The Seven Levels of Investors According to Robert Kiyosaki

I have been just reading “The Cashflow Quadrant: The Rich Dad’s Guide to Financial Freedom” by Robert Kiyosaki, author of the well known, must read, financial classic, “Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!“. In this book he has identified seven levels of investors which I want to share with you.

This list is fantastic for a couple of reasons:

  1. It helps you understand where you are now and what your next step is
  2. It helps you understand the process of building wealth and the mindset required to progress through each level

The fact is you cannot skip a step – you cannot go from level 1 to 5 without going through levels 2, 3 and 4.

The seven levels of investors according to Robert Kiyosaki are as follows:

Level 0: Those with Nothing to Invest
Level 1: Borrowers
Level 2: Savers
Level 3: Smart” Investors
Level 4: Long-term Investors
Level 5: Sophisticated Investors
Level 6: Capitalists

Level 0: Those with Nothing to Invest

These people have no money to invest. They either spend everything or more than their regular income. Rough estimates would suggest that 50% of the adult population would fall under this level. It is important to note that not all people fall who under this category are low income earners – there are many “rich” people who would also fall under this category too.

Level 1: Borrowers

Borrowers are those who borrow to invest (which can be a good thing) but are also borrowing to fund their lifestyle (which is never good). They often have multiple credit cards and are buying things like nice cars (with car loans), brand new TVs (on afterpay) and having overseas holidays (funded through a credit card). These people can look “rich” and/or like “an influencer” because they own expensive things and/or go on expensive holidays, but the reality is their net wealth (assets less liabilities) is very low.

These people may have some assets, but their level of debt is simply way too high and they are likely to heavily reliant on their active income (as it is their only source of income) to make ends meet.

Level 2: Savers

Savers are the opposite of borrowers. These people save small amounts of money in low-risk, low-return vehicles such as cash or term deposits. They prefer to save money rather than investing it. They don’t like being in debt and not willing to take any financial risks. Savers spend their time trying to save pennies instead of learning how to invest.

Sadly, savers over the long run are not going to finish up with much more than borrowers. With cash and term deposit rates being so low (I prefer to use the word insulting), they will continue to work hard for their money, rather than have their money work hard for them. One of Robert Kiyosaki’s message is that “savers are losers” and over the long run, that is true.

Don’t get me wrong, saving is important, but if you want to achieve true financial wealth you have to invest.

Level 3: “Smart” Investors

“Smart” investors are educated and intelligent people. However, when it comes to investing, they’re often uneducated.

There are three types of Smart Investors that Robert speaks about.

Level 3a: “I Can’t Be Bothered” type

“I Can’t Be Bothered” type are people who have convinced themselves that they know nothing about money and will never understand it. They did not bother to do anything about their money and allow it to sit somewhere doing nothing. They spend their entire lives working and satisfied with their retirement plan.

This can be a lot better than it sounds – there are many members of Master Your Money Now who know they should be doing something but just don’t know (or can’t be bothered) knowing what, hence they engage our services. However, there are others who can’t even be bothered engaging with a financial planner and often get a nasty suprise once they get to retirement and realise how little they have saved up.

Level 3b: “Cynic” type

“Cynic” people are the experts on why investing will not work. They will say things like “You Don’t Need Superannuation“ or “The Property Market Is Going To Collapse”  They are the ones who tell you how and why you will be swindled in every investment opportunity you’ll get. They know everything that could go wrong in an investment, so talking to them makes you feel discouraged, or even afraid, to invest. “Cynics” people are often afraid to make mistakes, so they spend all their time studying investments until it’s too late to execute them viably.

Level 3c: “Gamblers” type

“Gamblers” people are the opposite of “cynics”. When it comes to investing they have no plan to manage risk and say things like “You Don’t Need Insurance” and “You Don’t Need Savings In The Bank”.  To them, investing is just like playing in the casino – they think investing is just down to luck. Sadly, those who rely on luck end up losing most of the time. Being a gambler is just as dangerous, if not more dangerous, than being a cynic.

Level 4: Long-term Investors

Long-term investors are those who have a long-term investment plan and are engaged in that plan to ensure it helps their financial objectives. They are generally very conservative people (i.e. no fancy cars or houses) and have well-balanced financial habits.

They have a financial plan they have developed themselves or through a financial planner. They diligently spend time when it come to learn about investing to ensure they make wise decisions. They understand the importance of minimising debt, live within their means and steadily increase their assets. They are not keen to invest in sophisticated investments vehicles.

There are many well off retirees in Australia and across the world who have reached this level and are very happy with this level. But these sorts of people are those who will be able to provide wealth for themselves and their families, but are unable to provide wealth for the community around them. If you want to get to the next level, you have to become more sophisticated.

Level 4 can never ever be skipped. Anyone who tries to skip it is actually a level 3 investor – a gambler!

Level 5: Sophisticated Investors

Sophisticated investors are people who have a solid financial knowledge and involve in more aggressive investment strategies. They have multiple sources of income through work, businesses, properties and other investments and they earn more than what they spend, which enables them to invest even more. They are continuously seeking more information when it comes to investing. They are cautious investors, but not cynical ones. They have good money habits and have a long track record of winning.

Sophisticated investors start small so they can learn the game first. They are not afraid of failing, but in a way where the downside is minimal but the upside is infitine. They are focused on continuously growing their asset base and understand the importance of trading money for time, not the other way around.

Level 6: Capitalists

Very few people are capable of reaching level 6 which is the level of investment excellence. They makes more money from other people’s money, time, and talents. They usually have large businesses and large investments. True capitalist create investments and sell them to the market. They love the game of money and are generally very generous. They are the movers and shakers of the world economy by creating jobs and goods. Think Buffet, Gates, Musk, Branson and locally Packer and Rinehart. In every investment made, they expect the returns of 100% to infinity.

Have you identified what level of investor are you in?

And importantly, do you have a plan to play at a higher level?

If this is a topic that you would like to discuss in more detail, please go to to book in your complimentary 30 minute strategy session.

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Disclaimer: This information is general information only.  You should consider the appropriateness of this information with regards to your objectives, financial situation and needs. Past performance does not guarantee future returns.



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