If you’re thinking about investing, you need to be clear about which level of investor you want to belong to. That’s why we’ve put together these 7 levels of investors, taken from Robert Kiyosaki’s book Rich Dad’s Cashflow Quadrant, so you can work out where you stand when it comes to investing.
1. Those with nothing to invest
They spend everything they earn, or more than they earn. Hard as it may be to believe, there are plenty of “rich” people at this level.
2. Borrowers
They solve their financial problems by borrowing money, and they enter the world of investing with borrowed money. There’s no difference between this kind of investor and a gambler. For them, investing is the closest thing to a game of chance. If they’re lucky, they pay back what they owe. If they’re not, they borrow from Peter to pay Paul.
3. Savers
Every month they set aside part of their wages or salary and later put it into bank deposits, which pay a low but safe return. Risk scares them.
4. Smart investors
They’re intelligent people with a solid education, often university graduates, but they lack financial education. They know that building a fortune requires investing, but their investments aren’t sound. These investors tend to be the ones who lose the money that the more sophisticated investor picks up.
5. Long-term investors
These investors are actively involved in their own investment decisions. They invest in financial education before making their first investment.
Their success lies in long-term investing. Since they don’t need the money they’ve invested, they can comfortably wait a long time until the shares finally rise in price. With time and money on their side, they turn investing into something “safe.”
6. Sophisticated investors
These investors can afford to use aggressive, risky investment strategies, because they have a solid cash base and know their way around investing.
They buy investments wholesale, not retail. They know that bad times in the economy give them better chances of success in their deals.
7. Capitalists
These people tend to be excellent business owners and excellent investors. Rather than buying shares, true capitalists create them with their own companies and put them on the market, so they invest in themselves. They often make investors at other levels rich.
Their passion isn’t generating wealth but owning wealth.
Anyone whose goal is to become a level 6 or 7 investor has to go through level 3 first. Otherwise, they’ll always be a level 2 investor (a gambler).
Source: Robert Kiyosaki, Rich Dad’s Cashflow Quadrant.
Further reading
Featured image: Ank Kumar, CC BY-SA 4.0, via Wikimedia Commons.
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