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

Assets
Business
Real Estate
Paper Assets
Commodities
BALANCE SHEET
Liabilities
Income
Expenses
INCOME STATEMENT

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Why Are Investors Losing?
FAQ 
Why are uneducated investors losing so much?
Short Answer 
They invest without insurance.
Explanation
 
You do not drive a car without insurance. You do not buy a 
house without insurance. Yet when most investors invest, they
invest without insurance. When the stock market crashed, they
lost because they had no insurance.
When I invest in real estate I have insurance. If the building burns 
down, my losses are covered. Even my loss of income is insured.
The biggest losers in the last crash were investors who had their money, 
uninsured, in retirement plans, plans like the 401(k) in the United 
States. That is beyond risky. That is foolish.
We all know the markets will crash again, yet most investors invest 
without insurance.
FAQ 
How long did the Great Depression last?
Short Answer 
25 years.
Explanation
In 1929 the Dow hit an all-time high of 381. It took till 1954— 
25 years—for it to reach 381 again.
This is the problem for those investing for capital gains. This is why 
gold investors who rushed in late in 1980 to buy gold at $850 an 
ounce have not yet recovered. This is why baby boomers who were 
counting on their retirement plans filled with a diversified portfolio 
of paper assets and their home’s appreciation (capital gains) for their 
retirement are in trouble today.
As Buffett himself says, “Diversification is protection against 
ignorance. (It) makes very little sense for those who know what
they’re doing.”
Jim Cramer, a very smart investor and an expert on the stock 
market, often runs a segment on his TV program called “Am
I diversified?” During that segment, viewers call in and rattle
off the stocks they are holding in their portfolios. For example, a 
viewer may say, “I have shares of Exxon, GE, IBM, Procter and 
Gamble, and Bank of America. I also have an emerging market 
fund, money market fund, a gold ETF, a bond fund, a REIT, an 
S&P 500 index fund, and I just bought an index fund for large
cap dividends. Am I diversified?”
Jim Cramer then evaluates the viewer’s diversified portfolio.
In my opinion, the above portfolio is not diversified. It is de 
worsified. It is less worse, but not diversified, because it is filled with 
only one class of assets: paper assets. If the stock market crashes, 
which it will, diversification will not protect him. 
If the crash is severe, as it was in 1929 and 2007, the stock market 
may not recover for years, again destroying the portfolios for 
capital-gains investors.
Today, there are more mutual-fund companies than there are 
publicly traded companies. This is how insane diversification
has become. 
In 2007 when markets began to crash, everything crashed,
even real estate. Diversification did not save millions of people
from their lack of financial education.
For most people, their diversified portfolio is an oxymoron. It is a
de-worsified portfolio, a portfolio made less worse, but not less risky. 

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Chapter Four
Unfair Advantage
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