Robrt T. Kiyosaki article and Cashflow Quadrant investing advice

As Robert T. Kiyosaki tries to redefine an active investor as someone who lives off of investments, I’ll stick with the more usual view – someone who actively chooses investment vehicles instead of following indexes.

Nevertheless there is some useful information in his article:

The sad thing is: Many people think they’re investors when they’re not. Lots of people think their 401(k)s and IRAs, which have stock, bond, or mutual fund holdings, are investments, but I consider them savings plans. People with such retirement plans are what I call passive investors. They’re simply “saving” for retirement.

Similarly, if you own your home and live in it, I don’t consider it an investment. Without cash inflow monthly (and with money going out each month for mortgage payments, utilities, property taxes, insurance, and maintenance), your house is a liability, not an asset. It might become as asset — if you rent it out for income each month that exceeds your expenses on it, or when you sell it and realize a capital gain.

I love his idea of investing for cash flow first and capital gains second, but as usual he only has some vague advice about real estate to offer. In his book Cashflow Quadrant, he argues that rich investors buy into IPOs, large real estate projects, and businesses while middle class investors go for mutual funds, blue chip stocks, condos, houses, and duplexes.

Before one can become a rich investor, one first needs to become a long-term investor with an approach recommended by Peter Lynch or Warren Buffet. So far so good, but here the advice gets confusing. On page 89 he says these investors “are actively involved in their own investment decisions.” On page 90 he cautions “Don’t try to outsmart the market,” and suggests the Vanguard 500 fund. At least we have one piece of specific advice from Robert T. Kiyosaki.

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