Page 128 - Rich Dad's Increase Your Financial IQ: Get Smarter with Your Money

With stocks, a trader can use the leverage of options. If a trader thinks
the market is going up, the trader may use a call option, which is the right to

purchase a stock at a certain price within a certain time. For example, if the
stock is $10 today and the trader senses the price will go higher, the trader
may buy a call option for $1. If the trader is correct, and the stock goes to
$20, the trader has made $10 with $1. If the trader thinks the market is

going down, the trader may use a put option, or short the stock.
In other words, a trader has the potential to make money if the stock
price is going up or going down. The problem, however, is that the trader
has no control over the asset, just control over the terms of their trade. As

expected, most financial advisors who sell mutual funds and recommend
diversification say that trading a stock is risky—and it is for those who lack
training and experience.
Learning to trade a market, even in real estate, is an important part of an

investor’s financial education. Real estate investors also use options. In real
estate a call option is known as a down payment. If you are a flipper, a
down market in real estate can be disastrous.
Since most of my investment in real estate is based upon rental prices

and operating costs of a property, up and down markets in real estate do not
affect me as much. While I do occasionally flip a property, especially if
someone is willing to pay me a ridiculous price for it, as a practice I would
rather buy a property and collect rent and other income for a long time.

Then I look for another property to buy and hold.
For those who are interested in learning about investing in up and down
markets, we have our board game CASHFLOW 202, a game that teaches
you to trade with play money. CASHFLOW 202 is an addition to

CASHFLOW 101. It is strongly recommended you start with CASHFLOW
101 before moving on to CASHFLOW 202.
There are CASHFLOW Clubs all over the world for people who want to
learn the games before purchasing them. Financial education is essential for

anyone wanting to use more leverage.

Point #7: When most financial advisors recommend diversification, they

are not really diversifying. There are two reasons why the diversification
they recommend is not diversification. The first reason is that financial