Page 153 - Rich Dad's Increase Your Financial IQ: Get Smarter with Your Money

you something and then do the opposite. This person may go on television
and say he is bullish on a stock and is buying it. This bit of information

causes other people to buy the stock, driving the stock price up. Once the
price is up, the person who recommended the stock sells and takes a huge
profit. This is known as the pump and dump.

The Sleight of Hand

Another form of deception is known as the sleight of hand, a technique
named after a magic trick. When a magician taps on his top hat, your eyes
are drawn to the hat and away from what he is doing with his other hand
behind his back.

In business, consumers are often deceived the same way. For example, a
box of cereal may boldly say, “Low-Fat.” A consumer worried about
gaining weight thinks this is a good cereal for them. Upon closer inspection
of the fine print, however, you find the cereal is low in fat but excessively

high in sugar.
In investing, a mutual fund may advertise, “Highest returns of all funds.”
What the headline fails to state is that none of the other funds made any
money and neither did their fund. It’s like saying, “I caught the biggest

minnow.”

Classifying Information to Become Richer

There are a number of lessons I learned in the military about classifying
information that are applicable to business:

Lesson #1: Facts vs. opinions. The key to military intelligence is to know
the difference between facts and opinions. The same is true for financial

intelligence. One of the reasons so many people think investing is risky is
because they do not know the difference between facts and opinions. A few
examples of opinions are: