Friday, May 27, 2011

Investment that everyone is doing

Earlier I was looking through Robert Kiyosaki’s book, Cashflow Quadrant. The book illustrated some forms of investing that was always been practiced by average people among us.
That practically caught my eye! So I am sharing my thoughts and also facts on how average people think AND how successful people commented otherwise in a real world aspect.
Most average people have invested in either 3 or all of these investments I am showing below:

1.Education
Most average people invested in education as part of their investment. They invested into professional education; enrol in their Masters and PhD’s so that they get a professional career that offers thick paycheck.
Response from the real world:
While it may be true, education is a great tool of investment. But it may results to chance. Take an example this person graduated in his/her Master. Brought up a state-of-the-art CV to a prospective company. After being hired, he/she will be competing against his/her fellow colleagues. And a company hierarchy comes in a pyramid style.
Out of 10,000 executives, 1000 are promoted as seniors.
Out of 1000 seniors, 100 are promoted as managers.
Out of 100 managers, 10 are directors
Out of 10, maybe 2 are MDs…
So against all odds, to become financially free, this person has to fight his/her way up the ladder to enjoy life being wealthy.  If he/she’s lucky will get promoted. If unlucky enough maybe they will just work for the next 30-40 years of their life to survive.
Investing in education ALONE is taking chances, not helping to build wealth.

2.Invest in Family
Some families may want to build a decent family. They support their children all the way up to college. This is part of their investment so that in return these children will continue to support the parents.
Response from the real world:
This may not be a perfect family lifecycle. As the global trend and lifestyle is changing, it is becoming very difficult for families to handle the living expenses and medical expenses of parents.  So the end of the day, both parents and children still working hard to support each other.  

3.Government retirement plan
Some people will continue to work for company and leaving a portion of their salary into government retirement plan such as 401k (named as EPF in Malaysia).
Response from the real world:
It may sound sensible to leave a chunk of money for the government to invest. These people may have to rely on the government to return the money back to them. This is taking chances to hope that the economy and country’s future development is positive. One may not know how much return they can get until they receive the money. AND they may know even know if this money is SUFFICIENT for retirement.
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Whether you agree to it or not, these are the 3 forms of investment being practiced by people in the Industrial Age or older generation. Since that we are in the Information-Age where things are moving differently, hence these forms of investment are risky.
I am stressing that doing these 3 forms of investing are fine provided there are other sources of investment to help you build the passive income.
It was sad to know that some people to work 30-40 years until they retired. They relied their income in these 3 forms of investment, although they know its not helping them…Wake up!!

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