Robert Kiyosaki Reveals the Little Secret to Wealth

If you’ve ever heard of the Rich Dad business empire, the brainchild is none other than Robert Kiyosaki. A financial guru and accomplished author, he’s very generous with spreading his knowledge.

One of the subjects Kiyosaki regularly touches on is investing, because it’s a great way to build wealth. However, he has a precautionary tale for those who choose to put their money to work this way.

Kiyosaki recommends asset diversification, and he’s very clear about why.

What Is Asset Diversification?

Asset diversification is the method of spreading your investments around to different classes of assets. These include paper, commodities, real estate, cryptocurrency, and business.

Many people make the mistake of investing in stocks and mutual funds, thinking they are two different assets. They are, but they’re in the same class. True diversification per Kiyosaki is spreading money across different investments in the different classes.

But What About a Diversified Portfolio?

If you’re speaking to a financial planner who tells you they’ve diversified your portfolio, ask them for clarification on what that means. Usually, it’s your money spread across different paper assets, which is a good strategy.

But, you do need more to achieve long-term, lower-risk wealth. Make your intentions clear and ask for even more diversification.

Passion Is Great, but Don’t Let It Limit You

Kiyosaki is the first to acknowledge that passion is great and you should invest in something you’re passionate about.

However, it’s not the be-all, end-all. In other words, you need to step outside of that box to expand your repertoire, and your chances at making it rich. Invest in at least two classes, if not more.

You Won’t Lose It All

Investments can sometimes go sour. People have taken on high-risk ventures and lost it all. According to Kiyosaki, if you can diversify in different classes, you minimize the risk of this happening to you.

For example, if the market tanks, your stocks would be affected, but if you have additional holdings in businesses, real estate, or even in crypto, you’re not going to feel those effects as much. You’re not going to lose it all and you’re not going to be left at ground zero.

Understanding Systemic vs. Non-systemic Risk

Non-systemic risk, per the financial guru, is the better avenue to take. It has a lesser impact on the major trading avenues, namely the markets. The damage is limited to the specific asset at hand, not the entire system.

Systemic risk will have broad-reaching effects. One example of this is the subprime mortgage crisis that happened in 2007. When people stopped paying loans, it affected the entire system, causing the entire market to crash by 50%.

How to Get Started

It’s not recommended to go in blind with investing. The more you know, the better off you’ll be. And sometimes, we just don’t understand every class or what investing in those assets means. That’s okay, because there are experts who do.

This is where the help of a financial planner can be significantly helpful. But, make sure you choose one who is very knowledgeable in the asset you’re considering an investment in. And take the time to educate yourself, as well.