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Book Review: Rich Dad’s Guide to Investing

"Rich Dad’s Guide to Investing" is written by Robert Kiyosaki along with Sharon Lechter. Mr. Kiyosaki is a financial literary advocate and is best known for his “Rich Dad Poor Dad” series of book. Rich Dad’s Guide to Investing is 3rd in the Rich Dad series.

Primary goals of Rich Dad series books is to educate people about importance of financial literacy and to develop investor or business owner mind set. Rich Dad’s Guide to Investing is no exception to these goals.

Mr. Kiyosaki uses two characters throughout the book to convey the ideas – 1) Rich Dad, a self-made investor and business owner, and 2) Poor dad, a highly paid employee who eventually lost his job.

"Rich Dad's Guide to Investing" encourages people to become financially independent, to make their money work for them than they work for money, and to become investor not employee. The book then went on to define accredited and sophisticated investor types. Even if you are not accredited investor as per SEC, you can start your journey by becoming a sophisticated investor. A sophisticated investor is someone who has 3Es – Education, Experience and Excessive Cash.

Using Rich Dad interactions, Mr. Kiyosaki encourages people to ask themselves if they are mentally ready to be an investor, decide which type of investor they want to be, and how to become sophisticated investor? If you decide that you are mentally prepared to be rich, then you have to change priorities in life. Priority of poor people are 1) To be secure, 2) To be comfortable, and 3) To be rich. Whereas priorities of rich people are 1) To be rich 2) To be comfortable, and 3) To be secure.

The book then defines multiple categories of investor and propels readers towards becoming ultimate investor. Ultimate investor is someone who builds a company that others wants to invest in. To build a company, an investor must be good at Cash flow management, Systems management, Legal Management, and Product management. Once you become ultimate investor, don’t forget to give it back to society.

First things first, the prime objective of the book is to motivate people to become an investor and not to tell people how and where to invest the money. For this reason, I felt the title of the book “Guide to Investing” is somewhat misleading. With this title, I would expect the book will get into the specifics of investing.

Having said that, the book does offer many specific advises and investing rules. When we try to do something, we often get scared due to statistical averages. An average investor fails, so “Don’t be average.” Another advice is to start your business. “Mind your own business” as Mr Kiyosaki puts it. It is better to make mistakes and learn from them than avoiding mistakes. The book provides a framework, called B-I triangle, to analyse and build a successful business.

However the primary objective of the book is not to provide how-to of investing, these specifics are added bonus. The book is aimed at motivating people to become investor and then ultimate investor. The book does an excellent job of motivating people. However the book will raise more questions than it answers. So, be ready with that expectation, when you pick up the book.

In fact, some of the specific advices are contradictory. In one lesson, book says that becoming rich is finding the simple financial plan and sticking to this boring plan. But then in another lesson, book says to be rich, you have continue to invest time and be actively involved.

In summary, Rich Dad's Guide to Investing does an excellent job of challenging the mind-set. I highly recommend this book to all who are not yet fully convinced to leave the safe job and become investor. This book will force you to think over and will completely change the way you look at life & career, income & expenses, and money & investing.


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