What Schools Will Never Teach You About Money By Robert T. Kiyosaki

5. Mutual Fund 
There is nothing mutual about a mutual fund. A better term 
would be one-sided fund.
This does not mean I do not like mutual funds. Personally, I love 
mutual funds because mutual funds provide me the money to invest. 
When I took my gold mine public via the IPO, it was a group
of mutual-fund companies who purchased most of the stocks
we offered.
Mutual funds are designed for people who know nothing about 
investing and feel more comfortable having a fund manager pick 
their common stocks for them.
The problem is that the investor puts up 100 percent of the money, 
takes 100 percent of the risk and receives only 20 percent of the 
profits (if there are profits). The mutual-fund company takes 80 
percent of the investor’s money via management fees and expenses. 
To me, this is a one-sided fund, not a mutual fund. Making 
matters worse, taxes are not good on mutual funds. 
stock market buying shares of stock. But few investors know that there 
are different types of shares, and they are not fair. For example, there 
are 
common
shares for the common man. The smart investors prefer to 
have 
preferred 
shares. Simply put, investors who own preferred shares 
receive preferential treatment over commoners who own common 
shares. Most mutual funds are filled with common shares.
There is another class of shares far above preferred shares.
This level can be seen on the 
CASHFLOW 101
game board.
Most of those in the Rat Race invest in preferred and common shares.
Investors at this level do not invest in shares. They invest
in percentages. 
Rat Race
Fast Track

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Chapter Four
Unfair Advantage
131
130
I’d say there are at least four important problems with the predominant 
mutual fund/401(k) system that warrant an in-depth discussion with 
your financial advisor:
First, this brand of diversification does very little, if anything, to protect 
an investor against a large stock-market crash, a long-term stagnant 
stock market, or even a rising stock market that fails to outpace 
inflation over long periods. 
When a person buys large amounts of stock in a single company (like 
Warren Buffett who bought millions of shares of Coca-Cola), a large 
concern is that the share price of the company can fall, which of course 
is beyond the control of the investor. By the same token, when a person 
is diversified across the market, it is still possible (if not likely) that the 
entire market will fall, which also is completely beyond the control of 
the investor. I think most people would agree that our world markets 
have become more volatile and probably more fragile than ever. 
From the year 2000 to 2010 we’ve observed the “decade of nothing.” 
Getting back to zero offers little consolation when growth—the 
exponential growth associated with compounding—was required to 
make a plan work and now retirement is staring the investor in the 
face. Moreover, we could easily have another decade of nothing or, even 
worse, a huge market slide (and there’s plenty of fundamental data to 
suggest the latter). If you want to add to your financial vocabulary, the 
next time you’re with your financial advisor, ask him to explain what 
“systemic risk” means. Most mutual funds and retirement plans make 
the dangerous assumption that the market will always go up in the long 
term, but there’s no guarantee that that will actually happen for this 
generation of investors. 
Second is the question of consistency. Standard & Poor’s has released 
data that show that if a person takes a handful of mutual funds that 
do perform well in a given year, they almost never are able to repeat 
that performance over periods of five to ten years. In other words, past 
performance really is not a solid indication of future results.