There are many paths to wealth, but not everyone agrees when is the best time to get rich.
In early November, popular financial commentator Robert Kiyosaki, famous for “Rich Dad, Poor Dad,'' posted on his “Rich Dad'' YouTube channel his basic investment information, including the best time to get rich. He posted a video explaining his philosophy.
Grant Cardone: Passive income is the key to building wealth — here are my top tips
Learn: How to get cashback on everyday purchases
Here are some of the highlights of Kiyosaki's broadcast. This includes a detailed review of his recommendations and whether they apply to you.
sponsor: Open a new checking account and gain access to early paychecks. Up to 2 days early with Discover® Cashback Debit with Early Pay
When the market crashes, it's time to get rich.
What the average investor doesn't understand, Kiyosaki says, is that rich people make the most money during crashes.
If you have a stock portfolio that drops 50% during a market crash, this may not seem true. But the wealthy have the cash to take advantage of financial crises like this. The assets they own may also fall in value, but they have the ability to pour in more money and pick up assets at rock bottom prices during a crash.
Think of it this way. If he has $50,000 in his stock portfolio and no other cash, if the market falls by 50% he will be left with a portfolio of $25,000. From there, you need a 100% return to break even. But if you have extra capital and can buy an additional $50,000 in stocks when the price drops 50%, your portfolio will be worth $150,000 when the market recovers. Your total investment of $100,000 would increase in value by 50%, but someone who did not invest any more during the market crash would have a total return of 0%.
Discover: 6 ways to build wealth in 5 years
When does Mr. Kiyosaki predict a crash?
Kiyosaki believes that “the biggest stock market crash in history is yet to come.'' However, there is a caveat to this. In this video, Kiyosaki quotes a book he wrote in 2013.
The “biggest stock market crash in history” may still be coming, but Kiyosaki is making no new predictions about the impending catastrophe.
But regardless of the timing, Kiyosaki's point is that every time a crash occurs, wealthy investors see it as an opportunity rather than a disaster. Asset values may temporarily decline, but wealthy people can become even richer by investing when prices are cheap.
How does Mr. Kiyosaki explain the way rich people think about money?
In this video, and indeed throughout the world of Rich Dad Poor Dad, Kiyosaki emphasizes that wealthy people think about money differently than the middle class.
According to Kiyosaki, the rich mindset is that debts are transferred to assets. In other words, wealthy people invest in things that provide cash flow rather than things that take money out of their pockets.
A good example is a car. Cars are considered assets for many people, but not for the wealthy, with the exception of rare or vintage cars. For Kiyosaki, even a personal home is a liability rather than a real asset. Its value gradually increases over time, but owning it costs money in the form of property taxes, maintenance fees, mortgage interest, and more.
In Kiyosaki's view, the biggest assets for the wealthy are things like rental properties and high-dividend stocks, each of which puts money directly into investors' pockets rather than taking out tangible cash.
Do Kiyosaki's recommendations apply to you?
Kiyosaki is the first to say that his recommendations do not apply to everyone. Kiyosaki is a cash flow investor focused on real estate to achieve financial goals. His worldview requires generating enough passive income to cover all expenses, including discretionary ones. For Kiyosaki, that is accomplished primarily through cash-generating real estate.
But Kiyosaki has more general recommendations that apply to all investors, whether they choose to invest in real estate or not. Specifically, he recommends investors start small and focus on acquiring financial education.
By starting small, investors can afford to make mistakes and learn from them. By the time you have more money, you will have a better understanding of investments and will be able to make good choices.
Also, as Kiyosaki explains, if you continue to invest regularly, control your cash flow, and use it to generate more money, even small investments can become big investments over time. It changes to
As for Kiyosaki's belief that a major market crash is coming, consistent investors have nothing to fear. He may not have $50,000 on hand to take advantage of a big market crash all at once, but if he consistently invests weekly or monthly, he will eventually be able to buy when the market dips. and will take advantage of it.
Even Mr. Kiyosaki can't predict when a market crash will occur, or even if it actually happens, so it's best to stay invested and reinvest over time, which is best for investors of modest means. But it is achievable.
GOBankingRates Details
This article originally appeared on GOBankingRates.com: Robert Kiyosaki: The best time to get rich is not when you think it is
