“One of the reasons so many people lose so much money investing, or think that investing is risky, is because they invest like ranchers. They invest to slaughter rather than to milk” — Robert Kiyosaki.
Knowledge of investing is an essential part of financial intelligence and financial success. However, despite the awareness of the role of investment in the financial and economic success of the individual, people often invest wrongly due to wrong orientation about money or they rather avoid investing their money due to lack of exposure to intelligence and proper mentorship.
The author of Rich Dad Poor Dad Robert Kiyosaki, offers interesting insight on how investment can be better perceived and approached. The following insights are courtesy of Robert Kiyosaki:
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“I learned the difference between cash flow investing and capital gains investing from a herd of cows.
“When I was 16 years old, rich dad took his son and me to visit a cattle ranch. The ranch was a beautiful place to visit.
“On this visit to the ranch, we happened to see cowboys herding cattle from the feed yard to the slaughterhouse. Although rich dad took us away before we could see any cattle being slaughtered, we knew what was going to happen… and so did the cattle. It was an experience I will never forget.
“A few months later, rich dad took us to a dairy farm. Early in the morning, we saw the farmer herding his cows into the barn for milking. These cattle behaved very differently.
“The financial lesson rich dad wanted us to learn was that, while both the cattle rancher and the dairy farmer count their cattle as assets, they treat their assets differently, and they operate via different business models.
“The visits to the ranch and the farm were to emphasize the very important difference between two investing strategies: Capital gains versus Cash flow.
“Simply put, a cattle rancher can be compared to a person who invests for capital gains. He has to keep finding and raising new cows. It’s non-stop.
“A dairy farmer is more like an investor who invests for cash flow. He only needs to maintain his cows rather. It’s much easier work.
“One of the reasons so many people lose so much money investing, or think that investing is risky, is because they invest like ranchers. They invest to slaughter rather than to milk.
“I invest to milk. Milk makes ice cream” Kiyosaki said.