Firstly, investing means using money to buy things that can grow in value. In fact, investing is buying assets to make a profit. However, without a clear plan it can feel risky and confusing. That is why experts like Robert Kiyosaki emphasize simple rules. These basic rules cover using loans wisely, understanding different income types, and focusing on cash flow. By learning them early, new investors gain confidence and direction.
The 6 Basic Investing Rules
For clarity, let’s break down each rule one by one. Each rule is explained with an example and practical advice for beginners.
Rule 1: Use Other People’s Money (OPM)
In simple terms, “Other People’s Money” (OPM) means using borrowed funds to buy assets that can grow. For example, you could take a bank loan to buy a rental house and then rent it out at a rate that covers the loan payments. In that case, the tenant’s rent ideally pays the mortgage and leaves extra profit. However, borrowing also adds risk. If the property value falls or rent drops, you could lose money. So use OPM carefully: only borrow what you can afford to repay.
Rule 2: Know Your Types of Income
For beginners, a key idea is to understand three income types. Earned income comes from your job (salary or wages), portfolio income comes from investments (like stocks or property) that you sell for a profit, and passive income comes in with little effort (for example, rent from a property or royalties from a book). Therefore, try to invest a portion of your salary into income-generating assets. This slowly turns earned income into future passive income over time.
Rule 3: Get Financial Education
Next, focus on financial education. As one guide notes, “financially educating yourself is one of the basic rules of investing”. This means learning how debt, assets, liabilities, and cash flow work. For example, you might study how rental income is calculated or play an investing simulation game. Even simple steps like reading a beginner’s guide or tracking your own budget improve your money skills. In the end, more knowledge means smarter choices and more confidence when investing.
Rule 4: Invest for Cash Flow
Next, invest for cash flow. In other words, buy assets that pay you money regularly. For example, a rental property can give you monthly rent, and a dividend-paying stock can give you quarterly payouts. In fact, investing in cash flow means buying assets that generate ongoing income. Ideally, try to “pay yourself first” by using part of your income to buy these income-generating assets. Over time, these assets will give you extra money even if you’re not working.
Rule 5: Remember Investing Is Risky
Next, remember that investing is always risky. However, risk isn’t a reason to avoid investing – it’s a reason to be cautious. For example, even a steady job can be lost, so having some investments provides backup income. Also, stocks or property values can drop. However, with enough knowledge and planning, you can manage these risks. Overall, start small and spread your money across different assets. This helps protect you while still letting your investments grow.
Rule 6: Learn to Raise Capital
Finally, learn how to raise capital. A good deal needs money, so be creative in finding funds. Kiyosaki notes that “there is always a way to find the money for it with a good investment deal”finbold.com. For example, you might save a little and then use a small loan or partner with someone to finance the rest. The key is to have a clear plan and understanding before you seek investment. Over time, even small successes make it easier to raise bigger amounts. In summary, start with what you have and use each victory to build more capital.
In summary, these six basic rules give new investors a strong foundation. They cover ideas like using debt carefully, diversifying income, and focusing on assets that pay you back. By following these steps and taking small actions, anyone can start building wealth safely. Investing takes patience and practice, but each smart choice adds up. In the end, these rules help your money work for you and build your confidence.
