Rich Dad, Poor Dad Advice That Actually Keeps You Poor and Him Rich
Robert Kiyosaki is the New York Times bestselling author of the Rich Dad Poor Dad series. His advice is easy to comprehend and is often repeated. Just don’t ask him about investing.
The Rich Dad book does a good job challenging conventional thinking of working for salary versus working towards building passive income. That’s about as much praise we’d give Robert Kiyosaki. Beyond that initial advice, the books are maddingly generic on how to build the passive income. When he does offer investing advice, it is actually dangerous. Take an example of one of the Rich Dad Poor Dad lessons below.
“Put all your eggs in one basket, and watch that basket very carefully. If you do what most people do, you'll just end up with what most people have—and that isn't great. If you want what no one else has, you must do what no one else does.” – Robert Kyosaki
What does “watch that basket very carefully” even mean? The statement assumes so many things we don’t even know where to begin. If your eggs are all in one basket, do you know something that the market doesn’t know? Are you trading on insider information? Because that is illegal. Ask anyone who worked at Enron. They watched their basket grow and then shrank to nothing. Diversification is key and always will be because we simply don’t know what’s going to happen in the future.
In a since-deleted tweet in October 2021, Robert said “Giant crash coming in October…”. He then goes on to suggest you buy gold, silver, and Bitcoin on a dip. The glaring omission here is “when”. Let’s say his advice was acted on, how long would you have to wait to get a dip? What constitutes a dip, 5%, 10%, 20%? One of the keys to investing is allowing compounding and time work for you. Investors cannot meaningfully expect either to work if we’re not invested.
Upon further review, he’s had numerous crash calls since 2010. If we’re being nice, he gets the pandemic sell-off (which he actually did not predict). Anyone who listened to his advice in October alone would’ve missed out on roughly 5.75% returns in the S&P500. Gold was up 1.2%. The problem is he doesn’t tell his followers when to get back in, if at all. Year-to-date, gold is down -5.3% and the S&P500 is up nearly 25%, both as of 12/21/2021. At this point, the S&P 500 would have to suffer through a pandemic like sell-off for gold to catch up.
Despite what gold hawkers may lead you to think, the asset class has not proven to be a good hedge against downturns, inflation, and currency risks. (article: The Golden Dilemma)
Is Rich Dad Poor Dad worth reading? Only with a big grain of salt. Be especially aware of any advice you get on social media. Robert Kiyosaki is a marketing expert who uses his Twitter account to perpetually keep himself in the news. Boring topics like diversification don’t capture public attention, doomsday predictions do. People tend to gravitate towards negative news so you’ll see him constantly trying to pump negativity into the world.
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Consilio Wealth Advisors, LLC ("CWA") is a registered investment advisor. Advisory services are only offered to clients or prospective clients where CWA and its representatives are properly licensed or exempt from licensure. The information provided in this article is for educational and informational purposes only and does not constitute investment advice and should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.
