One of the best books I have ever read on the subject of investing is Rich Dad’s Guide to Investing written by Robert Kiyosaki. I would like to share with you some of the important stuff I learnt in this book that will help you get a better understanding of this confusing subject.
Since it means different things to different people:
These include stocks, bonds, mutual funds/unit trusts, real estate, insurance, commodities, savings, collectibles, precious metals, hedge funds, etc. Each one of these groups can further be broken down into different subgroups.
Stocks can be subdivided into:
Mutual funds/Unit trusts can be subdivided into:
Real estate can be subdivided into:
Insurance can be subdivided into:
All these different investment products are each designed to accomplish something different. This complicates the subject of investing even further because there are different investment procedures used in dealing with these investment products to achieve the desired goal or investment plan.
The word “procedure” here describes the technique, method, or formula for buying, selling, trading, or holding these investment products.
Here are some of the different types of investment procedures:
Here are some examples of different types of investors, their product specialties, and their investing procedures:
|Stock trader||Stocks||Buying and holding,Sell then buy, Dollar cost averaging|
|Day trader||Stocks||Buying and selling within a day|
|Real estate investor||Real estate||Buying and holding (rent or lease), Buying, and selling (Flipping)|
|Rare coins collector||Rare coins||Buying and holding|
|Car dealer||Cars||Buying and selling|
|Saver||Bank fixed deposits||Saving for long term|
|Producing products in demand and sell|
|Buying and selling in bulk|
|Buying and selling in small quantities|
non-consumables products and services
|Linking sellers and buyers|
If you look around you, you’ll see that people have invested in many different things. Look at the furniture in your house, your car, your favourite soft drinks, the office buildings you work in, the PC, Mac or Laptop you are currently using, the shopping center where your favourite store is in, the bank, the hotels, your clothes, etc. All of these things are there because someone invested in the business or building that delivers those things.
Since investing means different things to different people, there is no one person who can possibly be an expert at the entire subject. There are many different investment products and many different investment procedures.
Yes, everyone has a bias including you.
A person who is good at stocks will say, “Stocks are your best investment.” A person who loves real estate will say, “Real estate is the basis of all wealth.” Some people say “Diversify. Don’t put all your eggs in one basket,” and still others such as Warren Buffet, America’s greatest investor, says, “Don’t diversify. Put all your eggs in one basket and watch that basket closely.” Then you add your procedure bias.
All of this personal bias from the so-called experts adds to the confusion that shrouds the subject of investing.
So, what really is investing?
Investing Is a Plan, Not a Product or Procedure.