Basic Investing Rules
Here are some basic investing rules that we can all use to acquire assets and start planning for our retirement.
The investor is the asset or liability
Many people think investing is risky. The reality, however, is that it’s the investor who is risky. The investor is the asset or liability.
There are investors who lose money when everyone else is making it. In fact, a good investor loves to follow behind a risky investor because that is where the real investment bargains can be found!
If you want to move from being a risky investor to a good investor, first invest in your financial education. As part of your education—because nothing beats real-life experience—start small with your investments, learn from your mistakes, and then make bigger and bigger investments.
You can also play games that simulate investing, like Monopoly, in order to build your financial intelligence.
Most people try to predict what and when things will happen. But a true investor is prepared for anything to happen.
If you are not prepared with education, experience, or extra cash, a good opportunity will pass you by.
Robert Kiyosaki’s Rich dad would say that it was most important not to predict what will happen but to instead focus on what you want, to keep your eyes open to what is happening, and to respond to opportunity. This is done through continual education and application.
Good deals attract money
One of Robert’s big concerns as a beginning investor was how he would raise money if he found a good deal. Rich dad reminded him that his job was to stay focused on the opportunities in front of him, to be prepared.
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.
Rich dad’s point was that getting the money was the easy part. The hard part was finding a great deal that attracted the money—which is why so many people are ready to give money to a good investor. Robert calls this OPM, a.k.a., Other People’s Money, and it’s worth learning more about.
Learn to evaluate risk and reward
As you become a successful investor, you must learn to evaluate risk and reward. Robert’s Rich dad used the example of a nephew building a burger stand.
“If you had a nephew with an idea for a burger stand, and he needed $25,000, would that be a good investment?”
“No,” Robert answered. “There is too much risk for too little reward.”
“Very good,” said rich dad, “but what if I told you that this nephew has been working for a major burger chain for the past 15 years, has been a vice-president of every important aspect in the business, and is ready to go out on his own and build a worldwide burger chain? And what if you could buy 5 percent of the company with a mere $25,000? Would that be of interest to you?”
“Yes,” Robert said. “Definitely, because there is more reward for the same amount of risk.”
Learning and mastering the rules of investing takes a life-long investment in financial education. But these basics will get you started. Where you go from here is up to you.