The Same Old Advice

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.

(Page 2 of 5)

As the plane pulled away from the terminal, I began to recall when I was a first-time investor that knew very little about investing. My mind drifted back to 1965, when at the age of eighteen, I purchased my first shares of mutual funds. I purchased the shares even though I did not really know what a mutual fund was. All I knew was that mutual funds were connected to Wall Street and investing in Wall Street seemed like a cool idea at the time. I was at school in New York, attending the U.S. Merchant Marine Academy, a federal school that trains students to be ship's officers on freighters, tankers, passenger liners, and other ships of commerce. Being a military academy, we were required to wear military uniforms, polish our shoes, and march to class. And being from Hawaii, where all I wore were shorts and T-shirts, I was finding the adjustment to this new life very difficult. It was fall, leaves were turning beautiful colors and falling, and I was getting ready to experience my first winter.

One afternoon, I received a note that a Mr. Carling wanted to see me. I did not know a Mr. Carling, but when you're a plebe, a freshman, you learn to do what you are told and do it promptly, without questioning what you are being asked to do.

"Start investing while you're young," said Mr. Carling's smiling face sitting across the table from me. "And always remember the secret of great investors. The secret is to buy and hold, and invest for the long term. Let your money grow. And always remember to be smart and diversify."

To this advice, I just nodded and said, "Yes, sir." I really did not know what he was talking about, but after four months at the academy, I was well trained in sitting or standing tall and straight and saying "Yes, sir." Mr. Carling was an alumnus of the academy who had stopped sailing ships and had gone into the field of financial planning. He knew what hell we as plebes were going through. He had gone through it himself. Instead of simply saying "Yes, sir" I really should have been questioning how he got on campus, since he was no longer a student or in the merchant marine, and how he got my name. All I knew was that he had contacted me and had set up an appointment to talk to me during study hall and I was saying "Yes, sir" to another authority figure even though he was in a suit and tie, not a military uniform. "How much do I have to invest?" I asked.

"Just $15 a month," the smiling face said. "Fifteen dollars," I said. "Where will I get that kind of money? I'm in school full-time, you know." Remember, this was 1965 and $15 was a lot of money to a college student.

"Be tough," said the smiling Mr. Carling. "The academy will teach you discipline. With that discipline of putting a little bit of money away each month, you'll soon have a sizable nest egg. Remember, always invest for the long term." Even though I agreed with everything he said, I still noted how much he was emphasizing the word always. For some reason, the word and how he said it made me feel just a little uneasy.

Time was precious. I needed to get back to my studies, so I simply agreed to everything he said. After selecting the mutual fund company he recommended I invest in, I signed an agreement to send a check in once a month to purchase more shares. Once the paperwork was completed, I hurried back to my studies and pretty much forgot about the investment plan. Once a month, starting in November of that year, I began to send in my check.

Christmas Vacation

The first six months at the academy were difficult. They were some of the toughest days of my life. I was adjusting to being away from home for the first time, and in New York for the first time ... my head was shaved and the course load was heavy. On top of that, as plebes we were not allowed off the academy grounds, except for Thanksgiving and now Christmas. As the cold winds of winter whipped across Long Island Sound, I counted the days remaining to Christmas break. I had just enough money left in my savings account to afford the price of a military personnel discount ticket home.

Finally I was back in the warm weather of Hawaii. The first thing I did was join my former high school classmates and go surfing from early in the morning to late into the night. Although my friends were laughing at me for my lack of hair, it was still nice to have this break and to be a kid again. Although I was badly sunburned, my tan was coming back.

A few days into my vacation, I stopped by my rich dad's office with his son, Mike. Mike and I had been surfing and he said his dad wanted to see me. After the usual pleasantries and catching up, I happened to mention to my rich dad that I had made my first investment ... an investment in a mutual fund. I only mentioned the investment in passing. For me, discussing my mutual fund investment was just idle conversation. But for my rich dad, what I had done required far more than just idle conversation.

"You did what?" he asked. "I invested in a mutual fund," I replied. "Why?" he asked. He did not ask me which fund I had invested in. He only wanted to know why.

Rather than answer, I just stumbled and fumbled with words and thoughts, searching for a logical-sounding answer. "And who did you purchase the shares from?" asked rich dad before I could reply. "Do you know him?"

"Well, yes," I responded assertively and a little defensively. "He is a graduate of the academy. He is an alumnus, class of '58, who has permission to come on campus and sell investments to the midshipmen." Rich dad smirked and asked, "And how did he get your name?" "I don't know. I guess the academy gave it to him."

Again rich dad smirked. Rather than saying anything, he pushed back into his chair, extended his legs, placed his hands in a praying position under his chin, and just sat there searching for the words he wanted to say. Finally, I broke the silence, asking, "Did I do something wrong?"

Again there was just silence for a long ten seconds. "No," rich dad said finally. "First of all I commend you for taking the initiative to invest. Many people wait till it is too late, or never invest for their future. Many people spend everything they make and then expect the company they work for or the government to take care of them when their working days are over. At least you did something-you invested some of your own money."

"But did I do something wrong?" "No-what you did is not really wrong." "So why the concern?" I asked. "Are there better investments?"

"Yes and no. There are always better investments and there are even more bad investments," rich dad said, sitting up straight again. "It's not what you invested in that I am concerned about. Right now I am concerned about you." "Me?" I asked. "What about me?"

"I am concerned about what kind of investor you are becoming more than what investment you have invested in."

Sales Pitch Rather Than Investment Education

"I'm not a good investor?" "No, it's not that," said rich dad. "He advised you to 'invest for the long term, buy, hold, and diversify.' Is that correct?"

"Yes," I said softly. "The problem with that advice is that it is a sales pitch," said rich dad. "It's not a sound way to invest much less learn to invest. It's not a good way for you to gain the education you need to become a smart investor." "Why is it a sales pitch?" I asked.

"Well, think about it," replied rich dad. "How much do you learn about investing by simply sending a check in every month?" Thinking about the question for a moment, I finally replied, saying, "Not much. But why is it a sales pitch?"

"You keep thinking about it," smiled rich dad. "You keep thinking about the advice of 'Invest for the long term, buy, hold, and diversify.' " "You're not going to tell me?" I asked.

"No. Not now anyway. You're only eighteen years old. You have a lot to learn about the real world. Right now you have the opportunity to learn one of life's most important lessons. So think about it. When you think you have figured out why 'Invest for the long term, buy, hold, and diversify' is a sales pitch rather than sound investment education, you let me know. Most people never learn the difference between a sales pitch and investment education. That is why so few people ever become rich and why so many people lose money as investors. They lose because they think a sales pitch is investment education. And because they think that 'Invest for the long term, buy, hold, and diversify' is investment education, they actually believe it is the smart thing to do. There is a big difference between a sales pitch and true education."

As rich dad was talking, I was beginning to understand why the salesperson put such an emphasis on the word "always."

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.