Wednesday, December 23, 2009, 3:04PM ET - U.S. Markets close in 56 mins..

Robert Kiyosaki Why the Rich Get Richer

Robert Kiyosaki, Why the Rich Get Richer

Investing in Better Research

by Robert Kiyosaki

Email this Page IM this StoryBookmark this StoryAdd to your Del.icio.us accountDigg this StoryPrint this Story
Good (1088 Ratings)
2.97886/5
Posted on Thursday, January 17, 2008, 12:00AM

A few days ago, a reporter asked me if I was losing money in real estate. My reply was, "No, I'm making money."

Confused, he asked, "How can you be making money during the subprime disaster?" I explained that since the real estate market took a downturn, there were more people renting rather than buying, which is great for my apartment business. I also informed him that I'm raising rents since demand for affordable apartments is so high. When someone moves out, I increase the rent and new tenants line up, which means my cash flow is increasing.

He then asked, "Are you looking for new investments?"

A shocked look came over his face when I said, "I've been investing heavily in the stock market since August 2007. I've moved several million dollars into the market."

"The stock market?" he stammered. "Stocks are crashing. Why are you in the stock market? Besides, I thought you were a real estate investor?"

Ignorance Isn't Bliss

As Warren Buffett has said, it's important for society to have accurate and informed sources of information. While I agree, I sometimes wonder about the intelligence of many financial journalists, both in print and the electronic media.

For example, lately on financial TV stations, the reporters have been talking about the run-up in gold and asking, "Is it time to invest in gold and gold stocks?" What a ridiculous question. Now isn't the time to be investing in gold or gold stocks -- that time was 10 years ago, when gold was below $300 an ounce. Investors should've taken substantial positions when gold was cheap. For reporters to be talking about gold today is no different than them reporting on the hot real estate market in 2005, just before the top blew off.

I had dinner with a friend of a friend the other night and he was telling me about the Rothschild formula for investing. According to him, this involves not participating in the first 20 percent or the last 20 percent of an investment run-up. Instead, it's investing in the middle 60 percent, when risks are low and the direction of the price is determined. As the asset value approaches what appears to be the last 20 percent, you sell and move on to another asset class.

As we all know, most amateurs (and, possibly, many reporters) only participate in the last 20 percent.

Take Notes

I wondered if the reporter who asked why I was investing millions in stocks was an investor himself. I did my best to explain to him that there are two things professionals invest for: 1) Capital gains, and 2) Cash flow.

I said, "The amateurs who come in at the top 20 percent of a market are generally investing only for capital gains. In the last real estate boom, the 'flippers' who got no-document, zero-down loans paid very high prices, and hoped for a greater fool than them to take the property off their hands.

"These are some of the people being faced with forecloses today. They're the investors who make the news -- not the investors who are making money."

The reporter then asked me, "So what do you invest for?"

My reply? "Both. If I can, I want both capital gains and cash flow."

I went on to explain that I was investing millions in stocks that were paying a high dividend -- cash flow -- and also had their prices battered down by the market crash, a loss of capital gains.

Spelling It Out

He wasn't the brightest reporter, since he had trouble with the idea of investing for both cash flow and capital gains. After about an hour of explanation, he finally began to understand that I'm not just a real estate investor -- I'm someone who invests for capital gains at a great price, or cash flow at a great price, regardless of the asset class. If the deal is right, it doesn't matter if it's in real estate, commodities, a business, or paper assets.

Here's an example of capital gains for a great price: Back in the 1990s, every time I had some extra cash I would buy some gold or silver. Although I didn't receive any cash flow from gold or silver I knew I was purchasing the metals at a great price, and that someday those prices would rise again.

An example of buying for cash flow at a great price is when I buy a stock that pays a dividend. I wait until the stock market dips and then buy, which is what I'm currently doing. One of the better companies I've been buying is a bulk cargo shipping company that's hauling U.S. grains to India. The more the dollar drops in value, the more grains we export. Every time the market drops, I buy more of this stock at a great price, because I love the cash flow from dividends.

Finally, an example of buying both capital gains and cash flow at a great price is when I find an apartment building at a bargain, and then increase the rents. By doing so, I increase the cash flow and the property value, which translates into capital gains.

Leave It to the Pros

When I watch professional football, I love listening to John Madden because I know he knows what he's talking about. He's been both down in the trenches and in front of the bench as a coach. He knows the game. By that token, one financial reporter I respect is Bloomberg's Kathleen Hayes. She's a savvy reporter who knows what she's talking about. I wonder about some of the other financial reporters.

The problem with much of the financial news in print and on the web, radio, and television is that it comes from journalists who may not be investors. When I listen to most journalists whine and cry about the subprime mess, the slowdown in the economy, and the volatile stock market, I can all but tell that they're not really investors. None of these events really has much impact on professional investors, who follow market trends and are familiar with the underlying fundamentals of the assets they investing in.

So the next time you hear a reporter ask, "Is this the time to be getting into stocks, bonds, real estate, gold, silver, or oil?" remember that it's probably the time to be looking elsewhere. And keep in mind the Rothschild formula of investing. You never want to be too early -- and you also never want to be too late.

Email this Page IM this StoryBookmark this StoryAdd to your Del.icio.us accountDigg this StoryPrint this Story

Rate This story

Good (1088 Ratings)
3/5
Sign-in to rate!

446 Comments

Showing comments 6-35 of 446<< PreviousNext >>
Sort: first to last

  • Enti - Saturday, April 12, 2008, 11:23AM ET  Report Abuse

    • Overall: 5/5

    Funniest event and most hilarious joke of 2008.USA is ranked 1 by World Economic Forum. One rep from 131 countries should evaluate the analytic model used by HARVARD and COLUMBIA both are from USA and private sector prone to bias in order to lure investments and trap.Handling 911 aftermath,Katrina,Rita,Real estate mafia handling,failed law and order,meaningless investments and so many adverse effects from rotten USA system.In my opinion USA should stand 31 instead of 1.Preceding digit 3 omitted.Today USA is full of sorrow and future is certainly in the track of ITALY.2011 would be the feeling real punch.Wise investors should pack their bags by then from USA

  • real - Friday, March 21, 2008, 4:26PM ET  Report Abuse

    • Overall: 5/5

    Robert is a man to listen to anytime when it comes to this subject. This, i think is his specialty. I have learnt so much from his exoertise. This story in itself is so insightful and, encouraging and has so much warning in it. Love it.

  • rahul - Saturday, March 15, 2008, 2:23AM ET  Report Abuse

    • Overall: 5/5

    Robert is always good with advice and most definitely clear about his thoughts on investments. Thanks Robert, not only for your articles on Yahoo Finance, but also for the different books you have written. They are truly a pleasure to read. My personal favorites are 'Rich Dad, Poor Dad", "Why we want you to be rich" (with Donald Trump, another great advisor and writer).

  • Joe S - Thursday, March 13, 2008, 11:43AM ET  Report Abuse

    • Overall: 3/5

    Decent article. I only have one criticism. It's easy to say to get in on the middle 60%. The trick is to prognosticate accurately. If a stock has already gone up in price by 20%, is it only 20% of the way through doubling its price? Or has it reached a peak and is about to decline? One thing is clear. When the financial reporters are yelling "BUY" is probably the time to get out.

  • John - Sunday, March 9, 2008, 3:21AM ET  Report Abuse

    • Overall: 5/5

    Keep it up Robert! What impressed me most is the ability of you to gain advantages from economic downturn. Indeed professional investors do have many creative ideas in dealing with such situations and always bring things to their benefit.

  • ScottT - Monday, March 3, 2008, 11:40PM ET  Report Abuse

    • Overall: 3/5

    to joesinfront, ericr: you are the idiots. Why is RK writing advice colums & making $$ in 1000 different ways and you 2 idiots are posting blogs on yahoo. you sound bitter, but I bet you're no more successful financially than I am...at least I am getting wiser & you morons have your minds clamped shut

  • Bogdan - Friday, February 29, 2008, 1:03AM ET  Report Abuse

    • Overall: 5/5

    For all of the critics of Robert little easily verifiable fact - on August 20, 2007 Robert published an article -"A Silver Lining for Nervous Investors" - in which he was suggesting investing in silver. On the following days ETF representing silver - SLV was trading at $115-177 per share. Today, this particular ETF closed at almost $197 (71% profit in 7 months) per share and it looks that it is not about to peak any time soon. I agreed with Robert back then, but I lucked the courage to act, so I didn't invest in any of the precious metals. Again, I would very incline to trust Robert's opinion and listed to him more carefully. I wish (and probably many more like me) that he provided more "real-life" examples of his recommendations, but ...nobody is perfect. :)

  • Yahoo! Finance User - Thursday, February 28, 2008, 9:03PM ET  Report Abuse

    • Overall: 5/5

    As I read the comments I noticed that many of those "financial advisors" had been hit by the truth that Mr. RK is letting every one know. Of course they lose business once a reader gets wiser. RK, thank you for your advices. J. Franco

  • Liddel - Wednesday, February 27, 2008, 1:09PM ET  Report Abuse

    • Overall: 1/5

    Biggest bunch of garbage yet, from the worst advisor here. Listen to Kiyosaki if you want a bunch of hotair, nonsense, and baloney. Listen to someone in the investment business instead of someone who invests what he makes from public speaking, writing fictional books, and articles.

  • Yahoo! Finance User - Wednesday, February 27, 2008, 12:15PM ET  Report Abuse

    • Overall: 5/5

    The EXAMPLE of the Rothchild method of investing is a good one....if it required a crystal ball it would be popular amongst the gypsie population. This article is a small report on the lack of financial education in the world of investing, there is no advice here, Robert has been preaching this stuff since he invested in gold for the first time. Really dont let it bother you, I gave it a five star to bring up the vote that all of you "financial advisors" out there gave him.

  • Yahoo! Finance User - Tuesday, February 26, 2008, 11:02AM ET  Report Abuse

    • Overall: 1/5

    speculator, speculator, speculator.

  • verable - Monday, February 25, 2008, 10:17AM ET  Report Abuse

    • Overall: 1/5

    20% 60% 20% How does he knows ??????

  • ShahabE - Friday, February 22, 2008, 4:06PM ET  Report Abuse

    • Overall: 1/5

    First of all, Rothchilds were and probably are (as we do NOT hear about them at all) were bankers and loaned mostly to countries and not "investors". Second, unless you have a crystal ball or some other ball how the heck do you know you are at the beg/mid/end of market? He has given good advice at times, but stolen from another.

  • Frank - Thursday, February 21, 2008, 12:38PM ET  Report Abuse

    • Overall: 2/5

    Doesn't this guy even realize all of his articles can be read on Yahoo? When the heck did he start recommending to his sheep that they get long stocks. And this bit about buying the middle 60% of a run when the "direction of the price is determined"... what markets is he investing in again. You know, those markets where the direction of the price is determined... what an A$$HAT.

  • Yahoo! Finance User - Monday, February 18, 2008, 9:07PM ET  Report Abuse

    • Overall: 1/5

    First of all, Aug 2007 was when the markets are near their all time highs, so he violated his "buy low" rule. If he's heavily invested in dividend paying stocks: read: Banks, REITS, some Insurers, royalty trusts, Cyclical mature industrials, etc... He would be down huge today. Ignoring systematic risks to chase yield = mega losses. Secondly, he bought metals because they were a great price??? Metals provide NEGATIVE income, due to storage costs. And their "fundamentals" are iffy at best--mostly determined by the amount of fear in the market rather than real demand. This guy is a speculator... Nothing more.

  • Yahoo! Finance User - Sunday, February 17, 2008, 11:23PM ET  Report Abuse

    • Overall: 4/5

    I'm 37 years old and I have been reading RK books for 3 years. During that time, I've followed his advice and it has been of great benefit. Sure, he's a salesman and a self-promoter, but he gives excellent advice on how to conduct your financial affairs, how to get out of the rat race, and how to invest in Real Estate. The people who write negative comments seem to be more interested in shooting holes in RK's theories than they are in becoming financially independent. I plan to retire young and I will give much of the credit to RK and the way that he has taught me think. Everyone can benefit from RK's advice if they actually have the sense to implement his strategies. Just play his "cash flow" game one time and you will understand.

  • r - Sunday, February 17, 2008, 10:36PM ET  Report Abuse

    • Overall: 2/5

    Well, I learned something: The Rothschilds were Trend Traders!!

  • Yahoo! Finance User - Sunday, February 17, 2008, 4:28PM ET  Report Abuse

    • Overall: 1/5

    hmmmm... he tells this guy he was socking money away in stocks back in Aug 2007, but he tells yahoo readers in Aug 2007 that the "dow is a roller coaster" and we should put all of our money in silver... Was he not really buying silver then or was he selling his silver and looking for some suckers to buy it from him so he could buy stocks. I guess the 5 star raters (suckers) on Yahoo bought enough of RKs silver for him to buy stocks. What a moron. If you want some real investing advice - check out www.ifa.com, get an efficient portfolio, and be done with RK and two - bit characters like him.

  • Yahoo! Finance User - Sunday, February 17, 2008, 3:22PM ET  Report Abuse

    • Overall: 5/5

    RK has hit the nail on the head as always. Haters just don't get it, which is fine... less competition! What I find most hilarious, is that they whine about RK making money on his books. Guess what? Royalties are passive income, because he only has to write a book *once* and it will keep on selling even while he eats, sleeps or picks his nose. He can promote it himself to increase sales, but it's optional: the book will keep selling even when he's not activly marketing it. This is the whole idea behind RDPD! To not trade time for money, (a job), but build your assets and make those work for you. Haters trade hours for money: RK spends his time ONCE and the result keeps working for him long after he's finished. If his books remain populair, which I know they will, he will even continue to make money after he has died!!! Let that sink in for a moment, haters. Unlike most of you who still slave away in an office cubicle with nothing to show for it, RK practises what he preaches, just by selling his books alone. Haters foolishlysell hours for money. RK, I and many others spend their hours on creating/aquiring assets like houses (rent), stocks (dividents) and creative work (books) that can make them money again and again and again. You haters just keep selling those trees: I'd rather sell their fruits.

  • Ralphy - Saturday, February 16, 2008, 9:29PM ET  Report Abuse

    • Overall: 1/5

    YOU ARE THE BANE OF MY EXISTANCE, KIYOSAKI!!!!!!!!!!!!!!!!!!! ARRRRRRRRGGGGGGGGGGGGGG!!!!!!!

  • Richman - Saturday, February 16, 2008, 3:03AM ET  Report Abuse

    • Overall: 4/5

    I think the real story is what he isn't saying...that everyone's situation really is different, so your opportunities are different. He gives the kind of advice I wish I knew 20 years ago. While he does not follow Warren Buffett closely, he does tell you what Warren did right, which is picking stocks. Of course, Warren REFUSES to invest in real estate.

  • Billy - Friday, February 15, 2008, 12:07PM ET  Report Abuse

    • Overall: 5/5

    I LOVE ROBERT KIYOSAKI!!!!!

  • Yahoo! Finance User - Thursday, February 14, 2008, 4:41PM ET  Report Abuse

    • Overall: 5/5

    The title of the article is Investing in Better Research. That means do your homework, make your own decisions on what to do given your specific circumstances. RK will not tell you what to do and has not done so in the past. You and only you are responsible for your financial well being. Everything has cause and effects. Educating yourself to spot the causes (trends) and the effects (probable outcomes/directions in the markets or economies) will give you the info to make the proper decisions for you. Take charge of your own life, your own future. Waiting for someone to tell you what to do worked when you were a kid. Be an adult now. If you want someone to tell you what to do, pay for advice. But remember, you are the person ultimately responsible for your decisions.

  • Yahoo! Finance User - Thursday, February 14, 2008, 3:26PM ET  Report Abuse

    • Overall: 1/5

    Please tell us how to use the Rothschild method to investing. Is silver in the first or last 20%? How about stocks? Or real estate? How can you honestly advocate investing in the first 20% and sell during the last 20%? If anyone had that kind of precognition they might as well short tops and go bottom fishing. The only Rothschild method I have ever heard of before this article is to put 1/3 in equity (stocks, bonds, businesses, ect.), 1/3 in real estate, and 1/3 in art. I read that was their method of diversification. The truth is that their wealth and power lied in their banks, not in the ability to forcast market moves. And the truth is that your wealth comes from shilling books and seminars, not investing. How is that silver doing for you?

  • Yahoo! Finance User - Thursday, February 14, 2008, 1:05PM ET  Report Abuse

    • Overall: 1/5

    Good God, what a liar!!! This guy should be arrested for lying so chronically. I will guarantee you that he did NOT "invest heavily in the stock market since Aug 2007" with his "millions." What's he going to say if the market goes to 10,000? That he sold in Dec 2007? Sure buddy, you're busy making tons of money that's why you have the time to write these stupid articles. People who know how to make money from investments don't waste their time with this rinky dink article writing like you or gimmick seminars and cheesy TV shows like trump. Real experts like Soros and Buffett make money. Guys like you and David Bach and others try to make suckers believe you are good investors so they will buy your crappy books. Hey Robert, the gig is up. We all know you are a clown.

  • Ruan - Wednesday, February 13, 2008, 8:00AM ET  Report Abuse

    • Overall: 2/5

    By puting up 2 stars I was hoping nobody take his advice so that I and all the 5 stars people will benefit from him.

  • Flamethrower - Tuesday, February 12, 2008, 2:10PM ET  Report Abuse

    • Overall: 4/5

    Thank Goodness most of you goofballs just follow the financial "experts". You wouldn't know the difference between value, cash and ownership if it whacked you on top of your limited nut. Ok, sorry to have taken you from your financial "shows". Good luck with your "diversity" style of investing. Luck is all you have.

  • swan - Tuesday, February 12, 2008, 4:25AM ET  Report Abuse

    • Overall: 3/5

    There are people who know and those who don't. Readers who don't understand the work it takes to simplify complex information RK has consistently laid out in his books are at a loss. He explains the how and why of his success, even to the extent of his thinking along the way. He must be productive, it is his nature and that work shows through. When I want to know whats happening in the big picture economy, I want to hear from RK & Buffet, not some government prognosticator. Trump is even secondary as a mediocre source. Money is only one indicator, the character is measured by the work put into the communication backed by real life experience. He did not have to be so generous. I actually believe Trump is attempting to follow RK's lead. Truth is always right in front of ones nose it just takes some longer to see it.

  • Yahoo! Finance User - Monday, February 11, 2008, 6:08PM ET  Report Abuse

    • Overall: 1/5

    I bet Bob's nickname in financial circles is the same as Phil Mickelson's is with golf pros = FIGJAM. F_ _ _ I'm Good Just Ask Me.......

  • bill - Monday, February 11, 2008, 5:06PM ET  Report Abuse

    • Overall: 1/5

    Typical snake-oil salesman. He tells us about what he did ten years without any evidence that he actually did such. His articles during the last two quarters were about buying real estate and silver, not stocks. He has no more insight into finance than does my six-month old. I've read his book and really haven't found any real insight or value- just the same non-specific jibberish you find in horoscopes.

Showing comments 6-35 of 446<< PreviousNext >>
The columns, articles, message board posts and any other features provided on Yahoo! Finance are provided for personal finance and investment information and are not to be construed as investment advice. Under no circumstances does the information in this content represent a recommendation to buy, sell or hold any security. The views and opinions expressed in an article or column are the author's own and not necessarily those of Yahoo! and there is no implied endorsement by Yahoo! of any advice or trading strategy.

More from Yahoo! Sources

  • CNN Money
  • Consumer Reports
  • Kiplinger
  • The Motley Fool
  • Business Week
  • Wall Street Journal

Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data and daily updates provided by Morningstar, Inc. Fundamental company data provided by Capital IQ. Quotes and other information supplied by independent providers identified on the Yahoo! Finance partner page. Quotes are updated automatically, but will be turned off after 25 minutes of inactivity. Quotes are delayed at least 15 minutes. Real-Time continuous streaming quotes are available through our premium service. You may turn streaming quotes on or off. All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.

Yahoo! Answers is provided for informational purposes only, and no Q&A is intended for trading or investing purposes. Yahoo! shall not be responsible or liable for the accuracy, usefulness or availability of any Q&A information, and shall not be responsible or liable for any trading or investment decisions based on such information. View Complete Answers Disclaimer.