Robert Kiyosaki: Why Have I Not Discovered You Sooner?

Robert Kiyosaki is so stupid, I just can't resist.

Maybe at some point this blog will evolve back into me having original opinions of stuff, rather than just making fun of stupidity. But stupid people are just so much fun.

Robert Kiyosaki is the author of the famous "Rich Dad Poor Dad" book series, which has sold about a bazillion copies, and has spawned all sorts of other products like a board game, and a book from his wife.

By the way, according to this guy, Rich Dad Poor Dad is probably about the most useless personal finance book of all time.

Robert also writes a column for Yahoo! Finance, which is where I found this gem, titled "Playing the Mutual Fund Lottery"

A few weeks ago I was talking with Tom Wheelwright, a CPA and business owner, about why people play the lottery. His comparison of the lottery to investing in mutual funds is worth sharing.

I bet it isn't, but please Robert, continue.

Even though he's not an investment advisor and never presents himself as one, clients continue to ask Tom what to do to prepare for retirement.

I suppose Tom's clients could do worse than asking the advice of an accountant about their retirement. So what's your advice Tom? I'm waiting on the edge of my seat...

And since most people end up choosing mutual funds as their primary investment... playing the lottery would be a better way to go.

Hold the fuck on here. This moron is comparing playing the lottery to investing in public corporations? The fucking lottery?

Robert, buddy... Maybe it's time for a new accountant?

Gambling away your retirement funds in a government-sponsored game of chance that you have little hope of winning? Sounds crazy, right? Millions of people buy tickets with the same hope. How sensible is it to play the lottery when the chance that you'll lose the money you put in is so high?

I can't believe he keeps going with this.

Unlike Robert's friend, let's take some time to crunch some numbers.

Let's assume that someone is turning 65 this year. This person would be born in 1943, and let's assume that they started investing at age 26 in 1969. For simplicity sake, let's assume his mutual funds did 3% worse than the market over that time (2% management fee, 1% because fund managers generally underperform the market)

Return of the S&P 500 from 1969-2008, less 3%: 3.04% compounded

This is not including dividends. Plus, if you would have taken your money out of the market at this point last year, your return would have jumped to 4.57%, a 50% improvement.

The point of all of this? Even if you sold during the worst bear market of the last 20 years, you're pretty much guaranteed to make money in the market over a long period of time.

By the way, the odds of winning the 6/49 is 1 in 13.9 million. Great comparison.

But the same could be said of mutual funds. After all, it's also a government-sponsored program that you have little chance of winning.

Little chance of winning? This just in: The market goes up over time. That means that if you stay in for the long haul, you're pretty much guaranteed to win.

I once heard a radio interviewer ask a representative of a large mutual fund about the fund's performance. The rep said it had risen in value by an average of 20 percent per year for the prior two years.

Maybe because the market was up?

But when the interviewer asked about the average return to the average investor in the fund, the representative responded that the average investor had actually lost 2 percent per year. Why? Because the performance of the market is unpredictable.

For how many years? Was this fund launched in 2000? 2002? 2005? 1992? 1897? Without the knowledge of how long this fund has been in existence, the two percent a year number is meaningless.

What asset class is this fund in? Is it a balanced fund, or is it something more risky?

Apparently all these questions matter not to Robert.

The market is unpredictable? No shit! Stay tuned for when Robert reveals other great nuggets of information such as:

1) The sky is blue
2) Eaten food turns into poo
and the coup de grau
3) Mutual funds are EXACTLY the same as the lottery

Compare that to the lottery, where the precise chances of winning and the exact amount of the jackpot are known quantities.

They're known all right... Known to be pretty shitty.

As for the great tax advantages of putting your money into a 401(k) or an IRA, how is it a good deal to get a tax deduction when you're young and in a relatively low tax bracket so you can pay taxes on the money you take out when you're old and retired -- and probably in a higher tax bracket?

What advantages are there? Let me list 2:

1) The entire defination of retired is when you don't actually work anymore. Therefore, your tax bracket would be low because you have little to no employment income.

2) The government is PAYING you to SAVE. What a terrible idea. You shouldn't go for it.

Also, consider the difference in tax rates on capital gains and dividends if you're not in a 401(k) or IRA versus the ordinary income tax rates on the earnings when you pull them out of your 401(k) or IRA.

Holy shit! Robert is actually right about this.

Okay Robert, what should you invest in?

So should you just invest in mutual funds outside your 401(k) or IRA?

umm... yes?

No again.

Dammit! I suck at this game.

Mutual funds result in capital gains taxes when the fund managers trade them, even though you don't see the money. You have to pay taxes even though the fund may actually have gone down in value.

Only if you sell. Isn't a mutual fund uniquely positioned to be a buy and hold investment? After all, you have a professional manager running it.

Of course, if you just stuck it in your retirement account, you wouldn't have to worry about it.

Here's something else to consider: What about the lost opportunity cost of the money you pay in taxes, which you could've put into other investments?

So you've spent the last paragraph talking about how you hate 401(k)s and other tax deferred retirement plans, and then you talk about the lost opportunity cost of taxes? Which would only be a consideration if you did EXACTLY THE FUCK YOU SAY.

Which side are you on Robert?

At least with the lottery, you know the exact amount of taxes you can expect to pay if you win, and you only have to pay taxes if you do win.

Except you won't win, because it's the fucking lottery.

I can hear you saying, "But the lottery is gambling! And I have no control over whether I win or lose!"

Actually what I'm saying is "I can't believe I'm still reading this shit."

You're right -- the lottery is gambling. But so is a mutual fund.

A mutual fund is gambling... except with a very good chance that you'll win.

If you take that logic, whacking off before bed is a gamble too, since your palms can get hairy or your dick can fall off.

Don't believe that? Neither does anyone else. Because it's stupid.

You have no control over the stock market and neither does the fund manager.

Quick, name me one investment you can make you have total control over!

Your business? You can't control competitors, customers, or new innovations coming into the market.

Real Estate? You can't control the general economic principles that affect both real estate prices and the potential rents you can charge.

Bottom line: There is no investment you can make that you have total control over.

At least when you play the lottery you recognize that you're gambling. And you don't have the government, financial institutions, and your employer telling you that the lottery is a good investment. And your employer doesn't go so far as to match the amount you put into the lottery like it might with your 401(k).

I'll forgive the first 2 sentences, simply because the last one is so, so bad.

Robert Kiyosaki thinks that the guaranteed 100% return you get on employer matched 401(k) plans is a bad idea. Why has this asshat even sold one book? How stupid are Americans?

100% guaranteed return=good
Robert Kiyosaki=dipshit

But isn't there a better chance of making money in a mutual fund than there is in the lottery?

For the love of God, please say yes. Save the last shred of dignity you might have left.

Hardly.

*Slams head into keyboard*

There may be less of a chance of losing all the money you put into a mutual fund than there is of losing all the money you put into lottery tickets, but you're never going to win big in a mutual fund.

Mutual funds are not designed to have people win big. That's why investments are different than the lottery.

In fact, mutual funds are designed to minimize your returns by creating a "balanced portfolio."

A balanced portfolio also limits your downside during a market sell-off. That's the trade-off.

If they could minimize the risk of the market itself, that might be OK.

The way of minimizing the risk of the market itself is to do two things:

1) Diversify across different sectors
2) Diversify across different asset classes

These are both things a balanced fund does.

If nothing else, the lottery gives you a chance to win big, and you can sleep at night.

You can sleep at night because it costs 5 bucks for a quick pick. Hell, 5 bucks barely matters to a hobo anymore.

If you have thousands of dollars invested in something, you should probably worry about it. Maybe you shouldn't go as far as losing sleep over it, but it should cross your mind every now and again.

The advice at the end of this abomination?

If you really want to retire, look at other investments and work with someone who's willing to put in the time to help you retire soon and retire rich. Financial freedom is available to those who learn about it and work for it. It's unlikely for those who want to rely on such risky investment strategies as mutual funds.

Look, I hate mutual funds. I think that ETFs are a way better option. But for someone who has no idea how to invest and wants to make no effort to learn? At least they're doing something. At least they're saving and investing in the market. If they start young, they'll do fine. Even in mutual funds.

The whole point is the accumulation of capital.