Rich Dad Lessons: Seven levels of investor
Based on Kiyosaki’s work
In the world of the investments, many people act in a mistaken way by conceiving the investments as a random game or as a really risky and really complicated road for the money. For that reason, the fear and the financial instruments of low profitability are common for many people who lose daily opportunities to forge a quicker road toward the financial freedom. According to Robert Kiyosaki, there are 7 levels of investors we describe in the following paragraphs.
Level 0: Those that don’t have money to invest because they spend everything that they earn or even spend more than what they earn. Half of the adult population is in this level.
Level 1: The slaves of the debts. Their few investments are corroded by a lot of “bad debts” they accumulate along their lives. They live by borrowing to the banks, family and friends. Many times they use the loans to pay other debts, and then they stay in a vicious circle. If they earn more money, they get more debts and often they like to elevate its level of life with some luxurious things but at the end of the day they don’t get assets in order to generate monthly cashflow.
Level 2: The savers. They hate the uncertainty and prefer the security without risks and for that reason they put their money in a saving account or invest in some financial products with low profitability. Often they are very frugal with the cents but at the same time, by having money growing so slowly, they are not very frugal with one of their more important assets: the time. Saving is a good idea, but if your only investment is a saving account, likely you don’t have planned to retire in your early age, and rather you plan to work until the pension age. It is a slow race.
Level 3: In this level we have those who have some basic knowledge about finances and they prefer the investments that are packed for the masses: the 401(k) plans, the mutual funds designed for the public and the most popular stocks of the moment. Here also we found “the cynicals” who read many newspapers and financial magazines and get informed by mass media; however they never take a big risk because they think to know the reason why each risky investment will be a failure. Finally, here we found the stock market gamblers who think that people who become rich simply achieve it because they are lucky and therefore they see the stock market like a random game the same as to play poker in Las Vegas.
Level 4: Long-term investors. They know the important thing is to begin early to plan their financial future and they take the control with a carefully designed plan. Although some of these investors don’t have a strong knowledge about investments, they can find some expert advisers (brokers and good firms) to choose investments that guarantee long-term earnings. Although their investments are conservative and with low risk, those are also solid and later these investments will guarantee a financial future less difficult than the one that they would have if they are only saving for their retirement. If we don’t have a strong knowledge about investments yet, but we have some small or big money surplus we should begin to invest as a investor of this level and as we improve our financial education and our experience, we can go up in our level.
Level 5: The sophisticated investors. They are the investors who have the education and the appropriate experience and, besides of that, they have the available money surplus to invest; therefore they can take enough risk for a really good recompense and often they earn high yields giving them much more money to create more assets and more investments. These investors get financial wisdom by means of the experience during many years, therefore they can minimize the investment failures and they learn to intuit if an investment has good possibilities. They take the last decisions, not their brokers, although they are surrounded by a group of good advisors.
Level 6: Capitalists. The capitalists are the true masters of the investment. They have all the characteristics of the sophisticated investors, but besides of that they are able to create the investments, so people can buy those investments. For example, they create successful businesses and later they sell shares of these businesses to the public in the stock market, and often they become vastly rich.
What level are you in? Can you identify the level of your friends or known people?
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