The 5 Levels of Investors image

The 5 Levels of Investors

Where Are You?

As I wrote in Rich Dad Poor Dad, My rich dad often said, “If you are a true investor, it does not matter if the markets are going up or coming down. A true investor does well in any market condition.” In other words, your success is not dependent on the market, but on you.

Success or failure, wealth or poverty, depends solely on how smart the investor is. A smart investor will make millions in the stock market. An amateur will lose millions.

So what kind of investor are you? Below, I’ve listed five levels of investors. In Rich Dad Poor Dad I write about my real dad. My real dad was very educated, worked hard, and made a good income. However, he held traditional views about money and as a result ended up struggling financially all his life – I call him my poor dad. He was in the first two levels of investors.

In Rich Dad Poor Dad I also write about my rich dad. My rich dad, (my friend’s dad) did not have a college degree, also worked hard, but he thrived financially. Unlike my poor dad, he had a rich mindset and thought about money very differently and as a result ended up being one of the richest men in Hawaii. My rich dad was a level five investor.

Take a few minutes, be honest with yourself and determine which investor level you are at. Before you can reach your dreams you’ve got to be honest with where you are starting from.

Are You at Investor Level 1?

If there is nothing in your asset column with no income coming in from your investments and you have too many liabilities, then you are starting at the bottom level, ground zero.

If you are deeply in bad debt, your best investment might be to get out of bad debt.

There is nothing wrong with being deeply in bad debt, unless you do nothing. After I lost my first business, I was nearly a million dollars in debt. It took me almost five years to reach zero. In many ways, learning from my mistakes and taking responsibility for my mistakes was the best education I could have asked for. If I had not learned from my mistakes, I would not be where I am today.

Are You at Investor Level 2?

If you are a saver, be very careful, especially if you are saving money in a bank or in a retirement plan. In general, savers are losers.

Saving is often a strategy for people who do not want to learn anything. You see, it takes no financial intelligence to save. You can train a monkey to save money.

The risk in saving is that you learn little. And if your savings are wiped out, either by market decline or devaluation of the money supply, you wind up without money and without education.

Remember that the U.S. dollar has lost 95 percent of its value since 1971. It will not take long to lose the rest of its value.

As stated, a person can even lose money saving gold if they buy gold at the wrong price.

I suggest taking a few courses on investing, either in stocks or real estate, and see if anything interests you.

If nothing interests you, then keep saving.

Remember that the bond market is the biggest market in the world simply because most people and businesses are savers, not investors. This may sound strange to savers, but the bond market and banks need borrowers.

Are You at Investor Level 3?

This level is similar to Level 2, except that this level invests in riskier instruments, such as stocks, bonds, mutual funds, insurance, and exchange-traded funds.

Again, the risk with this level is that, if everything is lost, the investor loses everything—and learns nothing.

If you are ready to move out of Level 3, invest in your financial education and take control of your money, then Level 4 is a good level or you.

Are You at Investor Level 4?

If you are here as a professional investor, congratulations. Very few people invest the time to learn and manage their own money. The key to success at Level 4 is lifelong learning, great teachers, great coaches, and like-minded friends.

Level-4 investors take control of their lives, knowing that their mistakes are their opportunities to learn and to grow.

The fear of investing does not frighten them. It challenges them.

Are You at Investor Level 5?

To me, being a capitalist investor at level 5 is like being at the top of the world. Literally, the world is your oyster. The world has no borders. In this world of high-speed technology, it is easier than ever to be a capitalist in a world of plenty.

If you are at this level, keep learning and keep giving. Remember that true capitalists are generous because a successful capitalist knows you must give more to receive more.

It’s Your Choice

One great thing about freedom is the freedom to choose to live the life you want to live.

It’s your choice but you can’t do it alone. That’s why I have my Rich Dad Coaches and Rich Dad World.

Here’s Help

If you are not at level four or five, I’d encourage you to get free access to the Rich Dad World PowerPack. It includes my Choose to be Rich home study course, some new webinars by my financial coaches, and many other tools that will help you go through the process of thinking, learning and doing differently with your money until you are on your way to financial freedom.

You can start your journey to freedom and empower yourself by signing up to get your FREE Rich Dad World PowerPack, which includes sections of my best-selling book, Rich Dad Poor Dad!

“Rich Dad World’s goal is to increase your financial IQ, and bring you a world of possibilities, a world of learning, a world of understanding. A take charge world, where you’ll be equipped to take command of your finances and live a Rich life.”

Original publish date: September 03, 2013

Join Our Community—1.5 Million Strong

Register for free!