Kiyosaki Writes: Lottery Better than Mutual Funds

by Ryan Guina

Robert Kiyosaki is a famous and controversial author and speaker. Kiyosaki has made his fame and fortune from his educational book series and his mostly contrarian and sometimes controversial views. Some of his opinions and advice cause people to think outside the box in a good way, but other comments are self serving at best, and potentially dangerous to those who follow his advice without understanding the reasoning behind it. He was a featured columnist at Yahoo! Finance for a number of years, and one of his articles, which unfortunately is no longer around, was called, Playing the Mutual Fund Lottery. He is a quote from that article:

Quote: “Among other reasons, 401(k)s and IRAs involve putting money into an investment vehicle over which investors have little control. And since most people end up choosing mutual funds as their primary investment within these plans, playing the lottery would be a better way to go.”

Kiyosaki Calls Investing in the Stock Market Gambling

Is He Serious? Apparently. Kiyosaki goes on to compare 401k plans and IRAs to “gambling away retirement funds in a government-sponsored game of chance with little to no chance of winning.”

Kiyosaki Rips Tax Advantages of Retirement Plans: He writes that the tax advantages of 401k plans and IRAs are negated because most people using these forms of retirement plans get tax breaks while they are young and in a low tax bracket and trading that for paying the taxes when they are older and in a higher bracket.

This is a blanket statement, and is false under many conditions. I know plenty of people who are in higher tax brackets who use these plans, many people who are nearing retirement age who still invest, and at no time in the article did he mention Roth IRAs or Roth 401k plans that invest post-tax dollars, and will yield tax free dollars in retirement.

He also didn’t mention the tax disadvantages of investing in precious metals.  Regardless of how long you have owned the precious metals, they are taxed as collectibles at a flat rate of 28%, so you don’t get to enjoy the lower long term capital gains tax rates you get when you invest in stocks, bonds, and similar assets. Investing in precious metals might make sense if you open a Roth IRA since you use after tax money, and the gains aren’t taxed when you withdraw them in retirement. But Kiyosaki didn’t mention that either.

Kiyosaki Writes Not to Invest in Mutual Funds Outside of Retirement Plans Either: Why not? because you invest in funds where you have no control over the management, and you have to pay taxes even if the fund decreases in value. He has a point there because when trades are made, the fund is taxed on capital gains. You also do not have control over the fund – short of voting, or not investing in it to begin with. But here, Kiyosaki focuses only on the negative aspects, and likens mutual fund investing to ‘gambling.’

The Rest of the Article: It wasn’t worth reading. I did it. It just wasn’t worth it! 😉

Before Acting on Financial Advice…

When listening to any financial advisor, ask yourself what they are selling. Are they acting in your best interest? Believe it or not, there often aren’t laws requiring investment advisors to act in your best interests. Though Kiyosaki isn’t an investment advisor per se, he does give investment advice. So it’s essential to ask where his interests lie.

Robert Kiyosaki is a best-selling author of finance and real estate books. He makes a ton of money giving speeches and presentations. He is also a self-proclaimed real estate magnate, and business owner, including gold and silver mines.

His finance articles consistently center around several issues:

  • The US dollar is bad; precious metals are good.
  • Mutual funds are bad; real estate and precious metals are good
  • Saving is bad; go for cash flow (the only example he consistently gives is real estate)

To be fair, he does have some good points. Cash flow, for example, is probably the most underrated aspect of financial health and it is probably the biggest contributing factor to building wealth.

This article isn’t to bash Robert Kiyosaki, but rather a reminder to do your research before you believe the talking heads. This goes for Kiyosaki, Warren Buffett, Dave Ramsey, or any other famous author, writer, speaker, or investor.

Published or updated December 22, 2011.
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{ 1 comment… read it below or add one }

1 Dividend growth investor

I think that Robert Kiyosaki is a fraud that never made any money investing in anything but by selling books, courses, lectures etc. While most of the bloggers out there seem to be influenced by his ranting about “passive income”, overall I think that listening to this guy is detrimental to ones financial health. There’s a good link about him here:


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