Rich Dad Says…

Robert Kiyosaki, a fourth generation Japanese-American, a well know tycoon in financial education of this generation, a renowned author of the best selling book Rich Dad Poor Dad and the series of books that followed, has touched a delicate aspect of human life where one attempts for the better financial achievement along with health and peace. In his uniquely simple, yet professional technique, he has put forward the very essence of ones life. For him preaching financial intelligence amongst the masses is as important as providing the basic education. He also criticizes the schools for averting our society from such teachings. Following are few note-worthy tips advocated by him.

…a person may generate income by being an Employee, or by being Self-Employed, or by starting his own Business, or by operating as an Investor. He represents this in a diagram made up of four quadrants. While all four quadrants have its merits and limitations, none is better than another. The person may operate in either of them to make a better living. Each has its own measures of success and failures. An individual’s decision to work-out in either of the quadrant depends mainly on the core values he possesses. The strength of dream and the will to sacrifice plays an important role in success of a being. In his book Rich Dad Poor Dad, Robert throws light on the reason for people choosing the comfort quadrant and grounds for their success and failure. The Employees and the Self-Employed earn their income from their jobs and spend it over expenses while the Businessmen and Investors generate it though asset holdings.

…the phrase “Go to school, get good grades, and find a safe, secure job” is absurd in today’s fast growing and ever-evolving world. The advice stood good during the industrial age. But the changing times of Information age has proved otherwise. Schools do not teach the vital subject of money as the teachers could barely preach them to students. Hence, the students are deprived from the financial freedom. Robert tutors the financial aspect through books, seminars and board games.

…Robert entices people to know the difference between an Asset and a Liability. He explains an Asset as the holding that puts money in your pocket and the Liability as that take it out. Contrary to the general belief Robert argues that a person’s house is his Liability, as it burns his money with the day-to-day expenses.

…it is quintessential to make it a habit of paying yourself first. This means to treat your investments as top priority expenses and habitually pay them first. The monthly bills and other intrinsic expenses must give way for them. Robert challenges to have about 30% of your income get into investments on a monthly basis. His noble advice is to keep the expenses down until the investments reap results.

…to gain financial education means to gain understanding of one’s cash flow statement. The Cash flow statement portrays the sources from which the income is generated and the various ways it is taken out. It states whether the income is passive (generated through investments) or generated from the four quadrants. More passive the sources, better is the financial understanding and near is the financial freedom. An investment may be done for generation in cash flow or for the capital gains. Robert recommends to be sure of the rationale behind it.

…in the game of money, says Robert, to find a mentor. If the monetary figures terrorize you, find an expert who is wholeheartedly willing to scale up your knowledge and investment. He persuades to gain knowledge by reading financial journals and attending seminars. In the times of Information age, one has access to tremendous stock of knowledge. Only the appropriate source has to be found. Robert also cautions against the agents who are always on hunt of your money.

…by following the simple steps one may climb up the financial ladder. Money is something that can be your supervisor and also can it be your subordinate. Today the education system has made plenty of subordinates. But if one gains knowledge and becomes smarter, he can be the supervisor and make money work for him. Wealth, describes Robert, as the time your money can help you survive if at all you stop working for it.

Although, this is a glimpse of a floating iceberg, I urge you to gather more information about Robert Kiyosaki and his teachings by reading his books. His books namely ‘Rich Dad Poor Dad’, ‘Cashflow Quadarant’ and ‘Increase your Financial IQ’ are a must seen over your bookshelf.

A Buffet Decode

Warren Buffet, a man with his foresight, courage, perseverance and confidence has rode against tide, and perhaps times, to emerge victorious in the game called life. His wisdom, though globally criticized, has weathered the financial Tsunami and has laid a highway where-in the young aspirants can speed away their career wagon. Today it’s not only important but also apparent that his foot steps being thoroughly observed and followed.

Simplicity
From the time Buffet began his career as an investor he constantly choose simplicity over complexity. The familiar businesses which involved buying and trading of goods are his favorite and obvious choices. He purposely has stayed away from the hi-tech businesses such as IT sector for he’s unable to understand the rationale behind them. He invests in the businesses which he understands and seems to have a predictable future. His focus is on buying the shares of companies with great management and not for the sky high claims made by the rest. He advices to buy shares at a reasonable price and hold them for the entire life. This basic investment principle seems forgotten in the buying-selling mayhem of today.

Decisions
Buffet was visibly upset when he said that the so-called experts are to be blamed for misguiding the society and causing the universal financial slaughter. He has always used his own knowledge and expertise for the investment decisions. The experts, the analysts and the so called Guru’s, have no place in his calendar. He suggests checking their intent while they promote a stock or mutual fund to you. Usually the high-yield funds are more risky but bear huge commissions to these brokers. On the contrary he challenges one to gain basic knowledge in accounting which helps in interpreting the financial statements. In the long run, the investment in education will prove the results by itself. Post an investment set aside your entire panic factors. Even after an abrupt crash, hold on to your nerve and keep faith in your business. While others run away on some expert opinion, apply your skill and understanding before making a hasty decision.

Faith and Perseverance
Perseverance is a principle unearth from nature. It can be best explained with an example of farming. During the seasons, the farmers sow seeds. They protect the seedlings from all possible threats. They keeping watering and pasturing them with a hope that one day the sowed seed will sprout out and enrich the entire farmland with crop. The harvest will yield them return enabling a year’s living. Buffet promotes nature’s principle of sowing and reaping. He advises to buy, protect and believe in your investment. Persevere with it for a longer period which, as a principle, will guarantee result in future. Let the time take control of your investment while you, as a farmer, keep protecting and praying. Remember, inconsistency and panic can slay the entire yield.

Buy Businesses, not stocks
Businesses are meant to be constant, while the stocks are volatile. The fluctuations in the price of shares may occur due to reasons other than the underling principles of business. Often they are manually altered setting an emotional outburst within an investor. The hyperactivity in prices may lure an investor into a financial trap. Hence, it is apparent to get inside the core principles of the business and the people handling them. As Buffet says “Great people make great businesses”. Buying the stocks of sound business will ensure the steady returns while the good management will secure the companies future. This business-management mix provides an investors’ paradise. It’s not what you sale, but how long can you sell?

Be Opportunist
The stock market is the place where the emotions keep flowing as swift as a flooded river running downwards through the huge mountains. Usually the buying-selling decisions are taken over the tips gathered from the so called experts. People, alike the ship-herd, follow the best player even if the consequences may lead them into a financial turmoil. Thousands are slaughtered ruthlessly when this ship herd mentality creep in. During such lucrative times, Buffet advices to make decisions based on ones own assessment and adhere to the basic principles of investment. When the herd sells, the time is on for big purchases. Evaluate the correct price and pour into sound businesses. The downturn provides an opportunity for the professional and educated investor. By being an opportunist, Buffet doesn’t mean to swing at every pitch. He means simply awaiting the right opportunity to invest in your circle of business.

‘Mr. Market’ and the ‘Margin of Safety’
Mr. Market, describes Buffet, as your business partner-one with enormous emotional eruption within, who is influenced day in and day by the quoted prices and is allured to make buying and selling decision around it. When he’s elated, he dwells about every good part of business. He sells you his stock but within is afraid about you reaping huge return that he would miss. When he’s down he only sees trouble. He is terrified that you will sell him the depleted stock and tries enticing you by putting a lower price tag on shares.

Buffet warns never to fall under Mr. Market’s influence. Mr. Market will be there day in and day out. He’ll be back tomorrow if you have ignored him today. He’ll continue to offload his stakes with lucrative offers. He’ll play with your emotions over and over again. At such stage, advises Buffet, to check and study the moods of Mr. Market and take a wise decision. Use Mr. Market as a metaphor that every value investor should use to access the prices and opportunities.

Margin of safety means the difference between the ‘Price of stock’ to the ‘Value of business’ with the former better over the price. The bigger the gap, better for the business and ultimately better for the stakeholders.

Be Informed
Information plays a vital role while trading stocks. Keep your eyes and ears open, apply the knowledge and act sensibly. There is no room for hara-kiri in the stock market. Remember the emperor wears no clothes on the trade-street. Gather as much as possible before chucking your money. Get deep into the financial statements of the company prior investing. Check out the promoters’ ethics and the future prospects.

Further, Buffet suggests keeping down your stock holding. Which means, unlike the popular belief, maintain a narrower portfolio. He says diversification is cover for ignorance. More uninformed a person, wider is his portfolio. Ignorance leads a person towards a financial nightmare as he trades numerous stocks without much of ground knowledge. Hence Buffet keeps his holdings concentrated.

With all these proven and tasted Buffet-principles about investment, one can rest assure climbing the financial goal. The investment of time and education is worthy before investing your hard earned money over someone else’s hot tip. Buffet thinks so.

Get going and be a responsible investor.

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