“I have $10,000. What should I invest in?”
(Kiyosaki, Who Took My Money?)
…The truthful answer is, “It depends on you. What I would do is often different from what you should do.”
By Kyle J Christensen, Founder, Principles-Based Planner, Unique Advantage
Unique Advantage Monthly Client Email – August 2024
Asking the Wrong Questions
At the beginning of the book, Who Took My Money? Robert Kiyosaki speaks to this very question of “where should I invest?”. I believe his answer is the only right answer:
This book also offers me an opportunity to answer some frequently asked questions, questions I often avoid answering, such as:
“I have $10,000. What should I invest in?”
“What type of investment do you recommend?”
“How do I get started?”
The main reason I hesitate to answer such questions is because the truthful answer is, “It depends on you. What I would do is often different from what you should do.” (Kiyosaki, Who Took My Money?)
In twenty-five years of teaching and guiding people in their financial matters, I too have been asked these types of questions over and over. I get it. I understand completely why people ask these questions. First, getting the answer would relieve the person of the arduous task of figuring it out, looking, learning, investigating, and discovering “the right investment”. Second, people have been trained by the financial institutions to ask these questions, because they (the financial institutions) stand at the ready to provide people with “investment options”. Notice that I am putting certain things I’ve stated in quotations. The reason for that is because “the right investment” is extremely individualized – what’s right for one isn’t right for another– and the so-called “investments” that financial institutions offer are really “fake assets”. I say they are fake assets because, as Robert Kiyosaki states in his book Fake: Fake Money, Fake Teachers, Fake Assets, they are things that are designed to take money away from you, and not provide cash flow back to you.
A real asset is something that puts money into your pocket. Most “assets” are fake assets because they aren’t designed to put money in your pocket. They are designed to take money out of your pocket. Financial institutions have very little incentive to provide you with real assets. Their incentive is to provide you with things that draw money out of your pocket and into theirs.
All financial institutions want the same thing: assets under management.
In other words, they all want the control and use of your money. They all want you to give up control and use of your money to them. None of them are in the back rooms of their office buildings, discussing ways in which they can help you become financially free. None of them actually care about you beyond the amount of money you are sending to them. That’s a super harsh statement, but it’s absolutely and completely true. Now, that doesn’t mean that all of the individual people who work for financial institutions are all out to get you. I don’t believe that’s true at all. In fact, I know many individuals who are in senior positions within financial corporations, and I know that they are kind and generous people. They, individually, are charitable and want to truly help people. However, the goals of all financial institutions are designed for one bottom-line purpose: profit.
And they don’t make a profit if they are doing their best to give away as much money as possible to their customers any more than a clothing store is trying to give clothes to everyone in need. They would go out of business, just as financial institutions would. So, I don’t blame financial institutions for their desire and purpose to make a profit. However, we should not conflate their desire to sell us products (aka “investments”) with a desire to help us. They are not trying to do that.
Most people are, by nature, looking for the easy path. Real investing is not the easy path. We encourage real investing, which is why we lose some clients along the way. Some, even with initially good intentions to become a real investor, let too much time go by without actually taking steps to becoming a real investor.
Becoming A Real Investor – How To
What does becoming a real investor look like? How does a person get started?
To answer this question, we have to come to an understanding of what investing means. Does it mean putting money into something and expecting to get more money in return? Or does it mean something more than that? I love how Rich Dad’s Guide to Investing talks about investing. It states that, “Investing is a plan, not a product, or procedure” (Kiyosaki, Rich Dad’s Guide to Investing).
The word invest means to “cover completely”. It means to “earn a return”. This gives us some great insight into what it truly means to invest. Most people aren’t investing. They think they are saving (“saving for retirement”), but in reality, they are simply gambling. They are putting their money into something, in which they have no expertise, no control or influence over the outcome, and they are hoping for a return (and to not lose their shorts). That’s the definition of the word gamble.
Investing is becoming something. Become means “to undergo change or development”. So, the first question to help you on your journey to true investing is to figure out what you want to become. Do you want to become an expert in running a business? What type of business? Do you want to become an expert in investing in real estate? What type of real estate? Do you want to become an expert in innovations? What type of innovations?
Those who become financially free generally invest in three areas:
- Their own business/practice.
- Their own real estate (not just a house to live in).
- Their own ideas.
Contrary to what a lot of people might believe, and what financial institutions would love you to believe, extremely few people become financially free by investing in the stock market. Disagree? Argue with Thomas Stanley, author of The Millionaire Mind, who studied this exact issue for more than 25 years.
Quick side note on the stock market: If the stock market isn’t the source of wealth for most people that become financially free, why is it so heavily promoted? Why is it so popular? This goes back to some of what was stated earlier in this article. Most people are looking for the easy path. They really don’t want to change what they do, or invest a lot of time and money into learning. So, the stock market path (in all its varieties) offers what appears to be “the easy path.” You don’t have to be an expert to invest in the stock market. You don’t have to put forth any effort (today people are automatically enrolled to “invest” money into retirement accounts, without their initial consent). You need very little money to get started (anyone can invest with just a few bucks). So, the threshold for “investing” in the stock market is lower than ANYTHING else. Additionally, there is an absolutely TON of money to be made by people selling stock market products. There are over 600,000 securities reps in the United States today (a securities rep is someone who can sell stock market products). There are over 15,000 mutual funds selling stock market products. And most insurance companies offer “variable products” that are also invested in the stock market. Every bank, along with most credit unions, either own or are associated with a broker dealer (a company that sells stock market products). Every so-called news station constantly displays and talks about the movements of the stock market. Almost all financial pundits offer some sort of service for managing money in the stock market. Is there really any wonder why the stock market is popular?
It doesn’t matter that all of the proof in the world shows that the stock market is a loser’s game (for almost everyone). That fact simply does not get pushed to the public for obvious reasons.
Once you make a choice (which is not an eternal and irrevocable choice) to become an expert in something, the next step to investing is learning. Jeb Blount, author of one of the highest-selling business books in the world, Fanatical Prospecting, says, “Everything you ever need to know about anything is contained in a book. Everything” (Blount, Fanatical Prospecting)! So, reading a book is a great place to start and risks very little of your money to do so (maybe none, if you go to your library to borrow a copy). Herein lies an important key to successful investing. Don’t start by putting a ton of money at risk! Risk very little money at first. Learn more, and then invest more.
After reading several books on the subject, the next step is to find someone who has successfully done what you are interested in doing. This isn’t a novel idea! Why try to reinvent the wheel? Why not learn from the success and, more importantly, the failures of people who have gone the path before you? What person in any serious profession became great at anything without mentorship? There’s almost nothing you can invest in that someone else hasn’t already done before you made your attempt. Many of them also wrote books about it, which is why reading is the first place to start. Sometimes those mentors come in the form of someone we know personally. Other times those mentors come in the form of mentorship or coaching programs, where you pay a fee to obtain the information. Don’t be afraid to invest in your learning! Justin Donald, author of The Lifestyle Investor, talks about the importance of investing in learning in the first two paragraphs of his book:
“I value and spend time learning from people who are world-class at their craft of investing. I read books and listen to podcasts by smart investors and people who have different philosophies that have worked for them. And as a Lifestyle Investor, I am intentional about my mentors, striving to be their #1 student.
Education is one of my biggest keys to success. I’ve invested nearly $1,000,000 in my education, attending boot camps and seminars and learning from coaches, my advisory team, and industry experts” (Donald, The Lifestyle Investor).
The third step to investing is to build criteria for your investing. In other words, you need to have a process by which you can initially examine and qualify opportunities. I believe it’s valuable to keep this phrase in mind: “The difference between successful people and highly successful people, is that highly successful people say ‘no’ to almost everything” (Warren Buffett). Not all opportunities are great and not all opportunities are great for you. How are you going to tell the difference? How are you going to have the ability to “say no to almost everything”? You have to have criteria through which you pass all potential opportunities you feel inclined to consider. What about “opportunities of a lifetime”? I hear about these all the time. I’ve heard it over and over. The truth is, every day there is an opportunity of a lifetime (probably many). Everyone that is trying to raise money for this investment or that will try to convince you that “this is an opportunity of a lifetime.” If you want to be great at investing, you cannot let that be ANY PART of your decision of whether to invest or not. Your criteria cannot be, “Well, if it’s an ‘opportunity of a lifetime’, then I’ll invest in it.” If you have that attitude you will be conned out of your money (at some point). That mentality is an excuse for a lack of knowledge. Gain knowledge, hire a mentor, and build a legitimate criterion. And then, and only then, when an opportunity passes through those criteria, will you then consider the investment further.
What’s next? Now that you’ve learned as much as you can by reading, listening to podcasts and your mentor, and have an investment that passes your criteria, you start your investigation. “Invest” sounds a lot like investigation. Why? Because they are the same thing. Investing is investigating. I’m always shocked at how many people have their entire life-savings and their entire financial future riding on something that they have investigated less than they do their lunch before they take a bite into it. Seriously. People have tens of thousands, hundreds of thousands, and even millions of dollars in things that they weren’t even willing to find out the name of the person in charge (the person actually making decisions with their money). That’s the definition of “blind trust” or “blind faith”. If a person is going to invest in some real estate project (i.e. a syndicate), why would that person not invest in an airline ticket to physically check out the project and visit personally with the people making decisions? Why wouldn’t they hire an attorney to review the documents and contracts to 1) make sure that it doesn’t violate securities laws, and 2) really understand their rights and resources as it relates to the investment opportunity? I’ll tell you why. Because those things require time, effort, and money. And most people just want to write a check and then trust in the person that told them about it (that sold them on it).
Investigation requires time, and usually a lot of it. Recently I read a biography on Warren Buffett. One of his first and most successful investments was buying an insurance company (National Indemnity) in the state of Nebraska. This is what he did BEFORE investing into it:
“Buffett kept an eye on National Indemnity. A nonstop learning machine, he wanted to know everything there was to know about the insurance business. He checked out armloads of books from the library and came to understand Ringwald’s strategy, which was to insure the most difficult customers” (Schroeder, The Snowball).
Investigating means turning over every rock. It means taking a deep dive. It means going well beyond projected and marketed rates of return in proformas or prospectuses. In fact, real investors don’t allow projected rates of return to play a major role in their decision of whether to invest or not. They trust that if they are investing in things they know and only things that pass their criteria, that the rates of return will be what they want. Ray Dalio, who is one of the most successful investors of our time, stated,
“I would rather have fewer bets in which I am highly confident than more bets I’m less confident in, and would consider it intolerable if I couldn’t argue the logic behind any of my decisions” (Dalio, Principles).
Most people can’t argue for more than five minutes about their investment decisions (and certainly can’t if they weren’t allowed to talk about the projected/expected rates of return). If you want to be a successful investor, you must be willing to investigate.
Last step for this article’s purpose:
Failure.
Most people view failure as a roadblock. Highly successful people view failure as essential to learning. They view failure as stepping stones to greater heights. Again, from Ray Dalio’s book Principles:
“Over the years that followed, I found that most of the extraordinarily successful people I’ve met had similar big painful failures that taught them lessons that ultimately helped them succeed.
I saw that to do exceptionally well you have to push your limits and that, if you push your limits, you will crash and it will hurt a lot. You will think you have failed – but that won’t be true unless you give up. Believe it or not, your pain will fade and you will have many other opportunities ahead of you, though you might not see them at the time. The most important thing you can do is to gather the lessons these failures provide and gain humility and radical open-mindedness in order to increase your chances of success. Then you press on” (Dalio, Principles).
If you think you can be a successful investor without ever failing, without ever losing money, you have been fooled. At the same time, if you think investing is purely a gamble, you have likewise been fooled. All investing involves the risk of loss (not just of money, but of time and effort). However, that “loss” isn’t truly a loss unless you didn’t learn anything from it.
If you choose to become an investor (which is the only controllable and repeatable way to become financially free) then you must expect to fail in your efforts. Those failures can be temporary if you choose to have them be temporary. Those failures are your greatest learning device. They are the next step on your ladder to financial freedom. If you have the attitude of avoiding failure at all costs, you will be making the choice to avoid success. No one becomes financially free without experiencing failures along the way. So, I encourage you to change the way you view failure. If you struggle with the idea of failure, I encourage you to read the book The Obstacle is the Way (Ryan Holiday), which can greatly help you change the way you view this essential path of learning and growing.
Investing isn’t easy. It never will be. It’s not meant to be. “Easy” doesn’t have the power to create freedom or to improve us. Things that are difficult have that power. This is why very few people ever become financially free. You can make the difficult choice to become a real investor. You can make the difficult choice to pay the price that is involved. “Freedom”, as my Grandpa Christensen (WWII POW) used to always say, “isn’t free”.
