Rich Dad’s Guide to Investing is the third book in the opening series of Rich Dad, Poor Dad. This third book gets a little longer and a little more technical. At DoorInvestor, we feel that if you can read through these first 3 books from Rich Dad, you definitely have done your part and you should be proud of yourself. Finishing these 3 books can also be served as a good stopping point and an opportunity to explore other readings.

If you have not done so, we suggest you first read our blog posts on The Review of Rich Dad, Poor Dad and The Review of Rich Dad’s Cashflow Quadrant first, before proceeding with this post.

Accredited Investor

There are several keys concepts present in this book. The first one is about being an Accredited Investor (or sometimes being referred as a Qualified Investor). Being an accredited investor opens up various investment opportunities that normally cannot be legally offered to the general public. It is required by law that certain types of investment vehicles can only be participated by individuals with the accredited investor status.

The S.E.C. has clear definition of how to achieve the accredited investor status, you can check it out with the link here: https://www.sec.gov/Archives/edgar/data/872699/000105652012000205/kgaccreditedinvestorq.htm

Private Placement Memorandum

Another key concept mentioned in this book was Private Placement Memorandum, or most people refer this as the “P.P.M.” Combining the accredited investor concept above with P.P.M. here, one classic example is real estate syndication deals. These deals are typically being offered as P.P.M., and even though there are ways around it (so you do not have to be an accredited investor to participate in some cases), if you want to be sustainable and be able to invest in all kinds of different real estate syndication deals (or P.P.M.), being an accredited investor is a crucial step.

Insider Investor

Once you get a good foundational understanding of these 2 concepts, Rich Dad would talk about another key concept: “Insider vs. Outsider.” An accredited investor is still an “outsider” – because you invest something that another person offers. To truly accelerate, you need to strive to become an “insider” – the person who offers these deals. In industry terms, these insider investors are called the “deal sponsors.”

So how can you become an “insider” you may ask? Rich Dad suggested that you should own your own business, learn about sales and marketing, and you can then offer your business out and become an “insider” investor. We at DoorInvestor also believe that you can become an “insider” by being an “active investor.” This means if you find a real estate property, say a commercial building, and decide to do a value-add play to it, and need someone to come in with you on the capital side, you essentially have just become an “insider” in Rich Dad’s term. You present your deal to potential investors, and other “outside” accredited investors can join in and make money in this deal passively.

Financial Literacy

Lastly, we want to point out that Rich Dad thinks it is very important for us to be financial literate. We need to know what is an asset vs. a liability (by Rich Dad’s definition, not the “old school” definition). You need to invest in ourselves, especially in financial and investment education. Being financial literate is the way to be rich, and be financially free.

There are many great concepts introduced in the Rich Dad’s Guide to Investing book. We strongly recommend you to pick up a copy at Amazon.