Robert Kiyosaki

What is it about personal finance writers that make them so irritating?  Probably the most cloying is Robert Kiyosaki, the author of Rich Dad, Poor Dad, who for some reason has a weekly column up at Yahoo! Finance.  What makes his style particularly bad, besides his horrendous advice, is that every column is structured the same "My poor dad told me to _____, but my rich dad knew to ______".  One thing I find to be so damaging about writers like this is that they give the idea that the difference between the rich and the average person is that the rich simply know a few tricks.  Not that the rich worked saved better, work harder, may have been more creative, got a better education, but merely that the rich know how the game is played.

Today's column is called To Diversify or Not to Diversify: Why the Rich Get Richer.  He starts out with an out-of context quote from Warren Buffett: "Diversification is a protection against ignorance. It makes very little sense for those who know what they are doing."  Now, I have to believe that Mr. Buffett was talking about mutual funds, and other means of buying the whole market (like index funds).  In fact, it's known that Mr. Buffett is well diversified.  He owns over 30 different stocks, is invested in multiple currencies, precious metals, and his company has subsidiaries in industries from insurance to cowboy boots.  Sounds diversified to me.

But Mr. Kiyosaki doesn't tell the reader any of this, only that Buffett is against diversification, and if you want to get rich you should be too.  Mr. Kiyosaki insinuates that a diversifier is simply one who doesn't understand the market and is merely too stupid to pick the right stocks.  This is funny since most professional managers can't beat their indices.  Is the average reader of Rich Dad, Poor Dad really supposed to be superior to a fund manager?

In his column he admits that he is focused purely on real estate (something, by the way, that Warren Buffet is assiduously avoiding at these prices).  It'll be fun to check back in with him in a few years.

In suspect that in the future people will be saying "My Rich Dad used his brain and managed risk, my Poor Dad listened to Bob Kiyosaki".

Comments

[TechTrader]

I've read material on the Net that raises serious questions about Kiyosaki's credentials and his ability to dispense financial advice. Clearly, he makes a bit of money from real estate (who hasn't the last 5 years) and then he makes his real fortune telling others how to get rich.
Hope his books say that it's better to be lucky than smart...

[Jim]

Kiyosaki is so arrogant. He's a good salesman - I'm sure he made the majority of his net worth selling books, not investing in real estate, the stock market, or commodities.

[BillBass]

It really pissed me off when I read Richards coments. I thought how many unexperienced people are going to belive the advice of his rich dad and going to loose their shirts in the market. I am a Financial Advisor and I see it every day. Diversify, Diversify, Diversify.

[J Reed]

"This is funny since most professional managers can't beat their indices."

The author appears to believe that professional managers are good at what they do. If they really were that good, they wouldn't need a job managing your money. They could make more money managing their own money, or at least would be willing to personally take on the risk they put their clients through (i.e. Buffett). I don't see Donald Trump managing a mutual fund.

The best fund managers are willfully unemployed because they made themselves rich.

What if Tiger Woods devoted an equal amount of time to his 10 favorite sports? You would be saying "who is tiger Woods?"

That said, Buffett is not diversified. He invests (almost) exclusively in undervalued investments. That is his expertise and I don't think you will ever see him go outside of that.

If you don't want to do a few thousand hours of quality independent study, then stick with diversification to protect yourself as Buffett said.

Kiyosaki is right, but you CANNOT follow his advice unless you become an expert yourself in your chosen field. I read his book at 22, now I am 29, married with 2 kids, and about 2 years away from total financial independence. I have been a govt. employee the entire time. It did NOT come easy.

If you don't want to do a few thousand hours of quality independent study, then stick with diversification to protect yourself as Buffett said.

[Quintin Coetzee]

Look, Robert may not be the best financial advisor there is, but for me as a 24 year old engineer who is just getting into the finacial game I have learnt the following basic but effective lessons

1. Pay of debt a.s.a.p
2. Its not what you earn, but what you have left and what you do with what you have left
3. There are better ways to let your money grow than with property (Propably depends on your country)
4.Become the bank, not the banker
5. He has just kick started journey to becoming finacially free. I am now ready to go onto bigger and better things

Regards
Quintin
South-Africa

[Joe]

It is typical of financial commentators such as the author, to write under the assumption that that the average layperson is au-faire with all financial concepts. This is far from the truth. All Mr. Kiyosaki does is educate laypersons by pointing out the pitfalls of conventional financial advice (diversify, diversify, diversify, mutual funds - all systems of investment without any control).

[Cashflow in Ontario]

to clear things up, robert says that warren is not diversified because he only owns paper assets, ie stock. robert says he himself is diversified becuase he owns many different asset classes, ie. businesses, real-estate, commodoties, prescious metals and of course stock. when warren talks about diversification, he is speaking of only different stocks. he is correct in saying that if you know what you are doing then you don't need to diversify in stocks. but the diversification that these two men speak about is not the same.

I'm 23, own 4 rental properties with a total of 9 units. i own a property developement business that build 4 houses/year. my fiancee also usues roberts teachings and she too owns 7 units in 4 buldings. i've been a student of reberts sine i was 12. it's worked out pretty good so far i'd say.