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Investing with Little to No Money - Rich Dad's StockCast

Jun 06, 2021
this is the cast of

rich

dad stocks with andy tanner, the show that kicks 401k in the asphalt and teaches you how to be the master of your own stock

investing

domain and here's your host, greg arthur, welcome to another episode of

stockcast

and actually this is one that I'm especially interested in this because it's for people like me and this is actually a question that came up from our comments and it's like I said, it's something that I really need the answer to and the question it's Andy Tanner, how can someone with a small, modest amount of

money

start

investing

in stocks and I have to tell you this is an important question uh a lot of people have this question this isn't the first time it's come up in the comments and uh, I'm just going to say that it's an important question because getting started is one of the most important things and if you feel like you're already losing and you can't do it, then you're going to have the mindset that's going to make you fail, so, Andy, we'd really like to that you gave us a

little

hope.
investing with little to no money   rich dad s stockcast
So Andy, how do we get started with a modest amount of

money

? Well, this is a fabulous question and to tell you the truth, I've been a student of how to do this for about 30 years, so I'm still learning, uh, but it's also when having learned a lot and also been a teacher, I understand, you can imagine, I get this question: "I'm in daily, but at least a couple of times a week because obviously the people you know are starting out with modest means and they want to improve their situation, so they are looking for a teacher , so I have the opportunity to rub shoulders with all the different types of people different cash flows different net worths and I actually have good news for people that's good another thing that comes to mind with this question is and I don't want to take this out of context or say this incorrectly, but a lot of people, when you have a small amount of money, it means you're a

little

desperate, you've got this, I've got bills piling up, I've got a family to take care of and you're feeling the stress, etc.
investing with little to no money   rich dad s stockcast

More Interesting Facts About,

investing with little to no money rich dad s stockcast...

I think there's almost two layers: one, maybe you don't have a lot of money, but two, you're going to be a little emotionally drained if that makes sense, yeah, and that's important. I think that's actually a great place to start. You mentioned being emotionally drained, the good news I have for people is that if you can be cerebral and you can think a little bit and calm your heart a little bit, you can start a path to pretty prosperous places and I'll talk about that. I think we have a lot to cover, but first let's talk about emotions.
investing with little to no money   rich dad s stockcast
You know you can be very vulnerable. So let's talk first before what can happen. What not. What you can do. what won't happen what you could avoid thinking about doing yeah and we'll get both sides of the coin so to speak that way um when a but you know we all have a brain and a heart you know emotions and thoughts and uh I think you know if you came back with cavemen or even before, you know, when we were all amoebas or how it all happened, we feel before we think, in other words, Namibia doesn't do things because of how it thinks it has done them. reactions based on the stimulus from your environment, you don't really think it through, you just react and we still have a little bit of that in us.
investing with little to no money   rich dad s stockcast
I think you know, if you've ever made a mistake, maybe you said something you wish. If you had enough, you may have been very happy and maybe a little emotional about what you said, you may have been sad and so depressed that you said things you knew were there, or maybe you were angry at your spouse and you said some of the people you love that you really wish you could get back, you know, crimes that you've never had, you know, crimes of intellectual logic, it's always a crime of passion where we're wrong and therefore, Really, if you're just starting out with modern media, beware of greed.
I know, Greg, that when I go on YouTube, Facebook, Twitter, and Google, they track everything I watch like they do anyone else, so they know I'm interested. I invest, so I get ads that really take advantage of people who are in that emotional state. I see them all the time. I'll give you some examples. I once saw an ad that said we made forty thousand dollars in three weeks without doing any work right. Let's look at that statement, let's look at that statement on the one hand, emotionally, that's incredibly incredible, okay, 40 grand, it's like the Garden of Eden, all the food, all the wonderful things, nothing bad, no work, no effort, free, it basically says free money, right, 40 grand in three. weeks without doing any work now let's look at the logical side, let's test that theory you and I take three weeks off uh let's go to Bermuda and sit on the beach for three weeks and see if 40,000 come doing nothing.
I work so you know another another announcement that sticks in my mind someone said that our system only chose winners 87 weeks in a row, that is, almost two years in a row without losses. I've been trying to do this for a long time. I had never been through that. a long time without a loss, okay, Mark Buffett has never gone that long without a loss, so, you know, someone else says we make all our money by taking risks. Well, these messages are unfortunate. Well, why do people post them if they are not likely? to be true, good or a lot, it's probably not typical, maybe good, it's because of how they make people react and feel good and they put them all in a frenzy and they get their hopes up and say oh, I take my little savings and put it there, boom, I got 40 grand and I think you know that greed can lead to a word called gullibility, which is a polite word for being stupid, if I can say that, the first thing is, yeah, don't do it. hope to solve this problem with the mentality of a child, you know, like in willy wonka, the spoiled little one, eh, whatever his name is, you know, I want to appear right now, dad, I want everything right now, when my children come to me, they have modest means. because they're 13 and 15, so they're not

rich

yet and they're in the same boat, right?
They're saying, hey, I have modest means, when I start and here's the first good news I have for you, uh, the stuff. What I've told you is if you become a business owner, if you become a real estate investor, a stock investor that trades commodities. One of the principles that I think is a solid, solid principle to talk about is a word called compounding now if you just Google compound. interest calculators and compound interest and whatever compounding and start studying compounding uh einstein, I think this I don't know if you actually said it, but he is often credited with saying that compounding is the most powerful force in the world. universe, so if that is true or even if it is a little bit true or even if it is among the five most powerful forces in the universe, you can take advantage of it regardless of the amount of money you are starting with, because there are three ingredients: money rate and time, so the biggest problem maybe is It's not how much money you have, it's how old you are and how late you're starting, so we'll talk about that too, but I will tell you that if you look at an early cap chart you're not going a You'll see a lot, you'll see a lot and it's possible that if you take a two or three year horizon, you know, and it won't be as exciting because of the work you do, right man, I'll tell you once you get in.
That little hockey stick moves and starts to move, goes less horizontally and starts to go more vertically. Compounding becomes very, very, very exciting and that's a place where it's okay to be excited, so compound interest requires delayed gratification that you mentioned before, thank you, thank you. In fact, I read that they surveyed some of the richest people in the world and you know they are very diverse, they have different strategies and thoughts, but the most common thought that they all shared was that you must have delayed gratification, so I think that that what you are saying is not only in line with your belief, it is in line with the belief of the richest people in the world, it is science, there was an interesting study, you mention this, there is a study, I don't remember the name of the professor, but I think it was at Stanford and they took like a ton of four year olds and they took them one by one and they put them in a room and they put a plate and they put a big marshmallow on it and they said you can have this now, but if you can leave it there until I come back in ten minutes, you can have two and that was it and you know these kids are dying and some kids just said, forget it, I'm eating the marshmallow. other kids found ways to worry, they looked around the room and they found something else to do to divert their attention, you know, all this is happening and they tracked these people throughout their lives until they were like, you know, 30 or 40, you know, 50 years old, adulthood, surprisingly, at four years old, those who have that disposition with the ability to gratify themselves had higher net worths, better financial situations, better lives, better help across the board than those who didn't.
They had it, so idea of ​​combining and moving away from the get-rich-quick messages and, oh, let's take you from rags to riches, those are designed to appeal to your emotions, not your sense of intelligence, so right , when I was in marketing when I was in marketing there were only two things: you emphasized greed and fear, that the economy is doing well, you emphasize greed and if the economy is bad, you emphasize fear and they both work, yes, and people become I get carried away by my emotions, which is okay because that's what makes me a human being.
I wouldn't want to use Spock. I love feeling love for my children. I love feeling excited at a basketball game. I like coming back from a loss. You know, I like those emotions, so I don't want to get rid of them, but. I want to curb my passions if I can, okay, so that's number one, confidence in compounding, start studying compounding and that will get your hopes up even if you're starting with a Lincoln cent, okay, you can start to capitalization with Lincoln. penny, okay, the second thing I'm going to talk about is that appearances speak more about the stock market than the initial classes that you can capitalize on in businesses, like I did, that can arise in real estate stocks, which whatever, but yes, the idea of ​​actions. brings a couple of things to the table that I think help the person who is starting out with modest means, for example, the stock market is often said to have characteristics that are not better than other asset classes, but they are simply different and here's one called scalable, so what does that mean?
There are offers that come to my desk that are for accredited investors. Now, what an accredited investor is is the opposite of the person asking this question. They have at least a million liquid dollars not including their house. They have a million dollar network. make 300 plus 300k a year as a couple, I think it's a quarter of a million, I don't know what it's for on your own, but anyway, as an accredited investor, I'll get deals on my desk than the person of perhaps more modest means You never get a chance to see it and it's kind of silly because what if I inherited my money?
Having money doesn't denote intelligence, but they say well, if Andy can be a credit investor, he has enough money and if he loses it. It's not going to hurt him, that's how they see it, so you know, one of the things that's difficult is that let's say Kenny Mcelroy has an agreement for accredited investors and that's not going to be a situation where he doesn't you can join the rich and invest. in what the rich sometimes do, robert kiyosaki says in his esbi cash flow quadrant that b means investor but it also means insider, you know the guy with the inside track, there's a lot of truth in that, uh, the Guys in those circles tend to be cool. offers better returns than the average, you know, mutual fund type, so, and that's just a fact, so one of the good things about stocks is that they're scalable, so let's take the best investor of all times, in my opinion, that is Warren Buffett. bigger than you know anyone we know and Warren Buffett owns a company called Coca-Cola and so do I, so I'm a partner with Warren Buffett now I don't own that many shares, he's the lot, he owns more shares than anyone else, uh . but my son could go out and mow someone's lawn, maybe get three or four lawns and before long he could choose to invest that money in an immediate gratification like maybe an Xbox game or I could say I'm going to start capitalizing.
I'm going to invest a small amount of money in a company like Coca-Cola and we'll see what happens with the rate and time and with some financial intelligence we can accelerate that rate, we'll talk about that in a moment, so one of the things The good thing about stocks is that a person of modest means can often get involved. You might not be buying Amazon Tesla, but imagine owning companies like AT like my son does or making Heinz like my son does, or you know some of these household brands, I mean. Do you imagine that the person who owns companies andbrands like that are probably very rich people because they're big businesses, right?
And that scalability is good news to start participating with modest means, so that's the second one, there's about three more things. we have to cover, so the first is to accept compounding, the second is to realize that stocks are not only agile but also scalable, so I can interrupt you because my lazy brain is talking now and saying I don't need the financial education alone I'm going to look at what Andy and Warren Buffett do and I'm just going to copy them, I'll reduce them but eventually I'll mention it in my compound, boy, there's that advice culture that we always try to disrupt right where people say, just tell me what. to do and they ask for a fish instead of learning how to fish and they can certainly try, eh, but I think in their hearts if they move from that heart of hearts to the head of heads here and think with their heads.
It's like you know why Warren Buffett did well because he decided to buy stocks because he became very smart. The same with sweets. Same with Robert. Same with reboot advisors. You know I'm not a perfect investor. I always do it. I feel like I'm the least of rich dad's advisors. You know they are very intelligent, but I will say that the successes I have had are due to what I have known and the failures in how to think. of the area could have been ignorant, so that's a good point is the education part and I will tell you that, in fact, we are at the end, we will review that education part with the last important comment that I will have to say. so let's look at the third thing, obviously number one is compounding, learn about compounding and trust it.
Number two is that the stock is scalable so you can participate with billionaires and the things that billionaires own without being an accredited investor, right? It is more difficult to do it. In the real estate business the third thing is this, let's talk about the amount of money, people usually say how much money do I need to start or they will say what is the ideal amount to start in stocks and I am doing well, the ideal amount would be two billion dollars, that would be great, between two and four billion would be an ideal amount.
I would love to have started with that. And I say maybe let's change that question a little bit. The reality is that you are going to start where. you are and really the best amount of money to start with is what you have in your wallet right now because that's what you have right now, that's what you're doing, so don't wait and think well, I have to be, you know? It takes money to make money and all this you have to be rich, it's like my son saying I'm going to start taking piano lessons once he's done, you know, a few weeks, I've got a few recitals under my belt, it's putting the The cart before the horse may be a little bit there, so understand that compounding is a big deal, understand that scalability is a big deal, and understand that starting now with whatever you have is the ideal amount for you, let me say it again, the ideal amount for you is what you have now because compounding has a monetary rate and time and that time is the worst, that time is what sucks because you know that if you are 75 years old you have less than my children who are 15.
And that is why the immediacy. and the urgency of picking up that first investing book and getting into that first investing course and investing first, you know, there's a little video they used to call priming the pump, where a guy's car breaks down and he's walking around, you know, decides to leave. In the desert he finds a ghost town where there is no one and there is a pump and it doesn't work, there is no water but there is a bucket, he sees a little bottle and you take the bottle out of the bucket, there is water there and a note that says no drink this water, prime the pump, drink this little bit of water, prime the pump and this pump will give you more water than you've ever needed, then fill the jug, put in the cork and the note, leave it for the next guy and guys in this dilemma, do I take this small amount of water and put it in something that can teach me to get more water or do I just drink it?
And that's where you find a person of modest means, you know? I think maybe the best investment, you know? I think it was Abraham Lincoln or someone said that if he was going to cut down a tree and he had two hours to do it, I spent the first hour sharpening the axe, so invest in yourself first. It's an important thing, but even more important is the immediacy of starting capitalization right away. When is procrastination associated with success? When did everyone you know leave? When entrepreneurial researchers said you know I got here because I procrastinated. the state championship because we postponed things, uh, it's just human nature, so number one, composite, uh, number two, scalability, number three, start where you are, that's the ideal place to start for you, okay, number four, leverage, uh, so you have a fixed amount of money, you're starting with whatever and you have a certain amount of time to achieve your goals, the biggest variable will be the rate, higher rates require more risk, a Greater risk requires more intelligence, more education, more aggressiveness, so you can't, well, you can.
Do what you want, but I wouldn't recommend going too risky unless you're educated, so let me talk about leverage, how do you speed up that kind of thing? You know, I don't know if we can put a link to this, maybe we can. give give someone a I have a course called How do rich people invest with no money? and talks about how the principles of wealth work where actually Kenny, as an accredited investor, invests as if he has nothing, in other words, his model is set up as if he has no money, that's good news, uh, Warren Buffett It's set up that way that many, many investors are set up that way in real estate, we can use OPM, we use other people's money to acquire assets and increase our cap rate. in stocks we can use the options market this requires tremendous knowledge uh but you can do this without debt and do it by contract uh one of I'll give you an example from my own life Warren Buffett uh back at the doctor in the uh subprime Meldown helped a bank and he went to this bank and he sold them some collateral uh or that he said or uh that said hey I want the right or he bought some collateral he says I want the right to be able to convert my shares at a certain stock price when he became interested I thought I don't know if I want to spend a lot of money on this talk, but I bought something called some jumps and their options, their long-term stock anticipation values, one of the best.
The wins I once had were using a leveraged instrument, now these are very, very sophisticated and I wouldn't say they are a lottery ticket because there is a time decay, there is a risk involved, but there is leverage, there is a risk involved in the debt, so if you become a master of debt or a master of leverage and risk and able to manage the associated risk, your rate can go up now, one last comment on this will move to the last idea, okay people in a work context, Greg, you will want to know what they are going to get before starting a project they do not have the emotional strength to travel towards something with them ambiguity I will give you an example I tell it to my son all the time he has some goals to play with basketball at a high level and I can't give you a guarantee that he will.
I don't know what his body is going to do yet. I do not know how. I don't know if he'll be as tall as me, or taller or shorter. I don't know what's going to happen, but we're chasing it like it's guaranteed to happen and we might end up disappointed, but we're going to work and put in the time to develop his game as if that's where he's headed and that's where we can be. disappointed, a lot of people don't have the mental capacity to do that, especially work people, when you go to a job interview, you imagine yourself in front of your potential boss's desk and you start talking about compensation and he says and you say, well, how much?
Does this job pay and the boss says oh I don't know, somewhere between losing all the money in your bank account and making a million dollars somewhere in between, yeah, but could you tell me what it's going to be? No, I really can't, I don't know what it's going to be like for you, but just show up to work, you know, I tell you come work for five years and then we'll see what we pay you. What about that? You see ambiguity would never work with an e but that's exactly the answer in the i quadrant is that I don't know if that compound is going to be perfect or not, but I will tell you that I can't give you this guarantee if you don't do it, you will win.
I didn't get anything right, and that's something very, very important in leverage: understanding that leverage comes with knowledge, it comes with risk, and it comes with ambiguity. You'll notice a pattern here in our first principles: number one was compound, number two was scalability number three was starting right now and number four was leverage, some type of leverage, each of them requires emotional personal development with the one we started, well, I want the money now to be calm, to be stronger and more composed, right, I want a large scale now. Take it down and use escalation for an action, right, uh, procrastination, no, I'm going to get over my procrastination idea and take action, it's all about personal development, Greg, it's all about how strong you are as a person, developing yourself. uh with that, I'm ready for a final thought uh well, let me say it real quick, especially when you talk about debt and leverage.
One of the things Robert says is that it's like a loaded gun if you have as much education as you can. Use it to hunt and provide food if you don't have the education, guess what you'll probably shoot yourself in the foot or who knows where then it may be the best but if you don't have the education it may be the most dangerous thing you do, it's really true, you know a hammer is the same thing, you can use it for demolition and you can use it for construction, you know it's just a tool that gives you more power than you have with your bare hands, right? just uh it's that important so these are some of the concepts that are very, very, very important for people to understand.
Here's the last one I'll give you. One of the advantages of actions is that you can participate and learn. no money and I think this is the only asset class or the easiest asset class to do this. You know, there are things I've learned in business that just come from experience. You know, being sued. You know all of these things come from flaws in experience. Whatever real estate is, you know, the closest you get to practicing is probably playing the cash flow game, which will be a pretty basic mock simulation, but with stocks you can set up a mock account, which you should do.
Even if you have a million dollars to start with and you're going to start learning the same way a person with a million dollars learns by starting with a hundred thousand fake dollars, let's say and see what you could do if you had a hundred thousand dollars and those graphs. those options are going to be identical identical strategies that fundamental and technical analysis will be identical the risk management identical the different positions identical to what you would be doing with real money and you are learning and I will tell you the interesting thing is when money comes into your life, such Maybe you want to spend, you know, ten thousand dollars and renovate a deck or improve your house in some way and you say, "Oh, great, I'm going to save up and spend that money on a liability or a car or you know whatever, you know equipment." sports or vacations, but suddenly, what if you have this virtual money and you discover over time, not overnight, but over time, that you actually have the ability to put the money to work for you?
Now You are tempted to buy assets. Instead of responsibility it is tremendous and you will be surprised to think that you lack money. What would happen if you had? What would happen if I gave you a machine? What would happen if I gave you a machine? If you put in a dollar, you get ten dollars. only ten percent you put in a bigoted dollar and I gave you that machine, okay, all of a sudden, when they pay you a few dollars, where are you going to put that money? you're going to go buy fishing boots, you're going to go get your nails done, you're going to get hair extensions or you're going to put the money in that machine because you know that machine can turn that dollar into ten dollars, so the psychology of trading of paper and the mock account changes your way of thinking and changes the way you will spend your money because all of a sudden you will find money that you are spending that you didn't know you had, you will look at your budget and say why we spend on this when we can.
I've turned the dollar into a dollar ten maybe over the next year or whatever, so those are the things I would say and I think that's good news. Financial education is where it begins and personal development is where what we talk about begins. dealing with emotions of greed and feelings of procrastination being able to delay gratification and do things now uh where procrastination is not doing things now and delaying hard work, so it was kind of close to the way I opened, you know? these forty thousand dollar messages in three weeks I thinkthey harm people I think they harm their context I know they are attractive I think these messages of you know 87 weeks in a row without a loss you know they are aimed at the weak emotions of greed and psychology for their own benefit, where my advice is to study capitalization , get an education, take heart, look at that old cap chart, just jump in late at the end and say, look, I'm going to do this now and I'll see great rewards. uh in the future and then learn leverage if you're older and you don't have money, leverage is your dad and leverage means education because if you leverage without knowing what you're doing, you go from the frying pan into the fire.
So I hope those are useful ideas if you have a modest account, you know, I mean, hey, brokerages will allow you to start trading with two thousand dollars, five hundred dollars and start that compounding process with very little money, so that's it. My message to those who are modest means they are young. or old man and those are some things to think about and can I also connect please, I hate connecting, it seems like it's bad form, I get emotional when I think about this, I used to, you know, sell software. I used to travel and talk a lot and people would advertise and come and see the original software and I would just watch and I bet I've seen it.
You know, Bon Jovi says I've seen a million faces. I think I could. Know? I don't know if I shook it like he did, but without a doubt, at every event, someone approaches me homeless. You know, I just had health problems. I just filed for bankruptcy. I just got divorced, I just lost a child or, you know, I just don't have any money because of some circumstance in my life and I never had time to give the presentation I wanted to do, I never did Greg because I'm selling software. For someone right, you have to understand the sales pitch.
I wanted to heal these people by changing the way they thought because their way of thinking was wrong and years ago I thought if I could get all those millions of people that I have talked to. a room that was destitute and I could give them a class to change their mindset on how to go from rags to riches how to start with nothing uh I call this class how the rich invest with no money and it's very emotional for me because I take It's from my own life, my parents were not rich, they are wonderful people, but they were not rich and I knew that if I was going to make a dollar, I would have to do it and I talk about my failures.
I share my failures. but I talk about how I've used these principles in business, how I started my business with zero, you start your stocks at zero, real estate, zero and I share that experience with my little course called how to invest with no money. I'm ashamed because I don't know. I gave it to my team and said you guys offer it, but I don't even know where to get it, but I actually do. I've taken that course, so yeah, yeah, so you can do it. talk about it and call it a plug. I can talk about it and say that I took that and it really changed my way of thinking and I'm not using the wrong word, but it gave me hope and made me realize the fantastic possibilities, so there's my message. those who are starting out with modest means, you can do it, get that combination, get that education, get that personal development, other people have done it, you can do it too, yes, and my favorite part is that you gave solutions for young people, but she also gave solutions for The Boys Like Me, so I really appreciate that and I'll find the link to put it in the show notes and let's help a lot of people, Greg.
I am so grateful for the opportunity to be with you every week. It's something outstanding and I hope. people benefit if you have things you would like us to address please write the comments we read them and Greg collects them and we will put them in a tank for future shows sounds great thanks Andy take care have a good week you

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