Robert Kiyosaki: The Best Time To Get Rich Isn’t When You Think It Is
Written by
John Csiszar
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Chris Cluff
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There are many paths to wealth, but not everyone agrees when the best time to get rich is.
Popular financial commentator Robert Kiyosaki, of “Rich Dad, Poor Dad” fame, posted a video in early November on his “Rich Dad” YouTube channel explaining his basic investment philosophy, including when he feels the best time to get rich is.
Here are some of the highlights of Kiyosaki’s broadcast, including a deeper exploration of his recommendations and whether or not they might apply to you.
Time To Get Rich Is During a Crash
According to Kiyosaki, what the average investor doesn’t understand but the rich know is that the most money is made during a crash.
It may not feel like this is true if you have a stock portfolio that trades down 50% during a market crash. But the rich have available cash to take advantage of these types of financial disasters. While assets they own may also trade down, they have the capability to pour more money in during a crash, picking up assets at rock-bottom values.
Think of it like this. If you have $50,000 in a stock portfolio and no other cash, if the market falls 50% you’ll be left with a $25,000 portfolio. It will take a 100% return from there just to break even. But if you have extra capital and can buy another $50,000 of stocks when prices are down 50%, your portfolio will be worth $150,000 when markets recover. Your $100,000 total investment will now be worth 50% more, while those who didn’t invest more during the market crash will see a total return of 0%.
When Does Kiyosaki Anticipate a Crash?
Kiyosaki believes that “the biggest stock market crash in history is still coming.” However, there’s something of a caveat attached to this. In this video, Kiyosaki is quoting a book that he wrote in 2013.
While “the biggest stock market crash in history” may still be coming, Kiyosaki isn’t making any new predictions about an imminent calamity.
Regardless of the timing, however, the point that Kiyosaki is making is that whenever a crash occurs, rich investors view it as an opportunity, not a disaster. While asset values may temporarily fall, the rich get richer by investing when they are cheap.
How Kiyosaki Describes the Money Mindset of the Rich
In this video, and indeed throughout the entire “Rich Dad, Poor Dad” universe, Kiyosaki emphasizes that the rich have a different money mindset than the middle class.
In a rich person’s mindset, according to Kiyosaki, liabilities are transferred to assets. In other words, rich people invest in things to provide them with cash flow, rather than those that take money out of their pockets.
A great example is a car. Cars are viewed as assets by many people, but not by the rich — with the possible exception of rare or vintage cars. To Kiyosaki, even a personal home is a liability, not a real asset. While it might slowly appreciate in value over time, it takes money out of your pocket to own it, in the form of property taxes, maintenance costs, mortgage interest and so on.
The greatest assets for rich people, in Kiyosaki’s view, are things such as rental properties and high-dividend stocks, each of which directly puts tangible cash into investors’ pockets rather than drawing it away.
Do Kiyosaki’s Recommendations Apply to You?
Kiyosaki is the first to say his recommendations do not apply to everyone. Kiyosaki is a cash-flow investor who focuses on real estate to achieve his financial goals. In his world view, you want to generate enough passive income to cover all of your expenses, including the discretionary ones. For Kiyosaki, that is primarily accomplished through cash-generating real estate.
But whether or not you choose to invest in real estate, Kiyosaki has more general recommendations that do apply to all investors. Specifically, he recommends that investors start small and focus on gaining a financial education.
By starting small, investors can afford to make mistakes and learn from them. By the time they have more money, they will understand enough about investing to make sound choices.
Also, as Kiyosaki explains, even small investments turn into large ones over time if you continue to invest on a regular basis, controlling your cash flow and using it to generate even more money.
Regarding Kiyosaki’s view on a big market crash coming, if you’re a consistent investor, it’s not something you should fear. While you may not have an extra $50,000 laying around to take advantage of a big market crash all at once, if you consistently invest every week or every month, eventually you’ll be buying during a selloff and taking advantage of it.
As even Kiyosaki can’t predict when or even if a market crash is really coming, it’s best to consistently invest and reinvest over time — something that even an investor of modest means can accomplish.
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