After college, I discovered there wasn’t a lot of room in the workforce or the NBA for an ex-college athlete with bad knees and an attitude about punching a time clock.
Thank goodness.
Like most people, I was taught my whole life that I needed to go to school and get good grades so I could get a high-paying job. If I’d been good at that—at going to school, showing up every day just because it was expected, taking tests, repeating whatever the teachers had to say whether or not it made sense—maybe I would’ve gotten straight As and found that high-paying job. But I wasn’t, and I didn’t.
Growing up, I struggled with my seeming inability to toe the line and do what was expected. But now, as the economy has collapsed and those “good” jobs have dried up, as all those people who were trained to do what someone else told them are waiting around for someone new to come along to tell them what to do next, I find myself grateful for my struggles.
From the very beginning, I found I didn’t value what I was told I should value. I didn’t value just getting good grades. I wanted to understand the subjects that interested me. I didn’t value being in class if I saw an opportunity to do something more interesting. I didn’t value a degree in a subject that was assigned to me by a counselor who saw me as no more than a dumb jock.
Later, after I was out of school and happily married with a great little family to support, I didn’t value financial advisers who wanted to charge me for stock tips and one-size-fits-all advice. I didn’t value money plans designed to make me dependent on someone else’s knowledge.
I didn’t understand then that there was any other way to make it in the world. I didn’t have a rich dad. I didn’t have a mentor to show me the way. It was reading Robert’s books that made me realize there was a whole movement in the financial industry of other people who shared my values. And you know what? They were getting rich off those values. I’d found my team.
Starting out it seemed unlikely for me to speak knowledgeably on any topic, let alone paper assets, but today I’m Robert’s paper asset Advisor, and I’ve embarked on a path to never stop learning—and never stop teaching. I don’t want anyone else to feel that frustration of knowing that the way the world tries to teach us isn’t right but not knowing any alternative.
Mastering the Fundamentals
I got my basketball scholarship because I could foul, sure. I’m a big guy, and even now, even in a pickup game on a Saturday, guys feel it when I set a pick. But I guarantee you I never would’ve survived playing in college without knowing the fundamentals. My coach never tolerated lazy players. We all ran drills, we all showed up for practice, we all ran full-court, with sore knees or swollen ankles, during overtime or extra points, through bad calls or lucky breaks, on home court or away, whether we were stars or players no one recognized. We all knew every play, every drill, every strength and weakness of every opponent. When it came to hoops, we were all serious students.
I’m a serious student when it comes to money. I will never stop learning. I will always be passionate; I will always be engaged; I will always be active. I will never be an expert. In fact, now that I’m a serious student, I don’t want to be an expert. An expert is supposed to know everything. As soon as I think I know everything, I will stop learning. I never want to stop learning now. I have finally realized what a real education is all about.
My hope is that this book becomes part of your ongoing education. It’s written with the assumption that you are familiar with books such as Rich Dad Poor Dad and Rich Dad’s CASHFLOW Quadrant. Like all books in the Rich Dad Advisor series, it is written to help you increase your financial education. This is the Rich Dad Mission: to elevate the financial well being of humanity. I hope it inspires you to become or continue to be a serious student, the same way Robert’s books have inspired me.
Fundamentals
I’m all about the fundamentals. While I like understanding the high-end topics and can happily spend days studying the most esoteric concept, going down the rabbit-hole of economic theory, history, geopolitics, and socioeconomic analysis, I always start by breaking everything down into the fundamentals. My college counselor would’ve told you it was the jock in me. (He didn’t think I was very bright and liked to talk to me in a way that always let me know it). My wife says I’m a natural-born teacher, and I’ve got 15 years of teaching successful workshops to give her that impression. My sons say it’s because I speak cartoon and can make anything sound funny. Whatever the reason, I like to reduce difficult subjects to their simplest building blocks.
I’ll be doing that in this book too. I will introduce you to my 4 Pillars of Investing. The 4 Pillars are the basic building blocks to all investing. Once you’ve mastered them, you will find everything you do is based on one of these four vital areas of study. Let me make it simple for you. It’s how I learned. And if I could learn it…well, just ask that college counselor.
As we go along through the book, we’ll build on each pillar. You’ll go from learning the difference between capital gains and cash flow to understanding financial statements, reading stock charts, and even shorting stock. It will all make sense by the end of the book. And it will all seem easy as you are learning it.
Walking the Walk and Talking the Talk
I like making things simple. I’m going to explain the concepts that you should learn first. And I will try to make these concepts simple so you truly understand them and how they apply to your investments. Keep an eye out for Build on It graphics that summarize core concepts throughout the book. Watch as the number of concepts in the graphic grows to mirror the way your understanding will build your financial education.
Along the way you will also expand your financial vocabulary so that you learn to speak the language of the stock market. Don’t be afraid of the language. Embrace it. This is your money you are dealing with, so it’s critical for you to learn this language. To make it easy, I will translate and simplify new terms and concepts and give you a valuable foundation to build upon. But get used to speaking the language of money and enjoy your newfound fluency. That language will be your entry into other avenues of learning, allowing you to search out more information on your own and continue on with your financial education at your own pace.
I also find it effective to learn by doing. Don’t just passively read this book and let the concepts wash over you. Be willing to get your hands a little dirty. I don’t mean jumping into the stock market without knowing what you’re doing. That’d be getting your hands bloody, not dirty. But be willing to try paper trading.
We all know how foolish it sounds for a new investor to risk all their money on the very first trade. Recovering from a colossal mistake can be really hard. But little mistakes can actually be useful because you can learn a great deal from them. That’s why I recommend that beginning stock investors start with paper trading. It’s a process of practicing your trades in a real account based on actual stock market activity, but you are using paper money instead of real money.
While paper trading, you will make mistakes. And that’s perfectly okay. There is not an investor in the world with a 100 percent success rate. Again, the idea is to learn from the mistakes to continually improve your skills, knowledge, and wisdom. Learn to manage risks, have some fun, experiment—but do it all with paper, not cash.
One of things that gets lost in traditional schooling is the concept that making mistakes is one of the more natural ways we learn. Making mistakes should be okay, but it’s not. When I was in college, I was