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

Fin Ed History
In 1974, the U.S. government passed ERISA, the Employee 
Retirement Income Security Act. 
This act eventually became known as 
the 401(k) Act. In simple terms, corporations were no longer willing to 
pay an employee a paycheck for life. Employees were too expensive, and 
the United States could not compete with low-wage countries. 
Without any financial education, workers throughout the world were 
forced to become investors. When this happened, the number of 
financial planners exploded. It was like throwing lambs to a group
of lions.
Many schoolteachers, nurses, checkout clerks, and insurance salespeople 
changed professions and became financial planners. Again, the problem 
is that most financial planners get their financial education learning to 
sell in the S quadrant, rather than the I quadrant.
To be fair, I have met a few excellent, very smart, very dedicated 
financial planners. The problem is that I have met only a few. Most 
financial planners are in the business to make money. They know how to 
sell their products, generally paper assets. In fact, most financial planners 
can only sell the products of the company they work for. Since they do 
not make money selling other assets, most know little about real estate, 
oil, taxes, debt, technical analysis, and the historical reasons why the 
price of gold is going up.
Good financial education is essential for knowing good financial advice 
from bad advice.
If your financial advisor lost your money, I would not blame the 
advisor. I would look at myself and ask whether I’m willing to reduce 
risk by increasing my financial education, which you are doing now.

---

Chapter Four
Unfair Advantage
153
152
Andy Tanner explains:
One of the things I purchase on a regular basis is rental insurance. I do this 
in case my tenants damage my property by accidentally starting a fire, for 
example. Imagine trying to manage that risk with diversification. It wouldn’t 
make much sense to me to buy a whole bunch of houses and just hope that 
while some might burn down, most will not. 
I like the idea of having a contract that I pay a relatively small amount 
of money for to protect an asset that is worth a much larger amount of 
money. Most of us call these types of contracts “insurance.” When a person 
gets in an automobile accident, the first question that is often asked is, 
“Are you covered?” or “Do you have insurance coverage?”
In the stock market, we don’t usually use the word insurance. Instead, 
we use the word “hedge.” 
Like insurance, we can protect a relatively large amount of money against 
loss by spending a relatively small amount of money on a contract, such 
as a simple put option, as I mentioned above. Many professional investors 
will spend money on put options during times of uncertainty and when 
they’re faced with events that are beyond their control, such as an earnings 
report or an announcement by the Federal Reserve. The more risky the 
situation, the more expensive the contract. In fact, these kinds of contracts 
can give an investor insight as to how risky the situation is. 
An example of this is the credit-default swaps for countries like Greece, 
Portugal, Ireland, and Spain. Lenders don’t want to lend money to all 
these countries and hope that some pay them back and some won’t.
They want contracts that protect them against default. Lately, the price 
of these contracts has been soaring, which tells me things are getting 
more unstable.
money, they give the investor the chance to regain some control. While
I can’t prevent or control a hurricane Katrina, a flood-insurance 
contract controls the risk associated with the event if it happens.
For example, one investor will simply spread her money around lots 
of different stocks and hope winners outnumber losers in the long run. 
Another investor will purchase a contract that gives them the right to 
sell their stock at a set price, no matter how bad the stock price falls.
A put option contract is one simple type of contract that does this. 
The discussion of generating income from paper is a little more 
involved. When an investor plays the CASHFLOW 202 game, one 
of the important things that’s taught is the difference between an 
investment that has a goal of producing cash flow and an investment 
with a goal of producing a capital gain. It’s my opinion that amateurs 
rely more on capital gain, and the professionals tend to seek cash flow. 
So, in a nutshell, amateurs often seek to earn their money in paper 
from capital gains and to manage risk by diversification. The 
professionals often seek to earn their money with cash-flow strategies 
and to manage risk by using contracts.