Without doubt, each of us don’t want to invest because we are afraid of losing our hard earned money. The fear of losing money is the main reason a huge percentage of the public struggles financially. But fear isn’t the real problem. It’s how people handle fear that matters. Kiyosaki tells people that the primary difference between rich people and poor people is how they handle the fear of losing money. Some people, when hit with a financial loss, give up. Others transform the loss into a win. As John D. Rockefeller said, “I always tried to turn every disaster into an opportunity.” Losers are defeated by failure. Winners are inspired by it.
Kiyosaki often commented that the real reason for lack of financial success was that people played it too safe. “People are so afraid of losing money that they do lose it,” he would say. If they have some cash, they buy big houses and big cars rather than big investments. Or they invest all of their money in balanced portfolios—in CDs and low-yield bonds and mutual funds and a few individual stocks. These are people, driven by fear, playing not to lose.
Rich Dad Tip:
“The primary difference between rich people and poor people is how they handle fear.”
Of course, a balanced portfolio is a lot better than no portfolio at all. It seeks safety through diversity. Having a financial plan for security and comfort first are important. But if you have any desire to become rich, you must focus, not diversify. You must put a lot of eggs in a few baskets rather than putting a few eggs in many.
FEAR: I’ll lose all my money if I invest in anything riskier than CDs, bonds, and mutual funds.
FACT: If you lose some money, you can learn from the failure. Once you become an educated investor you’ll be positioned to reap potentially huge rewards.
FREEDOM: Financial failure can be transformed into financial gain.
If the prospect of failure frightens you, then play it safe. Keep your daytime job until you have enough cash to buy bonds and mutual funds and consult with a financial planner. But if the prospect of failure inspires you to fight and win, maybe you should challenge yourself to change your financial habits. Educate yourself and take some financial risks. The more education you have, the less risk there will be.
In investing, the higher the risk, the higher the reward. You won’t become successful if you didn’t take risks and part of that risk is the fear of losing money. Personally, when I increased my financial education, my risk appetite also increased. I started investing in mutual funds and unit investment trust funds and then went to a riskier type of investment – the stock market. As I increased my business acumen, sooner or later, I will begin engaging myself into business. The more financially educated I am, the less the fear that I am feeling about.
Source: Robert Kiyosaki’s Coaching Program