Blue field like crop rows and burgundy border, saying "Don't Just Survive - Thrive

Rich Dad’s Guide to Investing

By Robert T Kiyosaki

  • Decide which of the three you want in what order: to be secure, to be comfortable, to be rich and make plans accordingly
  • Basic Rule #1 : know what kind of income you are working for
    • Earned: salary or wage
    • Portfolio: paper assets like stocks and bonds
    • Passive: real estate or business investments
  • Basic Rule #2: convert earned income into portfolio or passive income as efficiently as possible
  • Basic Rule #3: Keep arned income secure by purchasing a security that helps you convert earned income into passive or portfolio income. What is a security? Something that you hope will keep your money secure. The secret is to know which are liabilities and which are assets: If it makes money, it’s an asset. If it loses money, it’s a liability. It’s about perception.
  • Basic Rule #4: The investor is the real asset or liability. 
  • Basic Rule #5: True investors are prepared for whatever happens, vs someone who tries to predict.
  • Basic Rule #6: If you are prepared by education and experience, when you recognize a good deal, money will find you or you will find it.
  • Basic Rule #7: Be able to evaluate risk vs reward.
  • When you are truly rich, you will be able to invest at the “rich level” of investing, which takes:
    • Education
    • Experience
    • Excessive cash so that you can learn from failures
Be financially literate:
  •  The direction that cash flows is what determines if something is an asset or liability in the moment. An asset puts money in your pocket. A liability takes money out.
  • It takes at least two statements to see the whole picture – remember that your expense is someone else’s income. People out of control of their finances make the other people rich.
The 90/10 Riddle: how do you create an asset without spending money to acquire it? That is how 10% of people have 90% of the money. (Create a business.)
Analyzing investments
  • Financial ratios: 
    • Gross Margin Percentage = Sales – Cost of Goods Sold/Sales
      • If gross isn’t there, there’ll be no net.
    • Net Operating Margin Percentage = Earnings Before Interest and Taxes/Sales
      • The higher, the stronger the business
    • Operating Leverage = Contribution (Gross Margin)/Fixed Costs
      • Higher than 1
    • Financial Leverage = Total Capital Employed (Debt & Equity)/Shareholders’ Equity
    • Total Leverage = Operating x Financial leverages
      • Keep it under 5
    • Debt to Equity Ratio = Total liabilities/Total Equity
      • 1 to 1 or lower
    • Return on Equity = Net Income/Average Share holders’ Equity
  • Real Estate Ratios:
    • Cash oN Cash Return = Positive Net Cashflow / Down Payment