Ask a Salesperson

Rich Dad's Who Took My Money? : Why Slow Investors Lose and Fast Money Wins!
by Robert T. Kiyosaki, Sharon L. Lechter C.P.A.

For the first time ever, the #1 New York Times bestselling authors reveal how to actually speed up and maximize the return on investments to achieve total financial independence.

Most people think that simply getting a modest return on one's investmentsis going to take care of them forever, right through their golden years of retirement. But for lots of investors, waiting - and hoping - for a 10% return on their stocks, bonds, and mutual funds is turning out to be a long and perilous wait. In this startling new book, Robert Kiyosaki shows how one can velocitize their money in such a way that they can quickly achieve financial wealth with extraordinary returns and amazing growth. Sound too good to be true? It's not - and Kiyosaki and Lechter show how anyone can make the move right now.

Chapter 1

"One of the first things you need to learn if you want to be a better investor is the difference between a sales pitch and sound investment advice."

- RICH DAD

"I have $10,000. What should I invest it in?" As mentioned in the introduction, for a number of years I really did not know how to answer this simple question. My early replies to this question were awkward, wordy, and rambling. The reason for my inability to answer such a simple question is simply because the appropriate answer is not that simple. We are all different. We come from different life paths, dreaming different dreams; emotionally we are wired differently, we have different financial backgrounds and different tolerances to financial risk. In other words, what I would do with $10,000 may not be what you should do with $10,000. In fact, what I did with $10,000 ten years ago is not what I would do with $10,000 today. As Einstein said, "It's all relative."

Finally, after being asked the same question enough times, I came up with an answer I believe is appropriate. Today, when asked the question, I reply, "If you do not know what to do with your money, put it in a bank, and do not tell anyone that you have money to invest." The reason I say this is because if you do not know what to do with your money, there are literally millions of people who do. When it comes to money, everyone has an opinion and advice on what to do with your money.

The Problem with Advice

The problem is that all advice is not good advice. Between March 2000 and March of 2003, millions of people lost $7 to $9 trillion in one of the biggest stock market crashes in history, many because they listened to the advice from so-called financial experts. The irony is, most of these financial experts are still handing out advice today and people are still listening to them. During one of the worst stock market crashes in the history of the world, financial experts were advising people to keep their money in the market. Rather than sell, the experts told them to keep buying... and many people did keep buying, all the way down to the bottom.

There is an old saying that goes, "When taxi drivers are handing out stock tips, it's time to sell." Maybe that statement should be expanded to include financial advisors.

Voices of Sanity

During the insanity of the boom between 1995 and early 2000, two voices of sanity were Federal Reserve chairman Alan Greenspan and Warren Buffett, reportedly the world's greatest investor. Mr. Greenspan warned of irrational exuberance and Mr. Buffett simply stayed out of the stock market. During the boom and the bust, Warren Buffett's name was often used in reference to smart investing. Financial advisors used his name as the authority figure as to why a person should get into the market. Financial advisors were saying, "Warren Buffett this and Warren Buffett that." When Warren Buffett's name was mentioned, people seemed to put more money into the market. What the advisors failed to tell their faithful investors was that Warren Buffett was not in the stock market.

In an interview in the November 11, 2002, edition of Fortune magazine, entitled "The Oracle of Everything," Mr. Buffett says, "I bought my first stock 60 years ago. Of those 60 years, 50 have been attractive to buy common stocks. In probably 10 years, I've not been able to find anything." One of the reasons he stopped buying stocks is simple. For those ten years, the period between 1992 and 2002, stocks were too expensive. I find it interesting that the world's greatest investor could not find anything to invest in, yet millions of first-time investors and their advisors did.

Criticizing the World's Greatest Investor

The article continues, noting that it was not too long ago, specifically at the height of the boom in early 2000, when many respected financial experts and publications began criticizing Mr. Buffett for not being in the market. One such expert, Harry Newton, publisher of Technology Investor Magazine, wrote, "Warren Buffett should say 'I'm sorry.' How did he miss the silicon, wireless, DSL, cable, and biotech revolutions?" A month later, the technology market collapsed, taking billions of dollars of investor money with it. Who should be saying "I'm sorry" today?

My Record

As a person who is often lumped into the group of so-called financial experts, it is important that you be aware of my record. In 2002, I received a phone call from a stockbroker in Baltimore, Maryland. He said, "I just finished reading your third book, Rich Dad's Guide to Investing. I congratulate you for predicting the crash of 2000. I wish I had told my clients to read that book before the market went down." Now, I do not believe I predicted the crash, I simply warned of it. But if you want to read the book, you can decide on the accuracy of my forecast.

The best testament to my record is not found in my record but in the records found in Rich Dad's Success Stories, the records of my readers. This is a book filled with personal stories of everyday people who did well financially, many between 2000 and 2003, the same period millions were losing trillions. So rather than touting my own financial success, which was pretty good during the market crash, my most important results are measured in the success of my readers. If you would like to check my record, please read Rich Dad's Success Stories.

Answer the Question

Good advice is crucial for financial success. There were many times I wish I did have the time to better answer the question "What should I do with $10,000" rather than just say, "Put it in a bank." After years of not answering the question "I have $10,000. What should I invest it in?" I have decided to answer the question in this book, Who Took My Money? The reason I decided to write this book in answer to the question is simply because the question is a very important one.

The Price of Bad Advice

In June of 2003, I was in a taxi heading for the airport. On the radio was a financial expert offering some investment advice, saying, "Now is the time to get back into the stock market."

"Why do you say that?" asked the radio host. "Because all the lights are green," said the financial advisor. "This market is headed straight up." He then went on to his tirade of jargon and standard stock market talk that many of us have heard over and over again, before the crash, during the crash, and now after the crash.

Gazing out the window of the cab, I just tuned out the financial expert until the host took back control of the show. "Okay, let's open up the phone lines and let's hear from any callers who have questions for you." The first caller to get through said, "I'm seventy-eight years old. My wife is seventy-five. In January of 2000 we thought we had a nice safe retirement portfolio. We had about one million dollars in mutual funds."

"That's great," said the host. "Yes-but that was in January of 2000." "How much do you have now?" asked the financial expert. "Well that's the problem," the caller said. "In March of 2000, when the market began to crash, I called my financial planner for advice." "And what did he say?" asked the radio host.

"He said about the same thing your guest is saying now. He said the market was just about to bounce back up ... it was only a minor correction caused by a little profit taking. He never told us it was a market crash. In fact, he never told us that markets could go down or that mutual funds were not safe. Instead, he advised us to continue to invest for the long term, buy, hold, and diversify." "So what did you do?" asked the host.

"We sat tight. We did as he told us to do. We held on and watched as the market kept falling. As the prices got lower, he even called to tell us to buy more while prices were low." "So did you buy more?"

"We certainly did. But the stock market kept falling and we kept calling him. By August of 2002 he stopped taking our calls. We were later told that he had left the firm and we were turned over to someone else. Anyway, we got sick of opening the envelope from the investment firm. I couldn't stand seeing the money we worked all our lives for disappearing as the market crashed. We aren't working anymore and are wondering what we can do now."

"So how much money do you have left?" the host asked again. "Well, after he stopped taking our calls, we took action and sold our mutual funds. My wife and I thought it was better to keep our money in cash. So after we cashed in our mutual funds, all we had left was about $350,000 and we put it in a CD at the bank."

"That's good," said the host. "At least you have some cash. "Three hundred fifty thousand dollars is nothing to sneeze at, you know."

"Well, the problem is, the certificate of deposit is only paying 1 percent interest per year. One percent of $350,000 is only $3,500 per year. Even with Social Security and Medicare, it's tough to live on that money. I'm afraid we might have to start eating into our savings, and if we do that, we'll be in even worse shape financially. What do you advise?" "Do you have a home?" asked the financial advisor.

"Yes we do," said the caller. "But please don't ask us to sell it. That's all we have left. Besides, it's only worth about $120,000 and we have a mortgage of $80,000 on it. The reason we have a large mortgage is because when interest rates dropped, we refinanced and took out some extra money from the equity in our home."

"And what did you do with money from your home?" asked the radio host. "It's gone. We lived on it. That's why I'm calling for some advice." "Well, what advice would you give to this couple?" the host asked the financial planner.

"Well first of all, you shouldn't have sold your shares," said the financial expert. "As I said the market is coming back." "But it kept going down for years," said the caller. "It's very frightening to lose so much when you're our age."

"Yes, yes, I know," said the expert. "But listen to me now. You should always invest for the long term. Buy and hold on. Keep diversified. Markets do go down but they will come back as they are now."

"So what should he and his wife do now?" asked the radio host. "It's time to get back in. As I said, the market is coming back. Always remember that over the past forty years, the stock market has gone up 9 percent per year, on average."

"You believe now is the time to get back in?" asked the host. "That's right," said the financial expert. "Get back in before you miss the next rally."

"Good advice," said the host to the seventy-eight-year-old man. "Thanks for the call. Next caller, please."

The taxi was now approaching the airport and my blood was boiling. "How can they keep handing out that same old advice ... and get paid for it? How do they sleep at night?" I muttered to myself as I headed for the gate. As I waited in line to board the plane, I read a headline on a discarded newspaper that screamed, "Investors Pouring Money into Real Estate." Quietly, I shook my head and said to myself, "From one boom and bust to the next boom and bust."

Copyright © 2004 by Robert T. Kiyosaki and Sharon L. Lechter

About the Author

Robert Kiyosaki a financier, author and teacher says "that the main reason people struggle financially is because they have spent years in school but learned nothing about money. The result is that people learn to work for money... but never learn to have money work for them."

Co-author of the Rich Dad series of books and CEO of the Rich Dad Organization, Sharon Lechter has dedicated her professional efforts tot he field of education. She graduated with honors from Florida State University with a degree in accounting, then joined the ranks of Coopers & Lybrand, a Big Eight accounting firm. Sharon held various management positions with computer, insurance, and publishing companies while maintaining her professional credentials as a CPA.