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

Fin Ed Definition 
A mutual fund is already diversified. 
Generally, a mutual fund is a 
diversified assortment of stocks, bonds, or other so-called assets. When 
a person buys a diversified portfolio of mutual funds, in many cases, 
they are buying the same stocks in different mutual funds. This is not 
diversification. This is concentration.
7. Debt-Free 
I always chuckle when someone says to me, “I am debt-free. My 
house and car are paid for, and we pay off our credit cards the 
moment we use them.”
Rather than disturb their dream, I say, “Congratulations,” and 
move on. Let them live in their oxymoron.
What I want to say is, “Have you seen the size of the national 
debt? How can you be debt-free when you and I are paying the 
principal and interest on nearly $75 trillion in debt? How can you 
be so naïve?”
In 2010, every U.S. citizen’s share of the national debt was 
$174,000 per person or $665,000 per family.
 
A Crash of People 
The subprime crash of 2007 was caused by excessive debt owed by 
subprime borrowers. 
 
A Crash of Nations 
The next crash will be caused by excessive debt owed by subprime 
nations. So far, the world has supported the crash of smaller countries, 
such as the PIIGS (Portugal, Ireland, Italy, Greece, and Spain).
If Germany had not bailed out Greece, the crash would have spread. 
The first major country to go will probably be Japan. 
Why is Japan in trouble? Debt. Japan has the largest percentage of 
debt-to-GDP ratio of the major world powers. The irony is that 
Japan is a highly educated, hardworking, homogenous population, 
with one of the highest savings rates in the world. In spite of these 
On October 9, 2007, the Dow hit an all-time high of 14,164. On 
March 9, 2009, it had fallen to 6,547. Millions of investors lost 
trillions of dollars. How long will it be before capital-gains investors 
get their money back? 
Today millions of people have their fingers crossed, hoping the Dow 
keeps climbing. This is not investing. This is gambling. Betting your 
future on the ups and downs of any market is risky, very risky.
I was taught to diversify differently. I own assets in different asset 
classes, not just in paper assets. For example, I do invest in oil, but I 
do not invest in oil company stocks. I do invest in real estate. I do not 
invest in REITs, Real Estate Investment Trusts, a mutual fund for real 
estate. I love cash flow, infinite returns, and tax advantages, which is 
why I generally stay out of paper assets. 
Bonds are paper assets. I do not invest in bonds. Rather I borrow the 
money that bonds create to buy apartment houses, especially when 
interest rates are low.
When the Fed and central banks are printing money, I save gold and 
silver, not money. If the banks stop printing money, I will sell gold and 
silver and go back to cash.
Simply put, I diversify by owning percentages of the different asset 
classes, not the paper assets (shares, bonds, mutual funds, ETFs) 
representing the different asset classes.
As Warren Buffett says, “Diversification is protection from ignorance.”
The question is, “From whose ignorance—yours, or the stock broker 
and financial planners selling you the de-worsified portfolio?” Or your 
real estate broker who tells you your home is an asset and that real 
estate always goes up in value (capital gains)?

---

Chapter Four
Unfair Advantage
139
138