7 Rules for Investing

April 9th, 2010 by admin Leave a reply »

“Investing is not a get-rich-quick drama. Investing is a plan, often a dull and almost mechanical process of getting rich.”

– Robert Kiyosaki

Kiyosaki goes on to say that before launching yourself as an investor, you should commit the Seven Rules of Investing to memory. If you follow these rules during your journey, they’ll keep you on the straight and narrow path toward comfort and security.

Rule 1: Know what kind of income you have to work with.
Are you dealing with earned, portfolio, or passive income?

Rule 2: Convert earned income into portfolio income or passive income as efficiently as possible. This will not only put your money to work for you but also increase the chances that your funds will grow. For example, an investor might purchase a multifamily home, live in one unit, and rent out the others to cover the debt service, or rent out all the units for a positive cash flow, investing the profits in securities. A good advisor can tell you how to handle investments in ways that maximize tax efficiency.

Rule 3: Purchase securities with positive returns. Obviously, securities are bought to serve as assets, yet some securities lose value and become liabilities. While no investment is risk-free, the educated investor will more often than not buy securities that provide a good return on investment.

Rule 4: Become your own best asset—instead of your own liability.
A good investor buys undervalued securities in a bear market or lucrative real estate in foreclosure. A bad investor locks in losses on a stock by panicking in a market slump. An educated investor is emotionally neutral when making investment decisions.

Rule 5: Be prepared for anything; don’t try to predict what will happen or when. Investing is a skill, not a science. The Zen swordsman disciplines body and mind to counter any blow spontaneously; he does not anticipate the moves of an opponent, for that impedes his ability to react. Likewise, professional investors know they cannot control the real estate or stock market, let alone the global economy. Instead, they train themselves to be financially intelligent, to think confidently and creatively when opportunities or problems arise.

Rule 6: Learn to trust that, when a good deal presents itself, the funding will be close behind. Sophisticated investors know a money-making deal when they see one, and nothing generates financial backing like the prospect of success. The opposite also holds true: If respected investors are all rejecting a deal, an investor should heed the red flag.

Rule 7: Know how to evaluate risk and reward. There is risk in every investment, but risk is a relative term. An investor who can understand a company’s financial statement, evaluate a business system, or take the pulse of the stock market has a greater chance of buying an asset than a liability. Since risk is often directly proportional to reward, anyone who hopes to become wealthy must be able to invest more aggressively than someone who’s content to be secure. The more financially educated you are, the less risk you’re taking.

To learn more about what Kiyosaki and other financial geniuses say about YOUR MONEY drop by at http://thecaym.com for the big one. You will need the Referral ID #10060 to read on. All the best!

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2 comments

  1. Wesley P. says:

    Great article. As a beginner investor myself, there is much value in these lessons. Too many people don’t take the time and due diligence to understand what they are actually investing in. I came across an article yesterday that will compliment your article well. It’s titled “Wall Street’s 5 Most Profitable Penny Stock Patterns” and it can be found at http://pennysleuth.com/files/2010/04/StockReport.pdf

    Looking forward to reading more from you.

  2. Volker Schaefer says:

    Great article, I love the books of Kiyosaki especially “Cashflow Quadrant” and “Rich Dad Poor Dad” and we play the cashflow 101 game often with our children.

    Be well

    Volker

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