I was enlightened after reading Robert Kiyosaki’s Cashflow Quadrant. It appears that there are many kinds of investors in this world. Interesting. Can you identify which kind you are?
The first kind can be categorised as the “Nothing” investor. No money to invest. All your income is spent. For some, even the ones who ‘look rich’, they spend more than their income!
It seems that 50% of adults are in this “Nothing” category. It doesn’t include you, of course as you are a part of this elite group.
The second category is the “Borrower“. As the name indicates, you are in this category if you borrow your way through life. You borrow money from your credit card,personal loans for your expenses .
The problem if you are a borrower, is not the amount of money that you have as an income. It’s just that you have poor money habits. Poor habits lead to poor actions, which lead to poor results.
The third category is the “Saver“. You are a saver if you save a little money every month, and keep it in a savings, or Fixed deposit (FD), or Recurring Deposit(RD)
Many save not to invest. But to consume. They like cash, not credit or debt.
The only problem with saving money this way is that it gives only very low returns. Frequently, it is a negative return (after inflation and tax).
You should of course have savings like the above. Some financial experts recommend that you should have about two years of your salary as savings. So that you can maintain your present standard of living for two years, if you have no income (because of retrenchment). Or you can survive for four years at 50% of your normal standard of living.
But anything above the amount needed for an emergency situation, should be better invested at 10-15% in other safe investments. You need to study, and look out for, such investments.
The fourth category is the “Apathetic“.Many young professionals are in this category. They invest but do not learn about their investment as they are very busy.
The fifth category is the “Cynic“. Or the Smart Aleck. You are in this category if you know all the reasons why an investment will not succeed. It appears that cynicism is the result of fear combined with ignorance, which leads to arrogance. Wowww! What an enlightening revelation!
Cynics are therefore best avoided. They infect people with fear, disguised as intelligence. Robert Kiyosaki wrote, “The worlds of academia, government, religion and media are filled with these people“.
Cynics often buy high and sell low. And then blame the market for ‘swindling‘ them.
The sixth category is the “Gambler“. The gambler thinks that life is all about ‘luck‘.
You know a gambler when he asks you, “Got any tips on which stock to buy?”. Just as a horse racing gambler will ask you which horse to bet on.
The seventh category is the “Long-Term Investor“. You are in this category if you learn, often through training seminars, before investing. You know about the power of compound interest.
You are actively pursuing your financial goals. With the appropriate planning. You know your expenses. Your debts and liabilities. How much to invest per month. You are not ‘flashy‘.
The eight category is the “Sophisticated Investor“. You are here, if you create your own deals. With at least 25% return-on-investment (ROI).
You are financially savvy. You know how to manage risk. You are focused. Once you have one investment ‘running on automatic’, then only you diversify.
Bad times do not deter you. You can see opportunities, whether in good markets or bad. You can consider yourself a sophisticated investor if you can arrange the deals, and organise the investments.
The ninth category is the “Capitalist“. You organise other people’s money, talents and time. You get paid for results. For creating a new company. A new organisation. Returns of at least 1000% is expected.
The moral of the story? What type of investor you are, will determine where you will be. Decide what you want to be, and take the necessary action (or inaction).
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