Why does Robert Kiyosaki say you shouldn’t invest in the stock market for the long term? (2024)

FAQs

Why does Robert Kiyosaki say not to invest in stocks? ›

Given skyrocketing deficits and what Kiyosaki perceives as fiscal mismanagement, he believes the dollar and the stock market in particular are vulnerable to crashes as more investors lose faith in their value.

Investing exclusively in stocks can cause you to lose a significant amount of money if the market crashes. To hedge against losses, investors strategically make other investments to spread out their exposure and reduce their overall risks. By reducing risk, you face the risk-return tradeoff.

The primary con of long-term investing is its opportunity cost. Funds that are tied up in long-term investments cannot be used for other investments, particularly short-term profitable opportunities. This may not be an issue in the future if the long-term investments bring in enough profit.

Final thoughts on long-term investing vs short-term

Both approaches have their potential benefits, but long-term investing potentially provides an increased chance of a higher return through compound growth and the recovery of losses over time.

Investing Only in Intangible Assets

Ultra-wealthy individuals invest in such assets as private and commercial real estate, land, gold, and even artwork. Real estate continues to be a popular asset class in their portfolios to balance out the volatility of stocks.

You're Not Financially Ready to Invest.

The stock market is known to be a little bit higher risk than many other types of Investments as you are investing in businesses. If you have debt, especially credit card debt, or really any other personal debt that has a higher interest rate.

Stock prices are risky and volatile. Prices can be erratic, rising and declining quickly, often in relation to companies' policies, which individual investors do not influence. Stocks represent ownership of a business, and hence investors are the last to get paid, like all other owners.

Although investing poses risks, such as market declines, not investing also can be a risk to your financial future. The key is finding balance – taking on an appropriate amount of risk to ensure you have enough growth potential to reach your long-term goals.

His penchant for long-term investments is reflected in another of his aphorisms: “You should invest in a business that even a fool can run, because someday a fool will.” He doesn't believe in businesses that rely for their success on every employee being excellent.

Can you lose money in long term stocks? ›

Technically, yes. You can lose all your money in stocks or any other investment that has some degree of risk.

Disadvantages of Short-Term Investing

Short-term investing comes with high costs due to a high transaction volume and their corresponding brokerage commission fees. Taxes and inflation also reduce the returns earned via short-term investing.

No matter what the goal, the key to all long-term investing is understanding your time horizon, or how many years before you need the money. Typically, long-term investing means five years or more, but there's no firm definition.

Long-term investments can provide steady growth over an extended period, but they require patience and dedication. On the other hand, short-term investments offer greater liquidity and potential for quick returns, but they come with higher risks and require active management.

Robert Kiyosaki is generally skeptical of traditional stock market investments and has cautioned against overreliance on stocks, bonds, and mutual funds, which he considers to be "paper assets" vulnerable to market crashes and economic downturns.

The Bottom Line. Ethics are morally subjective by nature, and there is no absolute standard for what is or is not an ethical investment. Investors must ultimately decide for themselves what they consider to be ethical and then try to apply that to their investment choices.

Low interest rates help make growth companies more attractive, too. Growth stocks tend to be less profitable, if they're profitable at all, as the companies invest in operations. But in a low-rate environment investors overlook this lack of current profitability because the cost of money is low.

People, organizations, and nations are said to be wealthy when they have accumulated many valuable resources or goods. Wealth can be contrasted with income in that wealth is a stock and income is a flow.