Chapter 1: What should I invest in?

“It’s the first million that is the hardest.”

In 1930, Joseph Kennedy pushed for the creation of the SEC or Security and Exchange Commission after the stock market crash of 1929. This government body was formed in order to protect the public from unscrupulous dealers. Ironically, this same Commission that was formed to protect the public from bad deals also keeps them from the best investment deals.
What are the types of investors?

Only the rich can invest in certain types of investments. An accredited investor is someone who is qualified to invest because:

• He or she has a net worth of $1 million or more.
• He or she has an annual income of $200,000 (or $300,000 jointly with a spouse) who has areasonable expectation of reaching the same income level in the current year.
• He or she can put up the minimum investment unit for accredited investors, $35,000.

A Sophisticated investor has the 3 E’s:

• Education
• Experience
• Excessive Cash

An investor may be “qualified” in terms of annual income, but may not be considered “Sophisticated” because he or she lacks the knowledge and experience in investments. Here are some of the investments of accredited and sophisticated investors:

• Private placements
• Real estate syndication and limited partnerships
• Pre-initial public offerings (IPO’s)
• IPO’s (While available to all investors, IPO’s are not usually easily accessible)
• Sub-prime financing
• Mergers and acquisitions
• Loans for start-ups
• Hedge funds

The Five Phases Rich Dad sets for becoming a Sophisticated Investor:

1. Are you mentally prepared to be an investor?
2. What type of investor do you want to become?
3. How do you build a strong business?
4. Who is a sophisticated investor?
5. Giving it back.