I have never read this book and I don’t ever intend too. But I have read several of this guys articles on Yahoo Finance and I can’t believe that there is much worth while to learn from this book, From the reviews on Amazon that I saw and if reading his articles are any indicator of his advice, it’s pretty bad.
In the first article that I read he argues that no one should invest in mutual funds because they are too expensive for investors and do not earn good returns. In his example e argues that your average mutual fund will ding you 2.5% of your invesment on an annual basis. This is flat out untrue. According to morningstar a review of all the US mutual funds the average expense ratio of a mutual fund is 1.5% of total assets invested. Now I agree that there are lots of mutual funds out there that aren’t worth the money to invest in but when we are trying to decide if mutual funds belong in our portfolio we should at least take a fair few of how much they are going to cost us. As with everything a fair asseswsment of the situation requires us to look closer. There are mutual funds which will charge obscene amounts of money for mediocre returns. But there are also funds that are run by talented managers and have much lower costs. For example, take a look at John Montgomery funds at Bridgeway. He offers a wide range of funds and has shown himself to be an ethical and talented manager and they come with a reasonable price tag. Some mutual funds aren’t worth there exorbitant fees, but some are priced more fairly and deserve a look at.
The second point in this article by Richard Kiyosaki is that mutual funds don’t offer the performance that a good active investor should expect from the market. He says you can expect about 10 to 25 percent annual return. That’s crazy! Show me the fund that offers 25% annual return and I’ll sign up. This is when you know this guy really is a nutter. The S&P 500 is generally used as the benchmark for average US stock return and that benchmark has acheived 10.25% annually or the last 75 five years on average. Small caps have done a percentage point or two better but no where near the 25% return that Kiyosaki says you can expect. The greatest part is that he scoffs at that though!
In another article I read by Kiyosaki he argues that only stupid investors diversify to cover their financial planners butts. He says you should be a focused investor because that’s what the worlds greatest investors are. Guess he’s never heard of Ben Graham, the father of modern investing. According to Graham and many other studies by intelligent people asset allocation which means diversification is a good thing. I feel bad for the focused investor who took Kiyosaki’s advice, done his due diligince but invested in the next Enron … bye, bye nest egg and riches. I guess for Kiyosaki your not an investor unless you are perfect. I for one am not and don’t know anyone who is so I think I’ll stick with the rational people and stick to an intelligent asset allocation.
From his two articles I’m pretty convinced this guy knows next to nothing about good financial practices. There will always be the cult followers who say this guy has made a bundle and is trying to enlighten us. But, as for me I think I’ll stear clear, and my pocket book will probably thank me for it.
So long story short: don’t waste your money on this guy.