I recently read “Rich Dad’s Guide to Investing – What the Rich Invest In,
That the Poor and Middle Class Do Not!” by Robert Kiyosaki. I had some questions
about the the book prior to reading it and wanted to answer those questions in this blog post as well as provide some additional thoughts.
If you Google the Rich Dad series or Robert Kiyosaki you’ll find a lot of controversy surrounding Kiyosaki’s financial advise and personal dealings. Kiyosaki’s books are filled with valuable information and financial wisdom but it doesn’t mean his advise can be applied to everyone.
Kiyosaki advocates leveraging debt more then I think is safe and many of his recommendations can be complicated for the beginning investor. My opinion is that his books do a better job of getting the reader to think differently about financial concepts rather then providing an actionable investment strategy.
I’m a strong advocate of continuous learning and exposing yourself to various schools of thought which is why I enjoy Kiyosaki’s books. Of course use your discernment, get multiple opinions and educate yourself before following Kiyosaki’s advice or any other financial advice for that matter.
How is “Rich Dad’s Guide to Investing” different from “Rich Dad, Poor Dad”?
Rich Dad, Poor Dad tells the story of how Robert Kiyosaki’s was exposed to two different view points regarding money growing up – one from his biological dad and one from his friend’s dad. Rich Dad, Poor Dad is largely an inspirational book in my opinion and leaves the reader feeling excited to start a business or invest in real estate. The only problem is that Kiyosaki only provides a brief and vague overview on his recommendations for how the reader can actually implement the same strategies.
Rich Dad’s Guide to Investing also weaves in inspirational stories but is much more practical overall. The book can be a little dry and repetitive at times but is more useful for someone wanting to build their wealth by starting a business or by becoming a serious investor.
If you enjoyed Rich Dad, Poor Dad but wanted to learn more about the actual strategies Kiyosaki uses to build wealth then I would recommend Rich Dad’s Guide to Investing.
What do the rich invest in, that the poor and middle class do not?
Kiyosaki says the rich put their money in investments that are legally not available to the poor or middle class. These types of investments are only open to accredited investors. An accredited investor is an investor permitted by the SEC to put money in riskier investments such as pre-IPO’s, sub-prime financing, loans for start-ups and private placements. An accredited investor is thought to be financially sophisticated and able to take part in investments that do not adhere to standard SEC restrictions.
Individuals must have a consistent income of $200,000 ($300,000 if married) or a net worth of 1 million, excluding their primary residence to be considered an accredited investor.
So how do you reach the financial requirements to be an accredited investor if you are poor or middle class? Kiyosaki recommends starting a business because of the financial potential it offers but also because of the tax benefits a business provides. Executives, doctors, lawyers and other high paying professions can obtain accredited investor status but often do not have the tax benefits that are available to business owners.
What is my biggest critique of “Rich Dad’s Guide to Investing”?
The content of Rich Dad’s Guide to Investing can be a bit redundant at times and it often recounts the same stories told in Rich Dad, Poor Dad. The book is pretty long at 471 pages, I feel some of the fluff could have been eliminated to make the content more concise and meaningful.
Certain parts of the book promote Kiyosaki’s other materials and makes the reader feel like they are being sold to rather then given valuable information.
What part of the book did I find most interesting?
Rich Dad, Poor Dad while inspirational, has been criticized for being too vague and lacking actionable advice. Rich Dad’s Guide to Investing helps address this complaint by providing a more detailed approach to how Kiyosaki operates his businesses, invests and purchases real estate.
Kiyosaki has a chapter where he lists the financial ratios he uses when evaluating a business or stock. I found his recommended financial ratios to be very practical advice that any investor could use to evaluate companies.
Kiyosaki also describes his evaluation process for investing in real estate and provides a due diligence checklist that he uses for his properties. If you are interested in real estate, I recommend reviewing Kiyosaki’s Due Diligence Checklist.
Download: Due Diligence Checklist