Investing for the Long Term, Part 2

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 4 of 5)

"Okay," I said. "I'll take time to learn this lesson. The next time I make an investment decision, I'll be more patient."

"Good," said rich dad. "Most investors blame the investment rather than themselves. In reality, the real problem is the investor not the investment. And right now you're learning about the price of your impatience. That is a pretty good lesson to start off with-if you learn the lesson." "But I'm a full-time student. I had to concentrate on my studies," I argued. "I didn't have time to learn more and do more research."

"And soon when you graduate and leave school, you will be working full-time. Maybe you'll get married, buy a home, and start raising a family. If that happens, expenses will go up as well as the demands on your time. If you think you're busy as a student, just wait till you're working and married with kids. If you do not make the time to learn to be a better investor now, you will be saying the same things tomorrow as you are today. You'll still be saying 'I didn't have time to learn more and do more research.' Because of your impatience, your laziness, and your lame excuses about not having enough time, you will do the same thing you just did, which is to hand your money over to total strangers and have no idea what they are doing with your money."

Sitting silently, I let rich dad's words sink in. I did not like what he was saying to me. I was getting angry. If only he knew how hard it was to attend a military academy, to carry a full academic load, play sports, and try to have a social life.

"Just admit you're impatient," said rich dad. "Just admit that you are not willing and too busy to invest the time to learn to be an investor. That would be more honest than to just say you're too busy. Then admit that you're not patient enough to find a great investment."

"And if I admit that, then I won't complain about my investment not performing well," I added.

"Or complain when your investment loses money," said rich dad with that smirk of his.

"You mean I can lose money in mutual funds?" I asked. "You can lose money in anything," rich dad replied. "But you know what is worse than losing money?"

"No," I replied, shaking my head. "I don't know. What is worse?" "The worst thing about not learning to be an investor is that you never see great investments," rich dad said matter-of-factly. "If you never invest the time to learn to be an investor you will live in fear of investing, constantly saying 'investing is risky.' By believing that investing is risky, you avoid investing, or you turn your money over to people you hope are investing wisely. But the worst thing is that when you avoid investing, you miss out on the hottest deals in the world. You live in fear rather than live with the excitement of searching for and finding great deals. When you play it safe, living in fear of losing, you miss out on the excitement of winning. You miss out on the excitement of getting richer. That's the worst thing about being impatient and not investing the time to become a real investor."

Thinking for a moment, again letting rich dad's words sink in, I began to recall the sales pitch of the financial advisor who sold me the mutual fund investment plan.

As if reading my mind, rich dad asked me, "Did your salesman friend tell you that the stock market goes up on average 10 percent per year? That's the standard canned sales pitch most salespeople in his business use. Did he tell you something like that?"

"Yes, he did say something like that," I replied. Rich dad roared laughing. "He probably thinks that's a great return. A 10 percent return is peanuts! On top of that, ask him if he will guarantee that tiny return. Of course he won't. He'll just send you a birthday card once a year to say thanks for the business. He wins, you lose. But the biggest loss to you is that you will never see the great investments because you will never become a great investor if you follow his advice of 'Invest for the long term, buy, hold, and diversify.' And on top of all that, while the best investments go to the most educated, the worse and riskiest of all investments go to the least financially educated investors."

"You're saying that mutual funds are the riskiest of all investments?" I asked. "No ... that is not what I am saying," replied rich dad, now in a frustrated tone. Taking a deep breath and gathering his thoughts, he said, "Listen to me. I'll say it again. I am not talking about the investment. I am talking about the investor. If the investor is uneducated, anything he or she invests in will be risky. They may get lucky now and then, but generally in the long run, any money they make they end up giving most of back to the market. I've seen an uneducated investor take a great real estate investment and turn it into a run-down foreclosure. I've seen an uneducated investor buy a profitable well-run business and soon bankrupt it. I've seen an unsophisticated investor buy shares of stock in a great company, watch that stock climb in value, and fail to sell at the top. After the stock crashes, they hang on to the dead stock. So it's not the investment that is risky ... it's the investor." I was beginning to understand what rich dad was saying. He was doing his best to get me to see a world very few people see ... the world of a real investor.

Catching his breath, rich dad continued, "I've also seen a professional investor take over an investment that a bad investor has ruined and make it a good investment again. So the bad investor loses money and the smart investor makes money."

"Are you saying the smart investor never loses money?" I asked. "Of course not," replied rich dad. "We all lose now and then. The point I am making is that a smart investor focuses on becoming a smarter investor. The average investor focuses only on making money. I'm not here to tell you how to run your life. Right now, I want you to stop, take a moment, and think about what you are now learning ... not how much money you are making or not making. Don't focus on the money. Focus on learning to be a better investor." "So I don't learn much about investing if all I do is write a check, stick it in an envelope, lick a stamp, and drop it in the mail ... investing for the long term?"

"That is exactly what I am saying. You're not learning to be an investor. You're learning to be a saver and stamp-licker."

Rich dad stood and stretched. I could tell he was tiring of drumming this simple but important lesson into my head. Glancing back at me, he asked, "So what have you learned from your mutual fund investments and about yourself?"

"I've learned I'm impatient. I've learned that I make excuses for not taking the time to learn to invest." "Which causes what?" asked rich dad.

"Which means that I do not always get the best investments. It means I miss out on an exciting world, a world that very few people see. It also means that if I do not make some changes, I am a gambler more than investor." "Good insight," smiled rich dad. "And what else?" Thinking for a while, I could not come up with any more answers. "I don't know what else."

"What about turning your money over to a total stranger?" rich dad replied. "And what about not knowing who this stranger turns your money over to and what these even-more-faceless strangers do with your money? Do you know how much money in fees is being taken out of your money? Do you know how much of your money is actually invested and how much of your money is going into the pockets of the people who manage your money? Is any money coming back into your pockets? What happens if they lose your money? Do you have any recourse? Do you know the answer to any of these questions?" Shaking my head, I replied with a faint, "No."

"Did you ever ask the guy who sold you these mutual funds if he could live off of his own investments or was he living off the commissions from the money you invested with him?"

"No," I replied softly. "I never asked."

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.