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Robert Kiyosaki Why the Rich Get Richer

Robert Kiyosaki, Why the Rich Get Richer

Fear Can Cost You Money

by Robert Kiyosaki

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Posted on Monday, January 8, 2007, 12:00AM

Wall Street recently paid out billions in bonuses to its employees. Those bonuses came from investors who believe investing is risky. In other words, there's a giant industry built around investor fears. The more fear, the bigger the bonuses.

A recent Time magazine article called "How Americans Are Living Dangerously" makes a number of good points on this reality. I'll look at a few of them.

Illusory Control

We misjudge risk if we feel we have some control over it, even if it's an illusory sense of control. The article uses the example of people who drive rather than fly.

Even though the risks of death are higher driving than flying, many people would rather drive simply because they feel they have more control driving. The facts are that only a few hundred people die a year flying and 44,000 are killed a year driving. After Sept. 11, 2001, many people took to the roads rather than the skies. Not surprisingly, between October and December 2001, there were a 1,000 more deaths.

Today, many people feel they have more control if they have money in savings. Thus the saying, "Safe as money in the bank." But the fact is that savers are the biggest losers of all.

Between 1996 and 2006, the purchasing power of the dollar dropped by 50 percent compared to gold. In 1996, gold was approximately $275 an ounce; by 2006 it was over $600 an ounce. In 1996, oil was approximately $10 a barrel ; in 2006 it was over $60 dollars a barrel. Compare the price of real estate in your area between the same 10 years and you'll notice that the purchasing power of your dollar has slipped.

The point is, in spite of the facts, many people feel safer with money in the bank because they feel they have more control over it. They don't have control over the price of gold, oil, or real estate, so they think investing in these assets is risky.

The Biggest Risks of All

The second point the Time article makes is that when we're afraid, we tend to ignore the statistics and listen to our emotions. As I mentioned above, you're over 500 times more likely to die in a car than in an airplane. Yet cars are not the biggest of all killers.

Of the 2.5 million deaths annually in the United States, the No. 1 killer is heart disease. In 2003, there were 685,089 deaths due to heart attack. Auto accidents caused 44,000 deaths. Only 17,732 deaths by murder and 1 death by shark attack occurred in the same year.

Despite these statistics, more people are afraid of sharks and murderers than driving up to a fast food restaurant and saying, "Super-size it." French fries kill more people than guns and sharks, yet nobody's afraid of french fries.

The same is true in the investment world. Since many people believe investing is risky, they go for the second-riskiest investment, mutual funds. As my rich dad used to say, "Mutual funds are like french fries. They may fill you up, but they aren't good for you in the long run."

John C. Bogle, founder of the Vanguard Funds, states in his book The Battle for the Soul of Capitalism, "When we have strong managers, weak directors, and passive owners, it's only a matter of time until the looting begins." Bogle has spoken out this way because the mutual funds industry is legally looting money from investors.

To put it another way, since most people think investing is risky and full of sharks, they've turned their money over to some of the biggest sharks in the world -- the managers of mutual funds.

True Expertise Counts

One of the reasons people think investing is risky is because there's an entire industry that wants you to believe so. Trading on your fears is very profitable.

This leads to point number three in the Time piece. The magazine quotes the findings of a study in which a panel of 20 communications and finance experts were asked about the risk of human-to-human transmission of avian (bird) flu. These experts said the risk was 60 percent. When the same question was asked of medical experts, their answer was 10 percent.

The point is that you need to be critical of experts. Is the person you seek advice from able to give you a credible answer?

Qualified and Unqualified Advice

There are three experts who are often not qualified to give you sound investment advice. They are:

  • Non-investors

    I'm always surprised by the number of people who take investment advice from non-investors -- people such as friends, family, and co-workers. A few years ago, I found a spectacular little condominium for sale for $50,000 in Phoenix, Ariz. All I had to do was put down $6,000 and assume the loan.

    At the time, it was worth about $95,000. Today the units in the same complex sell for $195,000. Best of all, the monthly rent at the time was approximately $1,000 a month and today rents are around $1,500.

    A friend from Portland, Ore., asked if I would let her purchase it. My wife, Kim, and I agreed, thinking at the time that this unit would be a great start for our friend. A few months went by and we asked her how the purchase was coming along. She said, "Oh, I forgot to tell you. I didn't buy the unit." When we asked her why, she said, "My neighbor Marge said it was too risky."

    "How many investment properties does Marge own?"

    "None."

    Clearly, taking advice from someone who doesn't know what they're talking about is the real risk.

  • Perceived experts, such as financial planners or stock or real estate brokers

    Most people take financial advice from salespeople, not rich people. Most stockbrokers are not rich nor do they invest in what they sell. The numbers are even worse for real estate brokers.

  • Investors themselves

    I've shown several great investments to an investor friend of mine. To this date, he hasn't purchased anything I've recommended. That's because he can always find something wrong with the investment. Instead of looking at what's good about them, he looks for what's wrong and then talks himself out of taking action.

    This is one reason why I invest as part of a team, so that I can consult with other investors rather than talk myself out of great deals.

The Time article made it clear that fear is normal. We all experience fear; I admit that I've let it hold me back. I probably would've been a lot richer a lot sooner if I flew more and drove less.

The important thing to remember is to pay attention to what we worry about -- and what we should be worrying about.

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  • Yahoo! Finance User - Wednesday, February 28, 2007, 9:09AM ET  Report Abuse

    • Overall: 1/5

    RK's key to success - State the obvious, rehash, rehash, rehash. Nice job.

  • Yahoo! Finance User - Tuesday, February 27, 2007, 1:43AM ET  Report Abuse

    • Overall: 5/5

    Being familiar with Kiyosaki's message, I would have to agree with this article. Most if not all of society struggles to earn a decent dollar and taking risk with that hard earned dollar is difficult enough for any individual. We are all accustomed to keeping and saving money since we know that money does not grow on trees, that is why we fear taking Investment risk. (The key to overcoming your Fear is Facing it).

  • Yahoo! Finance User - Monday, February 26, 2007, 1:34PM ET  Report Abuse

    • Overall: 5/5

    Being in what is considered one of the riskiest investment sectors, I will use Robert's article to try to overcome that stigma. Or at least get investment in spite of the risk.

  • Yahoo! Finance User - Thursday, February 22, 2007, 9:47PM ET  Report Abuse

    • Overall: 5/5

    Great article!! Anyone who wants to find the Perfect Business, go to www.secret4you.com and contact me for a free copy of Mr Kiyosaki's CD. What Mr Kiyosaki has done for my financial situation is amazing.

  • WernerL - Thursday, February 22, 2007, 11:52AM ET  Report Abuse

    • Overall: 4/5

    Several cogent points made in plain english that we all can grasp. Like he says, some people "can always find something wrong...instead of looking at what's good", so I thank some of the commentors for proving that point. Unless I'm mistaken, he seems to contradict himself. He lists "investors themselves" as one of 3 "often unqualified" advisors, yet he is surprised to note that his friend didn't take his advice??? Wasn't his friend being (albeit overly) prudent? I like his style. WL, CA

  • Yahoo! Finance User - Wednesday, February 21, 2007, 4:33PM ET  Report Abuse

    • Overall: 5/5

    Great article from a well respected best selling author. For a FREE cd from him about The Perfect Business, Go to www.theincrediblestory.com & contact me.

  • MJ - Wednesday, February 21, 2007, 1:31PM ET  Report Abuse

    • Overall: 1/5

    I meant to rate this article as excellent but my mouse slipped and Yahoo won't let me change my answer. So it's possible your ratings aren't as accurate as you'd like them to be. I think this article is informative, easy to understand, and I'd like more of them.

  • Yahoo! Finance User - Wednesday, February 21, 2007, 11:39AM ET  Report Abuse

    • Overall: 5/5

    Robert Kiyosaki knows what he is talking about! After reading "Rich Dad, Poor Dad" and "The Four Quadrants", among others of his books, I believe any of his litterature would be worth my time!

  • Yahoo! Finance User - Wednesday, February 21, 2007, 11:34AM ET  Report Abuse

    • Overall: 5/5

    The article was right on target. The basic conclusion is know the source of your advice. I made the same mistake after inheriting a ton of money. I listened to my broker who said playing the stock market is like taking a cold shower - you have to get in and out. Wrong! If I had held onto all the stock that my Dad bequeathed me I'd have been a millionaire many times over. Instead I had listened to a stockbroker whose employment before that was a bank teller. He became successful because of commissions while I was losing my shirt getting in and out of second and third tier stocks. Again, thanks for a great article!

  • Yahoo! Finance User - Wednesday, February 21, 2007, 11:08AM ET  Report Abuse

    • Overall: 1/5

    The article doesn't provide many solutions. King Of The Obvious notes that people are afraid of losing money in the stock market, yet doesn't give any real alternatives besides someone who invested in a good real estate deal. The article states "I've shown several great investments to an investor friend of mine. To this day he hasn't purchased anything I've recommended." Does Mr. Kiyosaki care to supply people with the other half of the discussion by telling people what he was going to recommend?

  • Yahoo! Finance User - Wednesday, February 21, 2007, 10:53AM ET  Report Abuse

    • Overall: 5/5

    This is the Mr. Kiosaki's best article.

  • Staci - Wednesday, February 21, 2007, 10:29AM ET  Report Abuse

    • Overall: 4/5

    Robert K has spent a life time gleaning the knowledge & judgement that he shares with the world. He has keen insight & explains in understandable terms so that all can benefit. He motivates others to think, learn & act, thereby not accepting face value or blindly following either the negative less informed or the dishonest. I have changed my perspective & greatly improved my life by employing his approach. I'm always amused by those who are too shallow, lazy or unmotivated to research or accomplish on their own, yet are quick to spew negative comments about the work of another. How much more powerful they could be by applying that wasted energy & effort acquiring knowledge about the subject under discussion!

  • Yahoo! Finance User - Wednesday, February 21, 2007, 10:24AM ET  Report Abuse

    • Overall: 4/5

    i agree with kiyosaki and gorgyj9, but as good as real estate might be as a store of wealth, it does NOT always go up. the key is to find a piece of property that is currently undervalued or offering a return better than leaving it in the bank regardless of the price of it. here in nyc, coop apartments lost half their value between 1960 and 1970. there was a similar downturn between 1988 and 1994. and now the time is ripe again for another downturn after this huge runup since 2000. you have to study the trends in the market and know when to buy, sell, or hold.

  • Janine - Wednesday, February 21, 2007, 9:53AM ET  Report Abuse

    • Overall: 3/5

    Good article. I've tried to give advice to friends and relatives and they're just not prepared to move forward. The fear of loss is greater than their lust for gain. To those of you who think that people are lucky when their property goes up in value have no knowledge if history. Property always goes up, and even if it doesn't go up like a rocket, someone else is paying the bills!

  • Elise - Wednesday, February 21, 2007, 8:52AM ET  Report Abuse

    • Overall: 4/5

    Mr K's "Rich Dad Poor Dad" is also an incredible read. He also teaches about MLM's. For the past year I have followed his advice & done VERY well with MonaVie. www.mymonavie.com/efriese Very small investment of $39 & some product & you are in a ground floor business from home. Great for mom's like me!!!

  • david t - Wednesday, February 21, 2007, 8:46AM ET  Report Abuse

    • Overall: 5/5

    Robert is King!!

  • David J - Wednesday, February 21, 2007, 8:13AM ET  Report Abuse

    • Overall: 2/5

    Reading Mr. K's books I noticed a common theme, all his examples show people that got lucky when their property shot up in value. They had no idea that would happen. The lesson is not to get lucky in real estate but rather one must get in the game. You cannot get create opportunity sitting on the sidelines.

  • Alexander A - Wednesday, February 21, 2007, 7:57AM ET  Report Abuse

    • Overall: 1/5

    All he did was take an article from Time Magazine and put some of the topics and ideas into his own words with his own experiences. These are not original ideas. I also disagree with the mutual funds topic, because there are many not so wealthy people who have to start from somewhere to save enough to get into the bigger investments. I think this article was just a bunch of fluff put on yahoo as filler material to fulfill a quota of how many articles Mr. Kiyosake needs to write to continue with his contract with yahoo on financial matters. In other words he reatated some ideas from someone else because his contract said he needed to write something for today.

  • Holy - Wednesday, February 21, 2007, 4:54AM ET  Report Abuse

    • Overall: 5/5

    I most hartedly believe in this man. A rich person can tell you how to be rich but a poor person can only tell you how to be poor, other wise they wouldnt be in the situation they are in. Mr.Kiyosaki knows about being rich and what it takes thank you. LCPL. Toledo

  • Yahoo! Finance User - Wednesday, February 21, 2007, 4:27AM ET  Report Abuse

    • Overall: 5/5

    I love it, here is a guy who made MILLIONS giving advice free, trying to educate as many people as he can financially and people bash him for doing so. Personally, I would follow him everywhere seeking advice from one of the best in the business. Everyone has their opinion and please keep them.. Thats more $ for those listening. Keep up the good work Mr. K. There are many of us listening. Your books and games are awesome. My kids understand financial statements and they are not ten yet. Once again.. Thank you for your comments.

  • Kathy - Wednesday, February 21, 2007, 4:10AM ET  Report Abuse

    • Overall: 5/5

    I'm definately one of those "safety net" people- so this was a good spankin' for me! Your statement at the end says it all- when you really look at it, the risks we assume to be dead ends- usually are the ones that open up a pathway for a whole lot more. Thanks

  • Harish - Wednesday, February 21, 2007, 2:59AM ET  Report Abuse

    • Overall: 5/5

    Robert Kiyosaki is one of the best financial writer in this world. I make sure i read all the articles that are written by him on yahoo Finance. He puts it in simple words so the whole world can understand. Robert Keep up the good work ........

  • Victor - Wednesday, February 21, 2007, 2:44AM ET  Report Abuse

    • Overall: 2/5

    Fabricated anticdotes and talk of flying vs. driving. The best way to make money is to write books and go on speaking tours. People who are unsophisticated enough to follow the advice of "gurus" should just keep their money in mutual funds and gov't bonds..LONG TERM.

  • __A_YAHOO_USER__ - Wednesday, February 21, 2007, 2:12AM ET  Report Abuse

    • Overall: 5/5

    Excellent article, the truth is painful sometimes and hard to accept, problem is that many times is very difficult to befriend a rich person since they just hang out with rich people.

  • william - Wednesday, February 21, 2007, 1:27AM ET  Report Abuse

    • Overall: 1/5

    It's not when you get in to the market,it's how long you stay in the market,stocks,real estate,etc.

  • Rich H - Tuesday, February 20, 2007, 11:46PM ET  Report Abuse

    • Overall: 3/5

    Much of this article is lifted from his flagship book rich dad poor dad. I just got done reading it last week. It has already helped me to make money. I read about his $195 board game "Cashflow" in the book and found it for a $1 at a flea market. It still sells for around $130 - $160 on ebay. If I hadn't been reading his book I would have just passed it by. I'll be listing it soon. Thank you, Mr Kiyosaki.

  • Bobby - Tuesday, February 20, 2007, 11:40PM ET  Report Abuse

    • Overall: 5/5

    I agree with mr. kiyosaki 100%! fear is the reason why people cant seem to get ahead. They feel comfortable living thier lives and assuming their investments in mutual funds. Then I also see people saying investments in mutual funds are the way to go. Well I have this question to those few individuals. Are you benefiting from your investment right away? Yes some investments take some time to see results, but how can some live a mediocre lifestyle and worry about saving at the same time? I would like to see more people living with out the fear that Robert was talking about and living a little bit more uncomfortably. When I say uncomfortably I refer to living less complacent. Thats what really shows results, But who am I to say. Ive come from a poor family, Im 20 years old, and already im worth $600,000. Maybe if some thought about that they would try thinking outside of the box...

  • Yahoo! Finance User - Tuesday, February 20, 2007, 11:26PM ET  Report Abuse

    • Overall: 4/5

    He is right on the fear part, though I don't think you necessarily have to follow the advice of rich people, nor ignore advise on family/friends because they happen not to yet have been. If certain people had followed my advice for real estate, when I was merely in high school and had none, they would've profited greatly. But they choose not to out of "fear", and they lost out. My advice had proven to be right though, and I wasn't even old enough to hold a job, let alone financial advisor.

  • L E - Tuesday, February 20, 2007, 11:24PM ET  Report Abuse

    • Overall: 2/5

    It is a well known fact that persons that present themselves as experts in a field and "invite" you to share in their knowledge and wealth, (through books/videos/seminars) are nothing more than the snake oil salesmen of yesteryear.

  • Yahoo! Finance User - Tuesday, February 20, 2007, 11:04PM ET  Report Abuse

    • Overall: 1/5

    This guy is a one trick pony and he rides it for as long as he can until he finds a new scam. First it was the fake rich dad, poor dad scheme and now he is riding the anti mutual fund kick. This is the last guy to be taking advice from.

Showing comments 6-35 of 110<< PreviousNext >>
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