Investor Lesson 10 - Why Investing Isnt Risky

1. They have not been trained to be investors. If you read CASHFLOW Quadrant, the sequel to Rich Dad Poor Dad, you will recall that most people go to school to be trained for the left side of the Quadrant rather than the right side of the Quadrant.

2. Secondly, most investors lack control or are out of control. My rich dad used this example: He would say, “There is risk driving a car. But driving the car with your hands off the steering wheel is really risky.” He then said, “When it comes to investing, most people are driving with their hands off the steering wheel.” Phase One of this book is taking control of yourself before investing. If you didn't have a plan, a little discipline, and some determination, the other investor controls would not mean much. The rest of this book will go into the remainder of rich dad's ten investor controls.

3. Thirdly, people say investing is risky because most people invest from the outside rather than from the inside. Most of us know intuitively that if you want a real deal, you have to be on the inside. You often hear someone say, “I have a friend in the business. ” It does not matter what the business is. It could be to buy a car , tickets to a play, or a new dress. We all know that on the inside is where the deals are made. The investment world is no different. As Gordon Gekko, the villainous character played by Michael Douglas in the movie Wall Street, said, “If you're not on the inside, you're outside. ”

We will review this relationship between being on the outside or inside later. What is interesting to note at this time is that people on the left side of the Quadrant usually invest from the outside. In contrast, Bs and Is are able to invest from the inside as well as the outside.

As this book progresses, many sacred money cows may be slaughtered. Inside investing is one of them. In the real world, there is legal inside investing and there is illegal inside investing. That is an important distinction. What makes the news is the illegal insider investing. Yet, there is more legal insider investing in the real world that does not make the news, and that is the type of inside investing I am talking about.

A hot tip from a taxi driver is in many ways an insider tip. The real question in insider investing is really: “How close to the inside are you?”

he said, “It makes perfect sense to invest from the outside when you invest at the secure and the comfortable level of investing. That is why you turn your money over to a professional you hope is closer to the inside than you. But if you want to be rich, you have to be closer to the inside than the professional to whom most people entrust their money. ”

And that was the focus of rich dad's plan to be rich. That is what he did and that was why he was so rich. To follow his plan, I needed the education and experiences found on the right side of the quadrant, not the left. To do that, I needed to invest a lot more time than the average investor . . . and that is what the rest of this book is really about. This book is about what it takes to move from the outside to the inside.

I realize that many people do not want to invest that much time into the subject of investing just to get to the inside. But before you decide, and before getting into a little more detail about rich dad's plan, I thought I would give you a very simplified overview of the subject of investing. Hopefully, after reading the next few chapters, you may learn a few new ways to reduce your investment risk to become more successful as an investor, even if you do not want to be an inside investor. As I said earlier, investing is a very personal subject, and I completely respect that reality. I know that many people do not want to commit the time to the subject of investing the way rich dad and I did.

Before going into rich dad's educational plan to teach me to be an investor at the rich level, the next few chapters are dedicated to offering the reader a simple overview of rich dad's investment plan.

The business of investing has many parallels to the business of professional sports. For example, let's use the game of professional football. At Super Bowl time, the entire world watches. On the field are the players, the fans, the blimp overhead, the cheerleaders, the vendors, the sports commentators, and the fans at home watching the event on television.

Today, for many investors, the world of investing looks like a professional football game. You have the same cast of characters. You have the TV commentators describing the play-by-play battle of the blue chip giants on the field. There are the adoring fans purchasing shares instead of tickets, cheering for their favorite team. You also have the cheerleaders, telling you why the stock price is going up; or, if the market goes down, they want to keep cheering you up with new hope that the price will soon rise. There are the bookmakers , called stockbrokers, who give you stock quotes over the phone and record your bets. Instead of reading the sports page, you read the financial pages. There are even the equivalent of ticket scalpers, but in the financial world they don't sell over -priced tickets to latecomers; they sell over -priced financial tip sheets to people who want to get closer to the inside game. Then there are the hot dog vendors, who also dispense antacid pills, as well as the people who sweep up the mess after the trading day is over. And of course we have the viewers at home.

What most people do not see in both arenas of the sports world and the investment world is what is going on behind the scenes. And that is the business behind both games . Oh, you may see the owner of the team occasionally, just as you may see a CEO or the president of the company, but the figurehead is not really the business. So as rich dad said, “The business behind the business is the real game. It's the business behind the business that makes money regardless of who wins the game or which way the market goes—up or down. It's the business that sells the tickets to the game; it does not buy the tickets.” That is the investment game rich dad taught me, and what the rest of this book is about. It is the investment game that creates the richest people in the world.

2. Based on what you know so far, are you willing to invest the time to gain the education and experience to become a successful investor as an insider?