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Up Close With Robert Kiyosaki: Bringing The Unfair Advantage Into The Financial World
In the Spotlight | 25 May 2012
By: Xavier Lim
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By: Choo Hao Xiang
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Knowledge is the new money. That is the mantra Robert Kiyosaki – the man behind bestseller “Rich Dad Poor Dad” – holds dear. As an avid advocate of financial literacy, Kiyosaki has always been doing what he loves. His passion for financial education has led him to a series of New York Times Bestsellers, including “Conspiracy of The Rich: The 8 New Rules of Money” and “Unfair Advantage” being his latest book.

Besides putting his investment philosophies into words, Kiyosaki made appearances on influential shows such as Oprah, Bloomberg International Television and CNN. His message? A good financial education is crucial when it comes to financial freedom.

Shares Investment caught up with Kiyosaki recently. Through this interview, he shared his views on the current economic landscape and how an average investor can posture him/herself in these testing times so that he/she has an ‘unfair advantage’ going into the game.

Shares Investment: What qualifies as an ‘unfair advantage’? Can you provide some instances where an average investor can create such unfair advantages over the others?

Robert Kiyosaki: In a fair game, everybody plays by the same rules. But, the rich have an unfair advantage: financial education. They play by different rules when it comes to money, which is why in the US, for instance, over 90 percent of the financial gains over the last decade have gone to the top 1 percent, economically.

One rule the rich play by is using good debt. Most people are told to avoid debt like a plague, but the reality is that there are two kinds of debt – good and bad. They don’t teach us that in schools.

By using good debt, any investor can gain a higher return because they use less of his or her own money to secure assets that they may never have been able to buy on their own. What qualifies the debt as good is when the asset’s income – rental income from real estate investment, for example – pays for the expense of the debt and provides income. You pay less out-of-pocket to secure the asset, have your expenses covered by the income, and gain a higher return, which allows you to invest using that same formula again and again. That’s an unfair advantage that almost anyone can use.

SI: There are contrasting opinions on the global economic outlook. In your view, is the worst over for us? What are the key challenges we are about to face and what can one do to shield him/herself from these hiccups and come out as a winner?

Kiyosaki: I don’t believe that the worst is over. There are still many problems facing the global economy. On top of it all, the central banks of the world have printed a ton of money to fight these problems, which will result in inflation in the future.

The way to ‘prepare for the worst’ will be slightly different for everyone. There is no one silver bullet. For me, I’m investing in assets that generate cash flows and hedge against inflation. This includes things like gold and silver and income-producing real estate. I’m also investing in things like oil and natural gas because it is in high demand and a scarce resource.

More than anything, and because money is a currency and not backed by anything tangible, it’s important to pay attention to where the money is flowing and scoop up assets when they are cheap.

SI: Saving is a widely known Asian culture. You’ve mentioned that the concept of saving money has, however, become obsolete in the current context mainly due to currency devaluation. Hedging is the ‘new rule’ now. How does one ensure hedging efficiency when there is so much volatility in today’s markets?

Kiyosaki: There are traditional assets that hedge against inflation over time. These include precious metals, commodities, and real estate. The key is to pay attention to the trends. Right now, gold and silver may be overpriced in the short term, but real estate in many areas is at the bottom of the market. The key is to see where the money is flowing in and out of and to react accordingly.

This requires vigilance and a high level of financial intelligence. Perhaps the best thing you can do if you are uncertain is to take some time and invest in more financial education. This will help you to follow the right trends and information.

SI: You mentioned in a video that US$200 is not out of line for silver. Does that still stand? What is your basis behind the forecast?

Kiyosaki: In the long run, I don’t think US$200 is out of line for silver, especially considering the coming wave of retirement for our baby boomer generation, which is something like 78 million people and the biggest generation in the US. Soon they will be demanding Social Security and Medicare benefits that our government simply won’t be able to afford. The only option will be to raise taxes or print money, both of which will result in inflation.

Technically, silver’s historical ratio to gold over many centuries is 16:1. Currently, it’s over 50:1. So, as inflation pressures kick in over the long run and people are looking for safe haven investments, I expect both gold and silver to continue growing, and I expect silver to catch up to the historical ratio between it and gold as it becomes not just an industrial metal, which it is now, but also viewed again as a form of money.

SI: What is the most important advice you would offer to someone who is thinking of doing a start-up?

Kiyosaki: I would encourage them to study and understand the B-I Triangle, which you can read about in my book, “Before You Quit Your Job”.

In the B-I Triangle, there are many important components to consider, but the most important is mission. The world is filled with great products that fail because the businesses that created them lack a strong mission.

The mission is the spirit of the business; it is the heart of the business. Without spirit and heart, most entrepreneurs will not make it, simply because the road ahead is a hard one.

Once you establish your mission, it’s important to build in all the elements of the B-I Triangle, which include great leadership, a competent team of managers who work well together, excellent cash flow and financing, clear and effective sales and marketing communications, systems that work efficiently, clear and tight legal documents and agreements, and of course, a great product.

SI: In this dog-eat-dog world, how does one gain from your books and seminars so as to consistently stay ahead of the game?

Kiyosaki: I’m glad that people read my books and go to our seminars. But at the end of the day, you have to put the knowledge you gain into practice. You’ll make mistakes, but that’s the only way you’ll learn. My advice would be to start small with real money and start doing what you’ve been studying. Learn from your mistakes and keep moving forward.

Kiyosaki will be in town to speak at the “Unfair Advantage” seminar, a 3-day event commencing 1 June (Friday) at Singapore Expo Hall 2. Shares Investment is proud to be a supporting partner of the aforementioned event.

This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

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