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The Four Keys to Successful Investing

Keeping investing simple to achieve great results

I’ve been investing for the better part of the last 30 years, and along the way I’ve heard a lot of advice, made a lot of mistakes, and had some tremendous victories. It’s been a lot of fun!

Thankfully, the fun I’ve had as an investor has also created a great life. Learning how to invest, and actually doing it, has allowed me to be financially free and do other things I love without fear, worry, or financial stress.

A lot of people shy away from investing because it seems too complicated, like the learning curve is too steep. And it’s true, some people do make investing seem complicated. But I like to keep things simple, and I think that anyone can become an investor with just a little bit of help and insight.

The following are four keys I’ve learned about being a successful investor. They’re easy to remember and simple enough for anyone to tackle.

Key #1: Arm yourself with some education

It’s all about education. The more you know, the better you’ll do when it comes to investing. This means that you’ll need to do some homework. The good news is that with the Internet, there are plenty of resources right at your fingertips.

I believe in the power of education so much that Robert and I built Rich Dad simply to provide financial education. We don’t sell investments or even recommend them. All we offer is education, both experiential in games like CASHFLOW 101, and cerebral like books and seminars.

Key #2: Start small

Whatever you choose to invest in, expect to make some mistakes along the way. You don’t have to be afraid of making mistakes. Instead, be afraid of not learning from them!

My first investment mistake was on the very first rental house I bought. After my first tenant moved out, I thought I could raise the rents by $25. I was only making $50 cash flow at the time, and to me a 50% increase in profits sounded great.

Unfortunately, I didn’t check the comparable rents in the neighborhood. If I had, I would have learned that I was asking for top-of-the-market rents. As a result, the house sat empty for three months. Instead of making a little extra, I lost $1,500.

Today, I own thousands of units. I’m glad I made that mistake—and learned its lessons—when I only had the one house. I’m glad I started small.

Key #3: Put a little money down

There are three reasons why this is important to your success.

1. Until you have some money on the line, you’re not in the game. Up to that point, it’s all theory. You have to put your knowledge into action.

2. A little money means a little risk, but a lot of money means a lot of risk. You can learn just as much from the mistakes on a little bit of money than you can on a lot of money. Make those small mistakes first, and then look at upping your money game.

3. Have you noticed how interested you get in something when your money is at stake? Having money on the line helps you become motivated to invest your whole self in the process.

Key #4: Stay close to home

As the old saying goes, the grass is always greener on the other side. People are always looking for that next hot market.

But whether you’re a seasoned investor or just starting out, I still recommend investing primarily close to home. What does that mean? It means staying close to what you know. This is the exact opposite of acting on a hot tip!

Instead of chasing investment rabbit trails, stick to the well-worn paths you know and love. That way you can always get back home!

Original publish date: November 27, 2014

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