Thursday, November 03, 2011

Different types of Investors as discussed by Robert T. Kiyosaki

I've read books about Robert Kiyosaki, and if I used words like "Financial Expert" or "Highly Financial Intelligent", in ways he used to discuss about finance. No one would give a doubt on those words. 
In one of his book "The CashFlow Quadrant". I've read about the different kinds of Investors which I think the way he explain is so complete and so I would like to share some of the ways he explained about the types of Investors.
The different kinds of investors as describe by Robert in as below:

Level 0: THOSE WITH NOTHING TO INVEST
These are the people that spend everything they made. According to Robert it also consists of those "rich" people you see out side which they seems like very rich but spend more than they can afford and they will spend more and more. And 50% of adults falls into this categories. 

Level 1: BORROWERS
These are the people that solve their financial problems by borrowing of money. They use one credit card to cover another credit cards. They borrow from one friend to pay for the debts of another friend. 
They loves to pay installment and they tends to buy things that will depreciate in values. They love shopping and always tell themselves "you deserve it". "You're worth it". 
If they have money it will be spent and if they don't, they will borrow. Their problems will always be not making enough money. Even their income constantly growing but it doesn't seems enough for them. Their habits of borrowing, spending and shopping is out of control.

Level 2: SAVERS
These are the people that always put aside small amount of money to save. The money are in low risk, low return such as savings, FD. They normally save to consume rather than save to invest. They believe in paying cash. They are afraid of credit and debt. They like the security of the money in the bank.
Even by showing them that saving turns out negative return (after inflation), they still unwilling to take the risk. They do not know that US dollar has lost 90% of its value since 1950. They often have whole-life insurance policies because they love the feeling of security.
They waste their most precious asset which is time on something small and would save them pennies. They will look for discount, vouchers, coupons, etc.
"A penny save is a penny earn" is something they will tell you. Their almost opposite of Level 1 Investor. 
Level 3: SMART INVESTORS
A total of 3 types of smart investors here.
3a: people here is "I Can't Be Bothered" group. they have convinced themselves that their not good in money or numbers. They are too busy and won't learn about money. They leave everything to financial planner who help them diversified. Work very hard and tell himself he has a retirement plan or saving plans from insurance.

3b: This categories is known as cynic. The know a lot about investment. Too much that they know how it will not work well. They are dangerous people around. Often too intelligent, speak with authority and are successful in their field. They are professionals and read everything they can possibly know about financials. They can tell you how each and every investment will fail and ripped you off your money. Yet these people follows the market and read all financial news. They know about the financial investment jargon. When bad news happens, they will say "I knew it". 
Deep down they can see people getting rich from investment, but security is more than fun. 
Cynicsm is a combination of fear and ignorance, which in turn causes arrogance.
They often enter market swing late, waiting for the crowd of social proof that their investment decision is right decision. Because of the wait, they buy late normally at market top and sell late as well. They will get ripped off most of the time. Everything they were so afraid of happening happens again, and again. 
Worst Cynic is among those academia, government, religion and media who only want people to acknowledge them when something turn out not right. But when things turn out well, they will talk less and jump into the market late.

3c is the gambler. They treat investment just like gambling and they don't set rules nor having any principles. They will love it when the market turns out in their favor but most of the time they will be ripped off. They always look for the holy grail and search for secret of investing. They loves tips and shortcut. They jumps into any kinds of investment and trying to win big but usually strike out. They only remember the one stock they pick that wins but ignore those that they have loss. 

Level 4: LONG TERM INVESTORS
These groups of investors aware of the benefits of investing. They are actively involved in their own investment decision. They have long term plan and objectives. They seek advice from competent financial planners. They invest in real estate, business, commodities and other exciting investments but taking conservative long term approach. Most millionaires in America are in this categories.

Level 5: SOPHISTICATED INVESTORS
They afford more aggressive or risky investment strategies. They have good money habits and solid foundation of money and is also investment savvy. They cut losses and usually focus and not diversified. While hating to lose but they are not afraid of losing. They look at loss a lesson. They are clear with principles and rules of investing. 

Level 6: CAPITALISTS
Few people in this world reach this level. They are people who change the world, creating jobs, creating economy and create investment of themselves to help people. They do not being just rich but they make others rich as well. Involving in projects, products, company that masses find it popular. Names like Henry Ford, Steve Jobs, Bill Gates are from this category.

Which one are you?
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