richdad cashflow 101

Re: cashflow 101

You're right that it's isn't fair to damn an author without at least reading his books, but my interpretation of what Clubman said was that it sounded like "Just another Scheme" and we've seen these schemes before.

Yes - that's my basic point.

Part of the problem of course is that an awful lot of people bought RDPD after the Last Word Interview so those people will staunchly defend RK for fear of seeming foolish.

I'm struck by how many similarities there are between these books and organised religion actually.

And I'd have to agree with that too. Being human there is an amazing amount of cognitive dissonance involved in a lot of what we do/think and financial decisions are not immune to this (but ideally should be!).

By the way - under no circumstances will I be going out and buying books like RK's - or even borrowing them from the library or whatever.

Re: cashflow 101

Hi Guys

Just FYI, I bought the book well before the Last Word interview.
What I thought the thrust of the book is actually quite commonsense - reduce outlays, increase income (from assets). Thats what I took from it - not the bit about holidays etc (which, was only an aside really).
I do see the point of the cultishness of it though - I registered on his website and have been encouraged to spend more money on his products!
I can see why people such as Clubman, Tommy etc would not be his greatest fans but if it encourages people to reduce debts and stop living beyond their means, I'm all for it to be honest. If, however, people read it and go off and incorporate a company/buy Porshes etc based on a generalised book then I'm afraid there is nothing ANYONE can do to help them!!

Re: cashflow 101

I can see why people such as Clubman, Tommy etc would not be his greatest fans but if it encourages people to reduce debts and stop living beyond their means, I'm all for it to be honest.

They would be just as well off reading the AAM Guide To Savings & Investments, other AAM content, the Motley Fool etc. instead in that case. In fact they'd be better off since all of these resources are free unlike best seller books about specific "systems".

Re: cashflow 101

As an avid reader of all the sites you mentioned, I would agree. However, as I read many financial books, I can see no real harm in RDPD - anything to improve ones financial education.

Cashflow 101

Hi All

Have read the posts above with interest. I think it is getting a little OTT. I am always interested in financial advice books etc but have realised that I only need one or two. I am afraid of wasting any newly acquired thrift on buying advice books. I have always been wary of sending off €X to the guy in the advert to learn how he became a millionaire and I certainly would never pay $5,000 to listen to someone telling me how I can if I believe I can etc...

Can't you see that this is essentially what this is? ...A rehash of Motley Fool (excellent) and others (Alvin Hall) etc... €200 is also too much for a board game that "teaches" you a lesson. Save the money, enrol in a nightclass, put the 5K towards a deposit on property to rent out or pay off personal debt... DO NOT GIVE IT TO THIS MAN TO BE TOLD THE BLEEDIN' OBVIOUS! - LIVE BELOW YOUR MEANS/PAY OFF UNPRODUCTIVE DEBT/INVEST IN A PROPERTY TO RENT OUT etc etc

Slim

Cashflow 101

I agree that $200 is too much for a board game and see your point "DO NOT GIVE IT TO THIS MAN TO BE TOLD THE BLEEDIN' OBVIOUS". The reason I originally asked the question was that I didn't want to be duped into spending that much for a game, and then feel foolish by having filled some schemers pocket.

But no one on this board is talking about paying $5000 to listen to someone telling you can if you believe??

The books are another matter. I think I paid less than €10 for one of his books, now that's not going to break the bank. Just about the price of 2 pints in this country, now I know which is better value to me.

Some of the stuff I learned from the book:
- what's good debt and bad debt
- that failures teach us more that success
- what it means to short a stock, what are the different kinds of options
- a flaw of mutual funds
- avoidance of CGT on real estate sale in US

A lot of people almost seem to have fear of what they dub "religious/cult type movements" - would never read one of his books, would never play the game, but would spend lots of time reading critical reviews or responding to this forum to give their views? Surely most people who read his books are interested in smart investing, will have read other books and are sensible enough to make good financial decisions for their own lives? I mean this guy is a best selling author, so if so many people are reading his books and receiving such bad advice we would see a lot of people who've read the books falling into financial ruin? Not happening.

Re: Cashflow 101

A lot of people almost seem to have fear of what they dub "religious/cult type movements" - would never read one of his books, would never play the game, but would spend lots of time reading critical reviews or responding to this forum to give their views?

I guess that could be aimed at me so once again I'll reiterate that I simply skimmed, and didn't spend lots of time reading, some of the interviews and critiques on RK's stuff. I consider myself pretty open minded generally but I have no overriding desire to go deeper than this given what I gleaned to through skimming. A good example of cognitive dissonance or cult style behaviour in this context is arguably the attempted marginalisation by those who believe that the "system" does have something to offer of those who don't buy/read the book as having something to fear. While this doesn't really bother me I believe that it is BS. Notwithstanding my ignorance of the details, I am confident that I, and many others, have nothing new to learn from such systems that we cannot learn for free elsewhere. On a broader issue, quick fix/magic bullet/get rich quick schemes (whether or not RK's fits the bill - I can't really say) are arguably misleading and dangerous to those who are naive about financial matters and/or don't have all their critical faculties about them when learning about them. All of this is merely common sense to me.

I mean this guy is a best selling author, so if so many people are reading his books and receiving such bad advice we would see a lot of people who've read the books falling into financial ruin? Not happening.

While I have no evidence to dispute that I wonder if you have any to support it? The thing that always makes me nervous about people writing "best sellers" about money making schemes is why are they doing this rather concentrating on practicing/perfecting/refining their schemes? Like the many contributors to AAM I'm sure that there are many altruistic people out there willing to share the benefit of their knowledge/opinions but authors of such books tend not to fit this bill promoting, as many of them do, an aggressive and individualistic pursuit of wealth as the end behind the means. Not my bag particularly but fair enough if you're into that. However, by promulgating their schemes they are proving the efficient market hypothesis in action and, as their schemes become more widely understood, any inherent advantage that they provide or purport to identify (assuming the scheme does what it says on the tin in the first place!) will disappear and the playing field be levelled once again for all.

Re: Cashflow 101

Quote:
quick fix/magic bullet/get rich quick schemes (whether or not RK's fits the bill - I can't really say) are arguably misleading and dangerous to those who are naive about financial matters and/or don't have all their critical faculties about them when learning about them.

RK doesn't offer any get rich quick schemes, unless investing in property or building a business is a get rich quick scheme.

Other than that this debate has become pretty stagnant. I think it's fair enough to critisise RK. But I pretty much go along with Adrian's last post. I personally learnt something from it, and he is motivational.

Quote:
"However, by promulgating their schemes they are proving the efficient market hypothesis in action and, as their schemes become more widely understood, any inherent advantage that they provide or purport to identify (assuming the scheme does what it says on the tin in the first place!) will disappear and the playing field be levelled once again for all."

RK's "schemes" generally tend to be, invest in shares, property and build successful businesses. I don't think these ideas will disappear because RK is promulgating them!

Piggy.

Get Rich Quick

RK doesn't offer any get rich quick schemes, unless investing in property or building a business is a get rich quick scheme.

Click to expand...

Actually he does describe MANY deals that he claims to have done which are the definition of get rich schemes.

I don't have a copy of the book to hand, but anyone who's read it will remember examples of Selling Property before he'd finished buying it. At a huge profit.

He gave an example of someone who didn't have enough money to put his kids through College or enough time to save it. No problem, a tip from RK and the guys money was invested in a property that more than paid for college.

He gives an example of buying a house way below value, simply by including a cheque with his offer "to show he was serious"

He talks vaguely about slowly building up your wealth, by saving and investing. But then the zinger... His examples all seem to involve almost instant gratification.

Yes it's possible to spot a bargain property and turn it around quickly for a profit, but the probability of doing it is a lot lower than RK suggests, and it's dishonest of him to use examples like this to motivate people.

The ZERO DOWN phenomenon in the US really does destroy lives and RK is one of it's leading evangelists.

For an example of downright WRONG information here's an example. At the back of the Cash-Flow Quadrant regarding Education He says....

Succesful Middle Class Investor
Values education, often college graduate
Attends courses & seminars on investing.

Rich
Values only 'Street Smart' education, often
acquired from peers and/or self learned.

An good education may not ensure that your mind is in the right place to get rich, but it will make it easier for you to have a comfortable life with some money to invest if you ever do get your mind into gear.

RK's contempt for college education is dangerous if people pin their hopes on it. But it's a great selling strategy for his books among his original target market, Amway America.

-Richard

Re: Cashflow 101

I have read (but not bought!!) the book. I would agree with Clubman. I didn't learn anything beyond what I knew from free sites like AAM and the Fool. I found some of the information far too specific to the USA. I particularly found the advice about surrounding yourself with a "team" of professionals (eg accountants and lawyers) somewhat difficult to translate to Ireland. It's fine if you are one of these professions yourself or have family members/friends/associates who work in these areas and can bash out your ideas and (hare-brained) schemes for hours to sort the wheat from the chaff. If you are paying an hourly rate for all this advice, well, you'd better make sure your ideas are profitable from the start!

I decided to spend less than I earned...and I started by not buying this book.

Cashflow 101

My last post was deleted, something to do with the thread being moved. I will try to recapture.

Adrian

Sorry, I was not addressing you directly although you started the thread. I read on some part of the discussion about weekend seminars costing $5k - possibly on the J. Reed link - I think that some of these GURUs are as bad a television evangelists.

However, I intend to borrow a book of RK's from my local library and see what he has to say, but I bet I've heard the basics before, probably on Motley Fool.

Slim

Re: Cashflow 101

I hope my last post did not kill this thread. I borrowed the book, RDPD, from the local library and found it a pleasant read, good bathroom accompaniment. However, the underlying message is sound enough, ie don't waste your money on liabilities but buy assets. He points out that most people are too scared to invest in, say, property etc. I agree and I have decided to invest in a house to rent out despite my lack of cash and fear of losing on the deal.

I take many of his anecdotes with a lot of salt and some of it verges on the unbelievable or else he really is so smart he knows that an oil company will strike oil the month after he buys its stock?? I am convinced that the RDPD scenario is a bit of a metaphor to tell his points.

I may well borrow a follow up book but I have seen most of it before on Motley Fool etc. Nice read though.

Slim)8

Re: Cashflow 101

I agree and I have decided to invest in a house to rent out despite my lack of cash and fear of losing on the deal.

If you are concentrating most or all of your wealth in a single asset class and in a single geographic region (e.g. Irish property - your PPR plus a rental property) then most observers would agree that you are exposing yourself to greater risk than if you diversified your investments (by asset class and geographic region and risk/reward profile). This may be a suitable investment strategy for some individuals, particularly if they understand all of the implications and risks etc., but in general concentrating investments in this way would not be considered prudent. I presume that you're not investing in property mainly or solely because of what you read in one book!?

Re: Cashflow 101

>you are exposing yourself to greater risk than if you >diversified your investments

Rich Dad Poor Dad doesn't go into this at all which is a big weakness. RK's philosophy is that Property is the best investment, full stop.

He uses the argument that a bank will not loan you the money to buy shares because the banks know shares are not secure. That's nonsense. If that was their criteria they'd never lend money for Cars or Holidays because they have no return. Banks only care if you can pay them back.

I think RK's fascination with Property is it's easy to convince people that it's easy to make money from it. Everyone understands that it's better to own your home than rent, so it must be better still to rent to others.

The show on BBC at the moment about property fortunes is also slightly dangerous. Unless they follow it with "How I lost my shirt in Property", it's be worried that they weren't being balanced.

-Rd

Re: Cashflow 101

In general terms (i.e. not referring specifically to any contributors to this topic)...

It always amazes me how many people will invest in property rather than (directly or indirectly) in equities for example, often because they consider the former easier to understand than the latter (see yesterday's Tribune for an example - a middle aged couple who bought four properties in the same estate for €800,000 in total and shied away from any equity investments because they reckoned that they couldn't understand the stock markets) while not realising that residential investment property should usually be treated as a business venture rather than a more straightforward personal investment. Property investment has its place in an overall balanced investment portfolio for some individuals but the assumption that property is a good or better investment per se is a fallacy in my view and some people seem to plunge in with a very simplistic view of the implications and potential risks involved.

Re: Cashflow 101

Clubman

You are correct! I am not basing the decision to but to let on the book but have been hankering that desire for some time now. The book has had minimal effect on that decision but was an interesting and encouraging read. Regarding your comment on limiting one's exposure to one asset class, I think the advantage of property is that you can put down a deposit, borrow the rest and let someone else pay off the loan. Despite what people are saying, property in Ireland rarely heads south in the same way that shares can, so can be sold off if necessary.

Or am I being naive and simplistic? Doubts creeping in again...

Slim

Re: Cashflow 101

property in Ireland rarely heads south in the same way that shares can, so can be sold off if necessary.

Click to expand...

Hi Slim - IMHO, it sounds like your decision is being based on the quite untypical performance of shares in recent three years. If we were having this discussion in late-1999 at the peak of the .com boom, would you be convinced that shares are absolutely the way to go because they have been performing so well? I've no doubt that many, many commentators would have stated at those times that 'shares rarely head south'.

The last independent comparision which I saw (from 2001) showed that, over time periods of 20-50 years, equity investments narrowly beat property investments by 1-2 percentage points.

However, I have been put off property by some other disadvantages. You can't sell 10% of a house - If you need cash for an unexpected bill, you can easily sell 10% of your shares overnight. To get that amount of cash out of a house, you would probably need to top-up your mortgage (incurring legal costs) or sell off the entire property. I'm also concerned about the lack of diversity. My biggest asset is my house. By purchasing another property, that would mean that a huge portion of my personal wealth would be dependant on the Irish house market.

There is no right/wrong answer for this one - but that's my tuppence worth.

Re: Cashflow 101

Slim - I am definitely not trying to undermine you or anybody else who decides that property investment is the appropriate strategy for their own individual personal circumstances but just teasing out some of the potential issues/pitfalls in the hope that this information will help people perform the required analysis for themselves rather than simple assuming that "bricks and mortar" are necessarily a good or better investment than the alternatives.

I'd go along with most of Rainyday's post above. I take your point about the "gearing" issue (borrowing to invest) but I personally would be reluctant to concentrate most or all of my wealth into one asset class and/or geographic location or to use my PPR as gearing for any investment.

If you have doubts, even if they simply arise from my comments, then I would suggest that you do nothing until you have eliminated them or decided that they indicate that this is the wrong investment strategy for your personal circumstances after all.

Hope this helps.

Re: Cashflow 101

Obviously you should only invest in things you understand. But there's a flipside to that coin that people often ignore.

You should understand why another investment is not as good. It's fine to give up diversity and plough everything into property, as long as you know why this is better than putting a portion in shares or Trackers or whatever.

Incedently it's interesting that the gearing aspect of property makes it so attractive. Gearing is possible in equities too, if you buy on Margin. Novices are advised never to do this, But property novices do it all the time.

-Rd

Re: Cashflow 101

Rainyday & Clubman

I take your comments on board but wonder how I can establish whether or not it is absolutely the right thing to do. Would you say that it would be inadvisable to take out a 100% mortgage, cross secured on PPR equity, in order to buy to let? There would be very little margin for vacancy but I could carry a little each year. I realise that location is a big factor. I am living in a relatively small but prosperous border area. I could dither forever...

Slim