Rich Dad’s Guide to Investing

by Robert Kiyosaki

To be successful in investing, you need
1. Education
2. Experience
3. Excess cash

Instead of trying to predict what will happen in the market, be prepared for three things :
Changes in the laws
Changes in the market’s momentum (sentiment)
Changes in the fundamentals of the business or real estate in which you are investing.

Investing itself is not necessarily risky, not being in control is risky.

The Ten Investor’ Controls
The control over yourself
The control over income/expense and asset/liability ratios
The control over the management of the investment
The control over taxes
The control over when you buy and when you sell
The control over brokerage transactions
The control over the E-T-C (entity, timing, characteristics)
The control over the terms and conditions of the agreements
The control over access to information
The control over giving it back, philanthropy, redistribution of wealth.

Investing is a plan, often a dull, boring and almost mechanical process of getting rich.

Why it is so hard for most people to follow a simple plan?

Because following a simple plan to become rich is boring.

Find a formula that will make you rich and follow it.

The path to achieving investment success is to study long-term results and find a strategy or a group of strategies that make sense. Then stay on the path.

History does repeat itself. Yet people want to believe that this time things will be different.

The main reasons for investing:

To be secure
To be comfortable
To be rich

Poor people measure in money and rich people measure in time.

The moment you begin to think of time as precious and that is has a price, the richer you will become. Because time is more important than money.

The basic of investing is to always know what kind of income you are working for

1. Earned Income
   Portfolio Income
   Passive Income
   
2. To convert earned income into portfolio income or passive income as efficiently as possible.
3. To keep your earned income secure by purchasing a security you hope converts your earned income into passive income or portfolio income.
4. The investor is the asset or liability?
5. Prepared for whatever happens. Most investments that will make you rich are available for only a narrow window of time. But regardless of long the window of opportunity is open, if you are not prepared with education, experience or extra cash, the opportunity if it is good, will pass.
6. If you are prepared, which means you have education and experience, and you find a good deal, the money will find you or you will find the money.
7. It is the ability to evaluate risk and reward.
   

You invest for one reason : to acquire an asset that converts earned income into passive income or portfolio income. That conversion of one form of income into another form of income is the primary objective of a true investor.

You can become rich by being financially smart.

You can become rich by being generous. The more people I serve, the richer I become.

It Starts with a Plan
To be a rich investor you much have a plan be focused and play to win.

To be very rich, you must have 5 D’s ;
Dream
Dedication
Drive
Data
Dollars

The accredited investor earns a lot of money and/or has a high net worth
The qualified investor knows fundamental and technical investing
The sophisticated investor understands investing and the law
The inside investor creates the investment
The ultimate investor becomes the selling shareholder


Market Up down

Losing investor loses loses

Average investor wins loses

Qualified investor wins wins


Rule number one in becoming an entrepreneur is to never take a job for money. Take a job only for the long-term skills you will learn.

If you cannot sell, you cannot be an entrepreneur.

Personal traits of a successful entrepreneur
Vision
Courage
Creativity
The ability to withstand criticism
The ability to delay gratification

Financial Ratios of a Company
1. Gross Margin Percentage=(Sales-Cost of Goods Sold)/Sales
2. Net Operating Margin Percentage=EBIT/Sales
3. Operating Leverage=Contributions (Gross Margin-Variable Costs)/Fixed Costs
4. Financial Leverage=Total Capital Employed (Debt & Equity)/Shareholders’ Equity
5. Debt to Equity Ratio=Total Liabilities/Total Equity
6. Quick Ratio=Liquid Assets/Current Liabilities
7. Current Ratio=Current Assets/Current Liabilities
8. Return to Equity=Net Income/Average Shareholders’ Equity