What Are You Investing For? Cash Flow or Capital Gains? – Robert Kiyosaki

Understanding the difference between cash flow and capital gains is one of the biggest differences between the poor and the rich.

In this video, Robert Kiyosaki and Ken McElroy (Rich Dad Advisor on Real Estate) discuss the primary reason they invest in real estate: cash flow.

They begin by the discussion explaining the two basic types of investing analysis: fundamental and technical. Fundamental analysis involves understanding everything involved between current economic and industry conditions. Knowing how to read a financial statement, a balance sheet, and the correlation between the two, for example.

Technical analysis, however, isn’t as subjective. Technical analysis seeks to identify patterns and trends in the markets.

Merging Of Fundamental And Technical Analysis Through Game Play

Robert and Kim Kiyosaki developed CASHFLOW® 101 board game to teach the basic fundamentals of investing. They later developed CASHFLOW® 202 to teach the technicals of investing.

After mentioning the fundamentals and technicals of investing, Robert and Ken explain why people who attempt to make portfolio income through capital gains ultimately lose. Even though they might time the market correctly when they trade on the stock market or flip a property, they are missing out on the real prize: cash flow.

Cash Flow And Capital Gains In Real Estate Investing

Back from a recent trip to Calgary, Canada, Ken explains why real estate is appreciating in value because of job growth. What industry is driving the boom? Oil.

Robert and Ken elaborate by explaining why they invest in Oklahoma (oil wells) and not Michigan (GM losing jobs).

In addition to job growth, Ken compares the cash flow he and Robert receive through cash flow and the capital gains earned from “flippers”. The way Ken and Robert see it, when you invest in real estate for cash flow you will make money regardless of what the market is doing. The market can go up or down, it doesn’t matter. You make money with cash flow either way.

A flipper, however, only makes money when they sell it. When someone buys a property and rehabs it with the intention of selling it, the money they make is called capital gains, or portfolio income.

Difference Between The Rich And The Poor

The poor want to LOOK rich. The rich want to BE rich.

As Ken continued to grow his real estate empire he had a choice to make. He could have taken his hard-earned wealth and bought fancy doodads people desire like a bigger house or more luxurious car. Or he could have put that money back into his investments to help them grow bigger, faster.

(Guess which option he chose.)

To wrap up the lesson on cash flow vs capital gains, Kim joins Robert to discuss her first cash flowing deal. Thought it wasn’t much (only $25 in monthly cash flow), it was a start. Today, she brings in over $125,000 per month in cash flow, not including passive income she makes from her other investments.

Take away: If you are focused on achieving financial freedom, focus on investing in cash-flowing assets. If you are seeking big wins through capital gains, you might get lucky and time the market correctly… but maybe not. Cash flow puts money in your pocket regardless of what the market is doing.

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31 thoughts on “What Are You Investing For? Cash Flow or Capital Gains? – Robert Kiyosaki”

  1. But I think we don't get full debt from bank ,we have to pay 10% or 20% down-payment, and saving that would take a lot of years for only 1 property, that don't it is important to flip one of a property to get some cash so can pay down-payment ??????

  2. Calgary has been a HUGE property crash. Why? OIL. 'The price of oil will keep going up'. The opposite happened. Otherwise These guys are very smart and make a lot of sense.

  3. Folks you need to ask youself a question….why would these people be teaching you this? So they have more competition? I smell a rat and so should you. Anyone who would give away their trade secrets would be a fool!

    So what is there real motive? Are they just being nice or are they up to something to capitalize on in the future? THINK ABOUT IT!

    So if they convince 100,000 people to invest in real estate like they do, what does it PROFIT THEM? It becomes HARDER FOR THEM TO INVEST IN REALESTATE!! Remember they are all about CASH FLOW and they are making it HARDER to keep their cash flow telling you how they do it! What?

    I have a few theories…

    1 ) they want lots of people to try at this only to fail (because its WAY HARDER than they make it out to be) so they can come in and make even more on say forclosures of those who fail.

    2) they are hired by the banks to try to increase the number of mortgages, to build up another housing bubble.

    3) they indirectly get compensated from financial institutions….they are marketers for them and get kickbacks.

    Folks you dont get the best muffin recipe in the world and the give it out to everyone!!! These people are HARD CORE CAPITALISTS and EVERYTHING they do they capitalize on or THEY DO NOT DO IT!

    Beware! I seriously doubt they are "just being nice" and want you to know what they have learned.

    Read between the lines!

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