Kiyosaki's latest

[Jay_Gatsby]

http://finance.yahoo.com/columnist/article/richricher/9262

I agree with the first part of his article, namely, people should quit lying to themselves about finances and investing. The rest of it is, well, less than accurate.

A Losing Encounter

As if to illustrate this, a loser came up to me the other night at a book signing and said, "I took your advice and got a job in sales."

"That's good," I replied.

"Yeah, but I quit," he said.

"Why?" I asked.

"Because I didn't want to make my boss rich," he said in a wimpy tone.

I nearly lost it. Raising my voice, I said to Larry the Loser, "How can you expect to get rich if you don't want to make someone else rich? Did you even sell anything?"

"No," he said, "I didn't. I couldn't sell because I didn't like my boss. I couldn't sell because of him."

To this I replied, "Don't make your boss the fall guy for your inability to sell. You need a personality transplant. You act like a loser, and nobody wants to buy from a loser. And who wants to make you rich if you don't want to make others rich? Grow up!"

I thought Kiyosaki always espoused that you should work for yourself, and that anyone who works for someone else is simply making that person richer. Thus, why does he criticize the guy? Perhaps it's because the guy quit without ever making an effort to sell, and blamed the boss for his laziness.

Mutual Funds Are for Losers

Today, there are millions of working people who are afraid of losing their jobs and of losing money in the stock market. That means they may never be able to retire.

These are the people who fall victim to the investment-and-advice gurus who recommend that they work hard, save money, get out of debt, invest for the long term in mutual funds, and diversify. Is this advice for people who play to win, or for people who play simply not to lose? I'll say it again -- grow up.

Look at the performance records of mutual funds and you'll see who the winners are, and why salespeople recommend that you invest for the long term. Over 40 years, most mutual fund companies retain approximately 80 percent of the gains while investors receive a paltry 20 percent. Investors also put up 100 percent of the capital and take 100 percent of the risk.

How is it that mutual funds are bad? Where does he get his numbers? Yes, mutual funds do charge fees. Those fees can be minimized through funds sold by Vanguard, et al. Does Kiyosaki think real estate is a better game to play in today's market? In real estate you're playing more with the bank's money, but your credit and your money are both at risk if you have to sell the property at a loss or let it go to foreclosure.

 

[d]

there will always be a "latest" with this turkey.  the most egregious thing he says (repeatedly) is that it is bad advice to "work hard, save money, get out of debt, invest for the long term in mutual funds, and diversify."  guess i've been baaad -- whatever was i thinking?!

his mutual fund expense/return numbers are not necessarily incorrect, but are definitely misleading.  they result from comparing mf returns to totally expense free market returns, compounded, implying that all mf expenses are pure profit, and that one could somehow invest without incurring any fees of any sort.

one last note ... where would we all be if there were no employees?  and if being an employee is so bad, why are there so many of them?

gobble, gobble!!

 

[brewer12345]

He's not a turkey. An assclown or a dirtbag, sure, but not a turkey. Don't smear a noble avian race by associating it with kiyoassclown.

 

[d]

'tis true the turkey is a noble bird, and certainly more noble than he, but i use the term as slang: "one deficient in judgment and good sense: ass, fool, idiot, imbecile, jackass, mooncalf, moron, nincompoop, ninny, nitwit, simple, simpleton, softhead, tomfool. ... dope, gander, goose.... cretin, ding-dong, dip, goof, jerk, nerd, schmo, schmuck."  with that definition at hand, i think "turkey" is sufficiently descriptive, though restrained.

 

[azanon]

What seems silly to me about Kiyosaki criticising mutual fund investing, is that he acts like your investment decision is the most important decision in your life.    In reality, compared to many other things, its not really that important at all.

Let me explain myself.   I have a few close friends;  some very well off (far more so than me), and some very poor.   Would making a different investment decision change any of their lives that drastically?   No - unless they founded the next Microsoft, and who's going to do that.

Your investment choice just isnt that important in the grand scheme of things.  Its who you are, your education level, your job, your drive, your ability to advance yourself, your discipline to simply save and live modestly, etc.    Heck, if you're just talking about saving, HOW MUCH you save is SO much more important than what you save it in; there are plenty of models to show that.

So Kiyosaki talks about investing as if its the be-all, end-all.   In reality, its a minor decision in this game of life.    How much you keep is at least 4 times more important.   So is how much you make doing your actual job (not investing). For example, having 20% of a 150K dollar income to save every year in a mutual fund, will, in almost all cases, take you further than trying any of his real estate schemes "Investing" 20% of a 40K dollar income.

Another point that can never be forgotten. Mutual fund investing is fire-and-forget. "Real Estate" investing IS a job in and of itself.

 

[spideyrdpd]

Without Rk what would you guys talk about ?

It interesting that when you guys berat people for having funds with costs its great advice. When RK says it ...

Now my MF in the 401k all have short term tradign fee's. So if I want to change my funds I gotta pay additional bux

Oh and even if my real estate goes down. I still make money.
Although RK talks more about commodities these days

 

[haha]

his mutual fund expense/return numbers are not necessarily incorrect, but are definitely misleading.  they result from comparing mf returns to totally expense free market returns, compounded, implying that all mf expenses are pure profit, and that one could somehow invest without incurring any fees of any sort.

While you cannot invest with no expenses at all, you can do it quite a bit more cheaply than mutual funds- even Vanguard Funds with 0.25% expense rations. Remember, they may be low traders, but they do trade, if only to keep current with their index benchmarks.

Many here have $2 million+ portfolios. That gives you quite a bit of room under the $5000 that Vanguard would take each and every year just for the privilege of letting them hold your money.

I think in a tax deferred account it might be best to own low cost funds until you reach the level where you could obviously do it for less on your own.

It is trickier in taxable accounts, because you get kind of locked in by unrealized capital gains that will eventually be huge.

Ha

 

[peggy]

Without Rk what would you guys talk about ?

It interesting that when you guys berat people for having funds with costs its great advice. When RK says it ...

<snipped remainder>

The quote above talks about people who invest in mutual funds as "victims" - implying that ANY investment in mutual funds is bad. That's what irked me about the Kiyosaki piece.

I also question his statement about mutual fund companies retaining 80% of the profits and investors only getting 20%. Even with high mutual fund fees (say, 5%), I don't see how he can get an 80% number, but I'm no mathematician.

Kiyosaki, IMO, overgeneralizes and over grinds his axes. That said, there are still some bits of good advice in his stuff.

 

[kumquat]

I also question his statement about mutual fund companies retaining 80% of the profits and investors only getting 20%. Even with high mutual fund fees (say, 5%), I don't see how he can get an 80% number, but I'm no mathematician.

Try http://www.efficientfrontier.com/ef/996/broker.htm

 

[Jay_Gatsby]

Try http://www.efficientfrontier.com/ef/996/broker.htm

Interesting analysis, but it doesn't smell right to me.

 

[d]

Without Rk what would you guys talk about ?

A: Ghengis Khan

 

[d]

Interesting analysis, but it doesn't smell right to me.

it's correct, but as i suggested previously, it's misleading. it suggests that any fees are without value, and that an individual could somehow replicate what the broker or mutual fund does without cost or effort ... a likely better comparison would be the return one could get in a savings account or something feasible.

 

[2B]

Let nothing I say sound like a defense of RK. He has a great business selling "motivational" books and seminars. He's big on hype and short on specifics. I also suspect we won't hear another peep out of him about commodities if oil and gold pull back long term from their recent highs.

As for mutual fund fees, they are all "bad" as are any other fee involved in investing. It's just relative. If I put together a $1MM portfolio of 50 stocks, that will cost me about $500 through my discount broker. I'd have great diversification similar to an ETF or index fund for a one time expense ratio of 0.05% -- about half of a year of SPY. If I did the same thing with $100K, it would still only be 0.5% but about 5 years worth of SPY's management fee.

The other extreme is when I go to my A.G. Edwards who buys load mutual funds for my account. There goes 5% off the top plus the annual 1.8% management fee for the fund plus the 1% annual fee charged for the honor of having my account with A.G. Edwards.

In either case the fees lower my return.

 

[spideyrdpd]

I think they come up with the 80% number cause your paying fee's irregardless of returns. So they get there check even if your funds go down.


Again its something you guys on here repeat like a mantra. Look for investments with low fee's. So sure you can pick apart what he wrote but obviously he is saying something that you guys agree with .

Also he has been discussing the commodities for a really long time. So yes maybe one day he will switch to something else. So whats your point ?

 

[2B]

Also he has been discussing the commodities for a really long time. So yes maybe one day he will switch to something else. So whats your point ?

I didn't hear a thing from him about commodities until they had already shot up a massive amount. I'm sure he had it in his super secret private newsletter years earlier. I just wasn't a subscriber.

Here's a tip. If oil goes to $20 next year he'll tell you how he made a fortune (another one) shorting oil and whatever else went down.

There's lots of stock pickers that do the same thing. "If you'd followed his call on the market turn in '01 you'd be rich today." To bad the first time anyone heard he said it was going down was around '03.

Here's the basic question on all these "genius.'" If they can constantly pick the tops and bottoms of everything, why are they piddling around for the pocket change they can make selling books, investment products and market advice?

 

[d]

So whats your point ?

He's not a turkey. An assclown or a dirtbag, sure, but not a turkey. Don't smear a noble avian race by associating it with kiyoassclown.

'tis true the turkey is a noble bird, and certainly more noble than he, but i use the term as slang: "one deficient in judgment and good sense: ass, fool, idiot, imbecile, jackass, mooncalf, moron, nincompoop, ninny, nitwit, simple, simpleton, softhead, tomfool. ... dope, gander, goose.... cretin, ding-dong, dip, goof, jerk, nerd, schmo, schmuck."  with that definition at hand, i think "turkey" is sufficiently descriptive, though restrained.

thought the point was quite clear.

 

[spideyrdpd]

So your response if cause you didnt read it then it didnt exist ?
Although Rk didnt discuss the commodities as much as he did real estate. He has talked about his silver mine and has had a website devoted to investing in gold. I know cause I used to say that it didnt make any sense. Since the point was to buy real estate at a discount and make money when you buy. Investing in gold still seems like speculating to me.

So D
How has your method of investing worked ? RK was retired he decided he wanted mo money. Seems to be working ok for him

 

[d]

So D
  How has your method of investing worked ?

my method ("work hard, save money, get out of debt, invest for the long term in mutual funds, and diversify.") has and is doing fine ... and best of all i don't intentionally give anyone bad advice in the process. thanks for asking.

 

[brewer12345]

So your response if cause you didnt read it then it didnt exist ?
Although Rk didnt discuss the commodities as much as he did real estate. He has talked about his silver mine and has had a website devoted to investing in gold. I know cause I used to say that it didnt make any sense. Since the point was to buy real estate at a discount and make money when you buy. Investing in gold still seems like speculating to me.

What sets off my BS detectors with Kiyoassclown is that he spends a lot of time bragging about his supposed good investments, but very little time talking about how to invest (although he hints that if you pay up a lot he will clue you in).

 

[PsyopRanger]

I just had a similar discussion, I think RK's books are good motiavtional tools to actually start investing or invest in other areas. However, he gets you fired up but doesn't tell you how. He makes the reader go out and find how buy reading other books from other people. Most people need a strong reason "why" to invest (FIRE, Less Stress, Work Less, Live More) there are thousands of books and material on how to invest. I only read a few of his books but it motivated me to learn more on investing and real esate from other sources.

I would say RK is a master of marketing and motivation but the how-to of proper investing he leaves out.

I think his MF comments are directly at the average 401k holder who doesn't even know what funds they are invested in or expenses. A lot of people bought heavily into tech funds and then in 2000, advisors told investors to hold and invest for the long term while there fund lost 35%.

At my last TSP meeting, the presenter couldn't answer basic questions about the funds, fees, and returns but he wanted us to "sign up and pick a few." I think RK tries to play to this crowd more than the experienced investors striving for FIRE as we see on this site.

Just my 2 cents.

Lance

 

[spideyrdpd]

Brewer isnt that what everyone does ?
Also people get lots of advice from Suze who was slinging hash not that long ago.
Plus people like Ramsey. Who I am sure didnt get all that much money from paying down debt as he does talking about it.

Rk did of course talk about real estate, but people think that he pushed it cause of the real estate bubble. In some ways the bubble actually hurt the business. Pre or early bubble you could get property that cashflowed. It wasnt about getting rich quick it was about building an income stream. Also cause homes arent liquid you can get a discount to value and increase your returns with leverage.
Back when real estate went up 5-6 % that was a 50 to 60% additonal return on your investment

 

[haha]

Brewer isnt that what everyone does ?
Also people get lots of advice from Suze who was slinging hash not that long ago.

I haven't read her much, but I think Suzie doesn't claim to be anything other than a personal finance journalist, kind of like Scott Burns. Kiyosaki seems to me to be in the class with "No Money Down" Robert Allen, or any of the other sociopaths who inhabit late night infomercials.

Ha

 

[brewer12345]

Brewer isnt that what everyone does ?

Not as such. For example, Andrew Tobias has a few excellent books out and his daily web page columns frequently have excellent investing tips and ideas, usually supported by a rational argument as to why he thinks something is a good idea.

 

[justin]

When I read Rich Dad, Poor Dad around 2000-2001, I wish Kiyosucki had told me to buy oil and gold. I'd be much richer now. Truth is he didn't hype commodities until after the real money was already made.