Wednesday, May 16, 2007

Rich Dad, Poor Dad Guru Joins Hall of Idiots

Robert Kiyosaki, the famed author of Rich Dad, Poor Dad has recently penned an article for Yahoo!Finance is has officially placed him in the same league of Jim Cramer - Idiot.

I don't bestow that title lightly, however Kiyosaki has earned it with his latest column titled "Playing the Mutual Fund Lottery".

Just to give you a little background, I've read several of Kiyosaki's books and for the most part enjoyed them, they are basically self-help manuals on how to get rich. Unfortunately there is actually very little information about how to do the things Kiyosaki says you need to do to become rich. His books basically are a waste of time in my opinion. Having said that, I do know people who have taken his concepts and made a lot of money - they have decided to take the risks that most people simply will not take and they have been richly rewarded.

I have no problem with people wanting to make more money and trying to better their personal situations, that is the heart of the American Entreprenurial system. However, I do have a problem with Kiyosaki chastising the vast majority of Americans who simply won't quit their jobs and speculate.

If you are of the "get rich slow" mindset, basically living below your means, savings a portion of everything you earn and investing that savings, you are not part of the "Poor" camp, according to Kiyosaki. This is ridiculous.

In his latest column Kiyosaki goes after mutual funds and compares them to buying lottery tickets. This is perhaps the most absurd comparison I've ever heard, it makes no sense.

His arguement is that management fees skim your earnings and that markets can go down, thats it. While management fees can be excessive, there are many ways to invest on a low cost basis, and markets will go up and down, the key is to be diversified and behave correctly. Even if you put all your savings into a one-star (morningstar rating system) mutual fund all your life, you would have way more money at retirement than if you spend it all on lottery tickets. Lottery tickets are guaranteed losers, for a diversified mutual fund to lose all your money we would have to have every single public company go bankrupt - so possible? If it is possible, I guarantee you that in that event anything that Kiyosaki recommends would also be worthless.

It really bothers me when people who have been given a platform abuse it my telling outright lies in order to get people to buy whatever it is they are selling (try a $6,000 seminar). Kiyosaki has gone to far this time and has ended up on my "idiot" list - which at this point also includes Jim Cramer.

Congratulations Robert, you've done something that few have been able to do.

Scott Dauenhauer, CFP, MSFP, AIF