Page 126 - Rich Dad's Increase Your Financial IQ: Get Smarter with Your Money

The investor has no control and no leverage power in any of the four
columns of the financial statement with savings, stocks, bonds, mutual

funds, or index funds.

A Pause before Going On

Before going on into higher forms of leverage and control, I believe it is
important to recap and review the points covered so far, before getting more

complex. These are the seven points:

Point #1: There are many types of leverage. The financial leverage most

people are familiar with is the leverage of debt, a.k.a. OPM, other people’s
money. There are other types of financial leverage, such as the leverage of
financial intelligence applied to financial controls. In fact, all five financial
intelligences, which are increasing income, protection from predators,

budgeting, leverage, and information, are forms of leverage. Leverage is
anything that makes your job a little easier. It’s easier to move a heavy
object with a forklift, and it’s easier to make a sophisticated investment
decision with a higher financial IQ.

Point #2: Most investors invest in paper assets, assets they have very little
control over. Examples of paper assets are savings, stocks, bonds, and
mutual and index funds. Because these assets allow little to no control,

these investors have very little leverage and low returns on investment, and
reflect a low financial IQ. An example of low financial IQ is a 5 percent
return on savings, paying taxes on that return, and then having inflation

almost wipe out its value.

Point #3: An increase in returns does not mean an increase in risk. When
financial advisors say that an increase in returns means an increase in risk,

they are right when speaking about paper assets. They are wrong when
speaking for all assets.