In continuation on Kiyosaki’s Cashflow Quadrant financial literacy education, I have read about the so-called “7 Level of Investors” in which each level was described according to their level of financial education from level 0 to level 6. It’s comparable to little steps towards achieving financial freedom.

How do they think? How do they invest? And who among these level of investors can you consider yourself? Let’s view each level of investor and identify on what level are we as an investor.

 

Investor Level 0: Nothing to Invest. These are the worst investors. You ask why? Simply because they don’t have money to invest. In fact, they should not be considered as “investor”. They have nothing to invest since they spend everything that they earn. Or to some, they even spend more than what they earn. For sure, if you belong to this level of investor, you will forever be in the rat race running on income and spend scheme with nothing left to invest.

Investor Level 1: The Borrowers. These are the investors who love to borrow hence the term “borrowers”. They are either slaves to their credit cards or they always use borrowed money to spend or invest. They are in a habit of borrowing and spending the same. They say, “I’ll jusy work harder and pay off debts in the future.” Sometimes, these investors can be disguised as “rich” because they tend to have lots of expensive things. However, if you examined their financial statements carefully, you will learn that these investors are in danger of high debt and may be bound to be working slaves for the rest of their lives just to pay off their debts.

Investor Level 2: The Savers. Opposite to Investor Level 1 are the so-called Savers. They are investors who regularly set aside a fixed amount of money into their savings accounts BUT not in order to invest but rather to spend it in some future “something”. They are risk averse investors and often resort to low-risk and low return investments such as savings accounts and time deposits. They are afraid of debt. They don’t know how good debt works for them.

Investor Level 3: Smart Investors. This level of investor comes in three further levels namely: the Level 3-A or the so-called “I can’t be bothered”; the Level 3-B or the so-called “The Cynic”; and the Level 3-C or the so-called “The Gambler”. Let’s view each level of the smart investors.

The “I can’t be bothered group”. These are investors who closed their mind about money and investing. They don’t want to be bothered. They will never learn about investing and how money works for them. Instead, they just know how to work for money. They spend their lives working and working.

The Cynic. As the word implies, cynics are negative thinker investors. They will tell every discouragement to you and that investing will never ever work. They play experts and tell every people the disadvantage and risk of investing. Kiyosaki says that these people are dangerous because they sound intelligent. They are so afraid of the risk in investing so they spend all their time and efforts studying these investments until it’s too late for them to invest.

The Gamblers. Opposite to cynics are the so-called Gamblers. As the term implies, these are investors who love risks and they tend to overindulge into it. It is as if investing is like playing in a casino. They don’t thoroughly study the risks involved in investments and just depend on sheer luck. In the end, they end up losing their money most of the time.

Investor Level 4: Long Term Investors. These are the investors who understand the fundamentals of finance. They are investors who are actively involved in their own investments and have a long-term investment plan. They spend their time to learn more about investing. They are not big-time investors but rather conservative ones. They have some grasp of financial education and they know the significance of being debt free, being frugal by living below their means, and saving wisely for long term goals.

Investor Level 5: The Sophisticated Investors. These are investors who already have a solid financial education going to deeper analysis like finance concepts and tax incentives for their investments. They know how to invest wisely and they are not afraid of risky investments since they know that high returns come with higher risks. They know how to evaluate risk and are neither gamblers nor cynics. They can afford to invest because they already have some extra money to do so. They first start small with small deals to learn the game of money and later on go to big deals to grow their asset base.

Investor Level 6: The Capitalists. These are the investors who are considered in the B-quadrant of the cashflow quadrant. They make a lot of money using other people’s money, skills and talents because they have resources to do it. They employ people to do the work for them. They are considered as the taipans and tycoons which are the movers and shakers of the economy.

Acccording to Kiyosaki, the best entry point in the 7 level of investors is investor level 4 or the long term investors. A person who does not have enough experience in handling a business or in investing must not go directly to level 5 or 6 since the probability of failure is very high.

After further assessments, I can say that I am on the right level. I am on level 4 or what can be considered as long term investors. I continuously educate myself in financial education by actively involving myself in investing my own money in stocks, mutual funds, and trust funds.

How about you? In which level of investor do you belong?

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