -- and it certainly can be. But, in my opinion, following their advice of putting money into a savings account and investing in a 401(K) is even riskier in this volatile economy.

2. Today, as the economy is contracting, cash is king. Yet because the Federal Reserve is printing trillions of Monopoly dollars in order to stop deflation, in a few years we could see a hyperinflationary period. Hyperinflation will wipe out the value of a saver's holdings and eventually destroy most mutual funds as the government begins to raise interest rates in an attempt to stem inflation. In a hyperinflationary period, gold and silver will be king.

3. I am not actually recommending gold, silver, or real estate. Assets do not make you rich. Assets can make you poor if you are not careful. In 1980 gold and silver hit all-time highs, gold hitting $800 an ounce and silver $50 an ounce. So the suckers jumped in and were slaughtered. The same thing happened with real estate in 2004.

If you do not know what you are doing, no asset can make you rich. Ultimately, what makes you rich is your financial intelligence. Your greatest asset is your brain -- so take care of it and protect it from bad advice.

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534 Comments

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  • Yahoo! Finance User - Wednesday, July 8, 2009, 10:05PM ET  Report Abuse

    • Overall: 1/5

    For some thoughtful reasons not to read RK, see http://www.johntreed.com/Kiyosaki.html#financialgenius

  • Yahoo! Finance User - Thursday, June 18, 2009, 6:42PM ET  Report Abuse

    • Overall: 5/5

    This last user comment is a great example of "trained taught and educated." Did you really read his books? I bet his real estate values dropped, but probably not his cashflow. Those who invest for cashflow don't care about how highly leveraged they are or whether their assets go up or down in value. They're investing for CASHFLOW, not capital gains. Keep up the good work, Robert.

  • Yahoo! Finance User - Monday, April 27, 2009, 12:32PM ET  Report Abuse

    • Overall: 1/5

    Ok, the Dow went down 38% or so recently. How much did you lost in Real State last year, Bob? You appeal to extreme leverage in your books, so I will bet for near 100%. Of course your main bussiness, that is, selling The Book time after time with different titles on cover, should be going OK in this though times. For readers: the most valuable asset against inflation is the Dow. Let's imagine a worst scenary of 20% inflation yearly, and you owning Coke stocks. Coke should rise its prices by 20% anually, so should do its earnings, and so should do its shares. Check the Dow in 70's or 80's, with high inflation, agains gold prices.

  • Yahoo! Finance User - Thursday, April 9, 2009, 12:26AM ET  Report Abuse

    • Overall: 4/5

    You are so right. Cash is King. If you are to survive in the current meltdown, you better have a real financial education and understand how to build liquidity, pay off debt quickly and protect your wealth. If you are living in fear right now, I suggest you start your financial education by researching www.maxhouse.com.

  • john - Tuesday, April 7, 2009, 10:22PM ET  Report Abuse

    • Overall: 1/5

    Pathetic. You have to admire a guy who can write an article saying gold, silver will be kings going forward, then in the next sentence say " I am not actually recommending gold, silver or real estate. One day soon he will market a book using partial quotes from this article saying 'I told you to (either buy or avoid) gold, silver, or real estate' depending on whether they go up or down using partial quotes from this lame article. This article is pure fluff. A waste.

  • olivier - Friday, April 3, 2009, 3:49AM ET  Report Abuse

    • Overall: 5/5

    For the detractors, I invite them to read http://www.berkshirehathaway.com/2008ar/2008ar.pdf especially the part "This debilitating spiral has spurred our government to take massive action. In poker terms, the Treasury and the Fed have gone “all in.” Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation. Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won’t leave willingly." on page 3.

  • Yahoo! Finance User - Sunday, March 15, 2009, 5:21AM ET  Report Abuse

    • Overall: 3/5

    This information is good, as far as it goes. At least it is a fairly current posting. Most of the other postings are over a year old and have nothing to do with what is happening now. People need to wake up and use their own brains to guide them. OK, you can hire someone to 'manage' your portfolio, but do not disengage yourself from what happens. Stay up to date and if you have an opinion about your portfolio, make sure your manager listens and acts. My family just lost over $400,000 because we let our manager float along on his own. That's our fault, not his. It's a lot of work to stay informed and keep an eye on your money. It's a lot of work to read about and understand what is happing in the economy. But you are saving your hard earned money for yourself and your own future. Who has more vested interest in your future.. you or the guy you hired?

  • Yahoo! Finance User - Wednesday, March 11, 2009, 7:20PM ET  Report Abuse

    • Overall: 1/5

    Classic sales pitch by Kiyosaki. Buy his book and spend your money and take out all your retirement account and then I'll tell you how to make money.

  • Yahoo! Finance User - Wednesday, March 11, 2009, 5:22PM ET  Report Abuse

    • Overall: 1/5

    What a pinhead article this is. I would suggest everyone file this one away in their own "BAD ADVICE" files. Yahoo -- wake up, and watch who you allow to post articles on your finance pages, most especially under the "expert" category. Disgusted Yahoo faithful member, who thinks people deserve better guidance and advice during these difficult and trying times (and advice, which is based on handling emotions, reviewing their own risk and diversification strategies, finding opportunities (in all categories) and making adjustments to the weaknesses, reviewing income needs and expenses, and remembering and refreshing thoughts on short/mid/long term goals and objectives) !!

  • Yahoo! Finance User - Sunday, March 1, 2009, 4:36PM ET  Report Abuse

    • Overall: 2/5

    I hear a lot of the same thing from Robert Kiyosaki, that there are ways to make money even in poor economic times, but I hear few details about how this can be done. He strings us along for a long time and then gives us one or two clues. It's not going to be worth my time pretty soon.

  • Sean Bettlach - Thursday, February 19, 2009, 2:33AM ET  Report Abuse

    • Overall: 5/5

    I agree, the brain is your best asset if you use it and train it. I recommend that you keep training your mind. Most people giving finance advice are people like you and me just trying to do a JOB. There going to give you advice that benefits them and creates more job security (managing your account) for them. your best bet is to learn for your self. Find your self a great teacher, and just not one but many. choose teachers that don't have allot to benefit from you. Be careful of scams. i wrote a blog on scams and how to recognize them. you can find it with this link. http://www.xanga.com/springfields_master/ It's good to explore different ideas and advice because every person is different. what is good for me may not be good for you. What is good for me isn't good for Trump. Every thing differs from person to person so read around and take control and take action based on what you want and what you need.

  • Yahoo! Finance User - Wednesday, February 18, 2009, 6:22PM ET  Report Abuse

    • Overall: 1/5

    YAWN multiple times - - RK, if you make money on something other than books, show us a tax return with the SS blotted out, seriously - - YAWN have the bbaallllss to say BUY gold or silver NOW?! recommend something at the exchange level so we can get in and out in a click - - YAWN - - snort - - now I am angry - - what serious metal speculator would buy silver WHEN PALLADIUM JUST BIT THE DUST (one-tenth of where it was six months ago) - - RK, if you really bought gold at $300, you should have sold at least half when it was floating over $800 at a reference level to the 80's spike you mention - - AND if you are stupid enough to be holding it ALL now, exchanging it for PALLADIUM OR PLATINUM ASAP since both are more precious. What are you telling me new? Coins are baloney, any jeweler will tell you that. YAWN - - why not advise the baseline real estate speculators to speculate on real estate in an exchange if they have to speculate on real estate at all instead of being dependent upon your pablum OH NO I JUST GAVE YOU YOUR NEXT BIG BOOK IDEA - - YAWN you are not recommending anything? I just read your other Yahoo articles, silly man. Or should I say my lightly-whipped chiffon-o-content bookpusher - - YAWN - - you state your advice does not apply to four out of five people, interesting - - YAWN - - get creative, think deeper, and put some content into your blog that is worth reading - - OH NO, WHY DID I WASTE MY TIME ONCE AGAIN THINKING RK HAD SOMETHING SPECIAL TO SAY? adios for now the dorkassslammer

  • fabian - Wednesday, February 18, 2009, 5:18AM ET  Report Abuse

    • Overall: 5/5

    ROBERT U'RE INDEED A GENIUS.I RESPECT UR ANALYSIS.

  • Yahoo! Finance User - Monday, February 16, 2009, 11:42PM ET  Report Abuse

    • Overall: 5/5

    Great article RK. Cash is king, at least until hyperinflation raises it's ugly head. For now, building liquidity is the key. The best method for building liquidity is opening a Mortgage Savings Account. MSA's have been effectively utilized in Australia and Europe for decades to save hundreds of thousands in mortgage interest while building liquidity. If you are unaware of this financial tool like most Americans, google "Mortgage Savings Account". www.maxhouse.com is a good place to find basic information.

  • Yahoo! Finance User - Monday, February 16, 2009, 2:29AM ET  Report Abuse

    • Overall: 5/5

    hyperinflation ha? my opinion of solution is that the goverment should increase the amount of trades between countries so the economy can grows balanced throughout the world. if each country protects their own economic interest, the crisis won't be over. and i think the hyperinflation period is going to come. if the fed really prints monopoly money , and i hope they don't! coz the economy of the world ruled by us dollar!

  • Yahoo! Finance User - Sunday, February 15, 2009, 12:59PM ET  Report Abuse

    • Overall: 4/5

    I have been listening to Robert since I was 21 yrs old and I am now living my dream. I am 30yrs old and have 4 investment properties and hold a mortgage note. The market on Wall Street is run by crooks and sharks just looking for commissions. They always ruin this country. At least we real estate investors provide people a roof and warm place to live.

  • Yahoo! Finance User - Friday, February 13, 2009, 9:29PM ET  Report Abuse

    • Overall: 1/5

    This guy is a master BS artist (and a net negative on our national intellect).

  • Yahoo! Finance User - Thursday, February 12, 2009, 9:07PM ET  Report Abuse

    • Overall: 5/5

    Those who wants a handout should go standing at the corner of a busy street with a cup in their hands and beg for money. If one don't understand the concepts and ideas behind Robert's intelligent message, one should just remember that long time ago, there was a person named Jesus who was telling the truth but none would listen, what did they do instead? Anyone? They made a movie about him not long ago. Robert is not saint, yet. He is a human being who really wants to help others by sharing what he learned. If anyone out there that doesn't want to learn, go away. Stopping acting like jerks and blasting him because you got nothing better to offer to this world except to call others names.

  • john - Thursday, February 12, 2009, 10:34AM ET  Report Abuse

    • Overall: 5/5

    Robert is on to the investment cycles between equities and commodities. I believe he is right.

  • Yahoo! Finance User - Thursday, February 12, 2009, 12:25AM ET  Report Abuse

    • Overall: 1/5

    Robert filed bankruptcy twice in his life doing what he is telling you to do here. He is only successful now because he's great at selling people what they want to hear, that they aren't rats and can own boardwalk and parkplace by being an entrepreneur and investing in real estate. Talk about hearing more of the same ol' stuff. And he says asset allocation and diversification are boring. He simply doesn't understand the massive body of academic research behind it. I discovered he is really pretty ignorant after reading his books. He just know hows to package his concepts well. But his books are incredibly opaque on the details and do absolutely nothing to walk you through a successful process of making money. Please Robert, if you want others to stop taking bad advice, then do us a favor and stop rambling.

  • MikeW - Wednesday, February 11, 2009, 11:36PM ET  Report Abuse

    • Overall: 5/5

    No "get rich quick or "guaranteed return". Nor are there million dollar bonuses for screwing up your job! If Roberts (or MY) investemts don''t pay money then we don't eat. Simple and brutal. That is the real world. Please name just ONE person who has got rich by "stock trading"- TD Ameritrade can't actually name even one!

  • Yahoo! Finance User - Wednesday, February 11, 2009, 9:42PM ET  Report Abuse

    • Overall: 1/5

    THIS GUY IS A REAL A**HOLE.

  • Yahoo! Finance User - Wednesday, February 11, 2009, 9:36PM ET  Report Abuse

    • Overall: 5/5

    Robert, I am so glad I discovered your books! I agree with your way of thinking about money and investing. You have opened my eyes and have shown me how, "go to school, get a good job, and save money" are not the smart ways to do things. I am an entreprenuer and soon to be investor! Thanks for giving me a completely different reality!

  • Larry - Wednesday, February 11, 2009, 2:57PM ET  Report Abuse

    • Overall: 1/5

    What a joke. This guy should be digging ditches.

  • Yahoo! Finance User - Wednesday, February 11, 2009, 11:44AM ET  Report Abuse

    • Overall: 1/5

    This guy is a total fraud. Still recommending silver and oil, or are we back to real estate now?

  • Joe - Tuesday, February 10, 2009, 8:29PM ET  Report Abuse

    • Overall: 5/5

    Robert, you are right. Personal responsibility for our investments and many other things in life has gone out of favor. It needs to come back. One place to begin is realistic budget planning which seems to have gone out of style too. I suspect it will make a raging comeback the worse the economy gets. http://www.checkthebudget.com

  • Francisco - Tuesday, February 10, 2009, 6:47PM ET  Report Abuse

    • Overall: 5/5

    While I don't fall into the category of a professional investor, I can agree that the advice given by most financial advisors can only improve their financial positions, not those of their clients. They all need a refresher course for Finance 101 and their clients need to look over their shoulders to see how they fare on the exams.

  • Yahoo! Finance User - Tuesday, February 10, 2009, 5:02PM ET  Report Abuse

    • Overall: 1/5

    Jeez, what a blockhead.

  • Yahoo! Finance User - Monday, February 9, 2009, 11:43PM ET  Report Abuse

    • Overall: 5/5

    Whenever Robert posts something, I always read. At least, I am able to stand out and think a while. I do wish Robert can give some directions or action items - hard not be the same as other advisers, and meaningful. At least he can give some examples.

  • Belt of Truth - Saturday, February 7, 2009, 1:58PM ET  Report Abuse

    • Overall: 4/5

    Once again those who cannot see outside of the box end up bashing RK. We'll see in two years if those of us holding silver are smiling or not. :)

Showing comments 6-35 of 534<< PreviousNext >>
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