- So let's talk about millionaire principle number two.
There's seven levels of investor.
I learned this from Robert Kiyosaki.
But over the years I've changed it a little bit
to kind of
put my own spin to it.
Now, during my in-depth study of money
I made a shocking discovery.
Despite the many and varied personality types
in the world, there are only really
seven types of, or seven levels of investors.
How many?
- [Audience] Seven
- And while it's common for an individual
to drift a little from one investor
type to another, most people stay fixed
at one level for their entire lives.
- [Voiceover] The King of High Ticket Sales
World's Highest Paid Consultant,
Media Celebrity,
Multi-Millionaire Entrepreneur
Acclaimed TEDx Speaker,
International Best-Selling Author
Dan Lok.
- So, if there are some books I would
recommend you to read, one would be
Rich Dad's Prophecy. Put in your to-do list, to read.
Rich Dad's Prophecy, also Harry Dent's book
The Sale of a Lifetime: How the Great
Bubble Burst of 2017 Can Make You Rich.
Those two books I recommend.
It will scare the shit out of you.
And my recommendation is, it may happen
it may happen in 2016, it might happen in 2017.
Right, he said baby boomers, taking money out.
What we do know, 100% with certainty is, it's gonna happen
it's just when.
So I say say, why not be prepared?
When the market crash, a lot of people will lose everything
and I mean wiped out.
Not, "My stock is worthless". I mean wiped out.
Asset class, gone.
Fixed, you know, risk free investment gone.
The banks are out of business.
But if you prepare, you also do very well.
So it all depends right?
I can't fucking wait. I can tell you that.
(audience laughs)
I'm like praying please, come, my time has come.
People often get caught up in the
I need to make more money trap.
In fact income actually has very little to do.
Your income, has very little to do with the ability
to obtain financial freedom.
So, seven levels of investors has nothing to do
with the income, rather it relates to what you do
with your income.
Now how much money you make, has nothing to do with
the income, but what you do with your income.
It's not how much money you make,
but how much money you keep and
what you do with it.
So talk about zero, level zero.
The very first level is level zero
I call that the non-existent.
The non what?
- [Audience] Existent
- The non-existent.
They essentially have no investments, or savings.
They are completely unconscious or
oblivious of money matters in general
and their spending habits in particular.
They usually complain "I don't make enough money"
"That if I just make more money everything would be okay"
How many heard of people like that before?
I don't make enough money,
I make more money everything would be okay.
The problem is not necessarily the income or lack of
but rather their money management habits.
Let me tell you about the sad story of Mike Tyson.
During the 20 year span of his career Tyson's
income exceeded four hundred million dollars.
Not 40, four hundred million dollars.
In his 20 years.
Yet in 2004, before his 39th birthday
he was thirty eight million dollars in debt.
So he blew, four hundred million.
On top of that another thirty million.
Now you can say, well but again
Tyson at the time he made millions of dollars a fight.
A guy who can make millions of dollars a fight
can't be broke.
Well, his financial statement says otherwise.
Doesn't matter how much money he makes.
You look at the financial statement,
he has the cash flow pattern of a poor person.
In fact it's worse than poor,
because if your net worth is zero,
you're thirty eight million richer than him.
(audience laughs)
His is thirty eight million in debt.
Follow me?
It's not how much money you make.
So, level number one.
The borrower, now the borrower is often in a far worse
financial position than the non-existent
though his or her potential for change may be great
because usually they make a little bit more money.
The borrower often has very high debt,
the borrower spends all they make and more,
they know how to consume,
they know how to buy stuff.
Their idea of financial planning is to get
a new visa or mastercard.
Okay.
Borrowers, here's the thing, usually they live
in complete financial denial.
They live in complete financial denial.
They often come to believe that the situation is hopeless
and they kind of just give up, they say
"Oh, it's just they way it is man"
and when they feel depressed, what do they do
they go out and? Buy more.
Because it gets them out of
their funk.
I'm depressed, I spend more, into more debt
and then I go back depressed and I spend more money
and it becomes this cycle.
Level number two, the saver.
The saver usually put aside a small
amount of money, on a regular basis.
Now the money is generally deposited into
a very low risk low returning vehicle such as
a term deposit or money market account.
So savers usually save to consume rather than invest.
So they saved up the money and then they'll go on vacation
they save the money they will buy a car,
they save the money they might buy a big TV.
They are very afraid of financial matters
and are unwilling to take any risk.
They're just safe, you can see. They are the ones
who drive many hours to save a few dollars.
They are the ones who will line up on boxing day
and fight and wait for 10 hours to try to save their item.
Savers.
Level number three, the passive investor.
What kind of investor?
- [Audience] Passive - The passive investor.
So these investors are aware of the need to invest
and usually, you know, add to the RSP or 401k in the US
by making employee contributions and sometimes
they even have outside investments such as
maybe a mutual fund or shares, stocks or bonds.
They make up two thirds of the population that we call the
middle class.
They're called what?
- [Audience] Middle class - Middle class
And however, when it comes to investing
they are financially illiterate.
They're just kinda like, put that aside
and that's the mentality
and these are very common things they might say;
"Well I'm not very good with numbers"
"I'm not very good with numbers"
"I never understand how this wheels to investment work
or how this stock investing stuff works"
"I'm just too busy to follow everything,
It's just too complicated"
"Well I just prefer to leave the money
decisions to the professional"
Oh here's a good one, I love this one.
"I have the best financial planner in town,
I don't need to understand everything that's going on
he's a great guy, he's a nice guy"
He's a great guy.
They have very little idea where
the money's invested or why.
Now here's the thing, these investors blindly
follow the market like sheep and then
squeal a lot like pigs before
running to their own slaughter.
They also believe the high rates of return
of investment are impossible and probably illegal.
You tell them oh this thing can get 15, 20 percent return
they say oh, that's too risky, that's impossible.
They don't do that oh no no no. That's how they are.
It's also common for these people to whine and complain
about missing out, so at the same time
you tell them about these investments potential
and you can make these returns. "Oh oh oh
that's too risky I don't want to do that"
and suddenly they see people making money. Oh shit!
I should have gone into that,
I should have jumped into that
I missed out.
And they're the ones that will follow
the newspaper suddenly the news is saying
oh the markets crashing, sell sell sell sell sell.
Oh no no no I need to buy
and the broker is happy to take their call
because everything they buy and sell they make a commission.
Okay.
So passive investor, so those are the first few right?
You have the non-existent, the borrower, the saver,
the passive investor. Now if I go into the other ones
let me give you three minutes to discuss those ones first
who do you know that belongs to what category?
Or maybe what level you are in.
Time to be honest, time to be fucking honest.
Put up your hand, how many of you are
learning something new today yes?
Very good.
And
put up your hand if you know people who are at level 0.
Okay.
Put up your hand if you know people who are level 1.
And how many of you know people who are at level 2.
And level three?
Let's dive a little bit deeper.
Now, the passive investor, they do not like risk.
They do not like risk, at the same time
they very much love to use what I call
sophisticated investment techniques
such as margins, short cord, puts, calls
without proper knowledge of exactly
what is this they are committing to
or the real risk.
Now, passive investors lose money more than 90% of the time
they lose money more than 90% of the time,
because they like to speculate.
They will never discuss their losses
but will always brag about their big win.
You don't hear about when they lose money.
Oh yeah I bought this stock, it went up I double my money.
You only hear about those stories.
They believe all they need is one big hit,
and they will be on easy street.
They are gamblers. They're basically gamblers.
They like to gamble.
Okay.
And unfortunately I've seen entrepreneurs,
they work very, listen to me.
I've seen entrepreneurs who work very very hard
their entire lives.
They make and accumulate quite a bit of money.
But they listen to their friends, they listen to something,
"Hey man, sure fire thing man, put some money into it"
And what took them 10 years to accumulate
because they are not a good investor
level 3, what took them 10 years
they can lose it in one year.
Everything.
And now it takes them another whatever how many years
but here's the thing. Entrepreneurs,
nature it's in our nature, we can work hard.
And then we're like let's rebuild this shit.
And we do.
And then next time, they're smarter next time.
But unfortunate thing is they lost a lot of time.
Lost 10, 15, 20 years.
I see that so often.
So my hope you is, don't follow that path.
Make the money, put aside some money,
get yourself educated, invest in what you know,
don't follow that path. It's painful.
Fortunately with me, it didn't take me 10 years.
I put in the money, now one with I was smart,
when I was investing, I wasn't greedy.
I wasn't trying to you know what I'm going to put
all my money into this. You know even all the
tech companies I only put a percentage of my money.
So even when I lost all that money, it is still okay but,
if I was greedy and say I put more because
I know how to cut my losses. That's one thing.
I know the tech company I invest in, an entrepreneur,
a young guy and you know talk about burn rate
he burned the money in three months.
I'm like okay... I need more money, fine I write the cheque
right I write a cheque and man you know a few months
later come back to me then I need more money
and I say you know what this is the last time
I write a cheque one last time.
If it doesn't go, we don't get traction I'm done.
So I wrote that cheque of course, lost that money
and that was it. So I wasn't trying to save it
trying to rescue and trying you know what
it's gonna win, it's like a gambler right?
They lose money and they go to the casino,
"I'm gonna win this time man, I'm gonna win"
and they borrow money and they're
"I'm gonna win next time"
So one thing I did do right is,
I minimized my losses although
I lost quite a bit of money.
But still, my nest egg it's okay.
But at the same time I never stop increasing my
improving my high income skills.
So I still have a lot of cash coming in.
That's what gives me stability.
Make sense?
So it was okay, it was okay.
Level number four. This is where every
single person in this room needs to get to,
at the very very minimum.
Level four, the automatic investor.
Automatic investors are clearly aware of the need to invest,
however unlike passive investors they are actively
involved in their investments,
they're actively involved in the investment decisions.
They have a clearly outwritten long-term plan
that will enable them to reach their financial objectives.
Let me ask you a question. With the wealth triangle,
is that a plan that you can follow?
- [Audience Member] Yes
- Yeah it's a very clear very simple plan.
They do not get fancy, here's the thing,
they don't use options or margin accounts or
any of the other stuff sophisticated money managers use.
They buy good shares, proven manage funds or
solid investments and hold them for the long term.
Such as Warren Buffet, right.
Automatic investor.
Like I said, you can have high income skills
and if you're smart and be an automatic investor
you do well. You can do very very well.
Level number five.
It's what I call--
- [Audience Member] What about equal (mumbles)
- Because, you only invest a certain percentage,
you're looking at it, you're learning about it
but you see the differentiation
between automatic and active.
So just put aside money automatically and you just invest.
Yes.
Mic.
- Yeah when I first started out investing in my 20's
I was a passive investor and I always know a banker
that look good in their suits, right.
So whatever they said, I said yes let's do it.
But in my 30's I realized that was not going to make
me wealthy right and I lost in one trade
a quarter million dollars. In one stock trade.
So that was a big big wake up call and
a big lesson that I needed to learn.
Not just trust other people with my money,
I have to learn to manage my own money so,
but yes but now I am a completely active investor.
I do work in finance, I can safely say conservatively
that 97% of mutual funds don't work.
97%. 3% work, there's 5000 funds in Canada.
3% work, and those funds change all the time.
So if you have a good financial planner who studies
the markets like I do, then you know what those 3% are right
Otherwise 97% of them don't work,
so that's the reality of it.
- [Dan] Round of applause, very good.
(applause)
And level number 5 is the active investor,
and this is where I'm at.
So the top two levels of investor
are reached by only a tiny tiny percentage
of the people on planet earth.
Active investors understand that to move to this level
they must become very clear on two things.
Their investing principles. What is it?
- [Audience] Investing principles.
- What is it?
- [Audience] Investing principles.
- And the rules of investing. The what?
- [Audience] Rules
- Rules of investing.
Their vehicle of choice might be real estate,
it could be discounted paper businesses or shares.
It could be even private companies.
They actively. What's the word?
- [Audience] Actively
- Actively participate in the management
of their investments, they don't just put
aside their money and hopefully they would do a good job.
They are looking, they are monitoring, they can see
how they can add value. The active investor.
They consistently strive to optimize performance
while minimizing risk.
It's not they just put aside money.
So automatic investor they just put aside money
they don't look at it. They should look at.
I mean not they don't look at it, they are not super active.
They are not super active.
They invest automatically but the are not super active.
It's normal for active investors to have long term
annual returns of 20 to even 100 percent.
They intimately understand money and how it works.
Okay.
The main focus is on increasing their assets
thus their cash flow. Their net worth. Build their net worth
So their money philosophy is very dramatically
from the poor or the middle class.
Rather than investing what is left of their money
here's the key, after spending, they believe in
spending what is left of their money after investing.
That's the differentiation. That is it.
When I make the money, I invest in companies,
real estate, when that throws off cash flow
I spend whatever the hell I want.
I can buy the nice place, I can buy the sport car.
Because it's an asset that's paying for my luxuries.
Not my work.
So I could, let me ask you this.
Can I take my high income skills and
my income and just go spend? Yes?
- [Audience] Yes
- Let's not do that.
Let's take the money, go through the filter first.
Manage my money, put into the investments,
whatever is left spend all you want.
Because this machine, these assets,
will keep cranking out cash flow for me.
Now I enjoy my life however I want with this.
Does that make sense? So yeah.
It's just the only difference is the order.
That is the order.
After investing.
Level number six, the capitalist.
Few people in the world ever reach this level
of investment excellence and fewer stay
to manage to remain there.
These are the Rockefeller's the Kennedy's the Ford's,
Carnegie's, Bill Gates, The Buffet of course.
Capitalists have two principals, motivations,
with regard to investing. To be a good manager
of their money, while they are living.
While they are alive and leave a legacy
to continue after they are gone.
Bill Gates give a lot of a big chunk of the wealth.
Same thing with Warren Buffet, their legacy give away
a big chunk of their wealth. That's the capitalist.
That's the capitalist.
Take two minutes.
Hello?
- [Audience] Two minutes.
- Discuss the rest of the levels.
Go.
So, what have you learned from my talk?
What does it mean to you and
how you gonna take direct action?
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