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2-Cent Rant

Should You Follow The Financial Advice Given By These Gurus?

Are these financial advices really useful for you?

 

In the fast pace world we live in today, not everyone is able to find the time to read a book, attend a talk or watch a program.

Reading a Robert Kiyosaki book or watching one episode of the Suze Orman show may take too much time. Instead, we prefer getting our nugget of wisdom through quotes from these people. These quotes don’t take more than 10 seconds of our day to read and understand.

Here are some quotes that we pick out from these financial gurus. We check out if these advices are worth heeding.

# 1 Many times, people do not make money simply because they fear losing money more – Robert Kiyosaki

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Robert Kiyosaki is the author of the very popular book, Rich Dad, Poor Dad. He teaches people the importance of investing, and why we need to learn how to make money work for us.

To make money work for us, we have to invest and take on risk. Risk includes the possibility of us losing the money we have invested.

However, this quote from Robert Kiyosaki could cause more harm than good, especially for novice investors.

Fear of losing money is a good thing. By being worried of losing money, it makes us think hard of our risk appetite. It forces us to recognise the risks that we are taking in our investment, rather than to simply ignore them.

# 2 “Rule No.1 is never lose money. Rule No.2 is never forget rule No.1” – Warren Buffet

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Most investors should heed the advice of Warren Buffet when they invest.

This isn’t to say that we should keep all our money in fixed deposits and be afraid of investing. Rather, it means that when we do invest, our priorities should be on risk management, rather than on the returns we hold to get.

We should focus on managing the risk that we are exposed to when we invest and to let the returns take care of themselves. If we can effectively manage our risks, we will end up as a winner in the long run.

Read Also: 10 Famous Quotes From Warren Buffet That We Can Learn From 

# 3 Your Home Is Not An Asset – Robert Kiyosaki

Here is another quote from Robert Kiyosaki that you shouldn’t just swallow entirely.

By itself, the quote isn’t wrong. Buying an expensive home that you can barely afford isn’t a great idea. It forces you to work hard just to meet the monthly mortgage repayment.

At the same time, you can’t generate income from your home if you are staying in it. Capital gains (if any) can only be realised if you sell your home.

That quote, however, have been blown out of proportion by people who do not believe in home ownership. They use the quote to claim that renting is a better alternative than buying your own home. This isn’t true.

If you were a Singaporean staying in Singapore, following the advice and choosing to rent, instead of owning your own HDB flat, would probably be a bad idea in the long run. Instead of paying monthly mortgage for your home, you would just be paying rental to someone else instead.

# 4 I still believe that over time a home can be one of the most satisfying investments you can make – Suze Orman

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We love Suze Orman. She gives great advices that are easily relatable to the masses.

One such advice is for people to own their own homes. By doing so, you will always have a place that you can call you own. As long as your home mortgage is at a reasonable level that you can afford, you have nothing to worry about

In contrast, if you were to rent a place instead, you will always have to worry about renewing your lease, and possibly having to pay more when your landlord demands for higher rental.

To sum it up, a home is not necessarily always an asset, but it’s definitely something we all still need.

# 5 In investing, what is comfortable is rarely profitable – Robert Arnott

Robert Arnott is the founder of Research Affliiates, a company that specialises in gathering insights to help investors get higher returns. This could be one of the reasons why he advocate less conventional investing methods that not everyone may agree with.

While there may be some hedge fund managers that subscribe to Robert’s method to generate excess return (because you can only generate excess returns by trying something different), most investors are generally better off investing in something they understand, and are comfortable with, rather than to try something which they are not familiar with.

Take Advices That Are Relevant To You

We must remember that all the little nuggets of wisdom out there are not always applicable for everyone. Though they may be great to read, and could inspire the financial decisions we made, we should still ask ourselves how they ultimately relate to us.

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