What Seems Secure is Really Risky- 11 Traits of the Sophisticated Investor
Did you know what seems secure to you might seem risky to another investor? I’m going to share with you 11 traits of the Sophisticated Investor.
This information can be found on p. 217 in Rich Dad’s Guide to Investing by Robert Kiyosaki.
#1 Multiple Financial Statements
The average investor has only one financial statement, for their personal wealth.
A Sophisticated investor has multiple financial statements for various businesses then control.
#2 Wants Nothing in their name
The average investor wants everything in their own name.
The sophisticated investor uses corporate entities, and often their personal residence and automobile are not in their names.
#3 Uses Insurance as an investment product to hedge exposed risk
The average investor doesn’t think of insurance as an investment, and uses words such as “diversify”.
The sophisticated investor uses insurance to hedge against exposed risk.
They use words such as “covered”, “exposure”, and “hedge”.
#4 Has both paper assets and hard assets such as real estate and precious metals.
The average investor has only paper assets, which includes cash and savings.
The sophisticated investor has hard assets as well, such as real estate and precious metals.
Precious metals are a hedge against government mismanagement of the money supply, also known as fiat money.
#5 Focuses on Financial Freedom
The average investor focuses on job security.
The sophisticated investor focuses on financial freedom.
#6 Focuses on Financial Education
The average investor focuses on professional education and avoids making mistakes.
The sophisticated investor focuses on financial education and understands that mistakes are a part of learning.
#7 Willing to pay for financial information
The average investor does not seek financial advice, or when they do they want it for free.
The sophisticated investor is willing to pay for financial advice.
#8 Thinks in financial gray
The average investor thinks in good or bad, black or white, right or wrong.
The sophisticated investor thinks in financial gray.
#9 Looks for future indicators
The average investor looks at past indicators – such as p/es and CAP rates.
The sophisticated investor looks for future indicators – trends, proformas, changes in management & products.
#10 Calls broker last…after consulting with plan and team of financial and legal advisors
The average investor calls brokers 1st and asks for investment advice or invests alone, asking no one for advice.
The sophisticated investor calls broker last…after consulting with plan and team of financial and legal advisors then calls appropriate broker.
Their brokers are often part of their team.
#11 Values personal self-confidence and independence
The average investor seeks external security, such as job, company, government.
The sophisticated investor values personal sef-confidence and independence.
Conclusion
Are you an average investor or a sophisticated investor?
This chapter really got me thinking about hard assets and the legal and tax structures we are using.
I hope it helped you think about your own finances more clearly as well!
Be sure to leave a comment below and tell me what you think!