THE BASIC RULES OF INVESTING

Posted By: TimoStevens (Wealth Sage, 2009)

Rule 1:

Always know what kind of income your are working for!

There are 3 different kinds of income;

a) Earned Income - income from paychecks and bonuses
b) Portfolio Income - income from investment activities like stocks, bonds, mutual funds, etc.
c) Passive Income - income from real estates and royalties from patents or licensed agreements

PS: You have to work hard for portfolio and passive income if you want to acquire wealth!

Rule 2:

Convert earned income into portfolio or passive income!

This is all you should do as an investor; convert the income earned through your hard work and sweat into the kind of income that will make you acquire wealth and become rich.

Rule 3:

Keep your earned income secured by purchasing a security you hope converts your earned income into passion or portfolio income!

A security is something you hope will keep your money secure. Yet, not all securities are assets. So its up to you, the investor, to know which securities are assets and which securities are liabilities.

Rule 4:

The investor is the asset or liability, not the investment or security!

It is the investor not knowing the difference between an asset or liability that makes investing risky. Investing is not risky, it is the investor who is risky.

Rule 5:

A true investor is prepared for whatever happens. A non-investor tries to predict what and when things will happen!

Success in investing al begins with training your mind to know what to look for and being prepared for the moment an investment is presented to you.

Rule 6:

If you are prepared with adequate education and experience or extra cash, and you find a good investment deal the money will find you or you will find the money!

When you are ready, done your homework, gained some experience and track record, found something that is a good investment, then finding the money is not that hard.

Rule 7:

Develop the ability to evaluate Risk and Reward!

It's not the investment that is risky; it is the investor who does not have the adequate skills that makes the investment even riskier.

Source: Rich Dad's Guide To Investing - Robert Kiyosaki