The investing classic has some things to teach us about Crypto investments, too
By now, almost everyone has heard of the classic personal finance book Rich Dad Poor Dad by Robert Kiyosaki. It was written in 2002 long before the world of cryptocurrencies and the digital economy.
Despite the book coming out years before Bitcoin, Kiyosaki is a fan of cryptocurrencies and ESPECIALLY Bitcoin. Here’s one of what is a fairly typical tweet from him at his handle @therealKiyosaki on the subject.
And there are some great ideas we can take from the book, both generally, and in the cryptoeconomy too. Let’s look at some examples.
RDPD Principle: Passive Income is the name of the game
I put this one first as it’s the most important goal of all. The other principles we discuss here will help you reach your goals. This one is the only tactic that gets you there.
Kiyosaki says that when the amount of passive income from your assets is more than your monthly expenses, then you are free. Not only are you financially free when this happens, but it’s also the ONLY way to be free.
RDPD’s Favorite Asset Classes
Although cryptocurrencies weren’t around when the book was written, Kiyosaki is clearly a fan. He believes the stock market is a huge bubble about to burst and not a great place for most of your long-term savings.
Yet, one of the issues to keep in mind, as in this tweet from September, is that Kiyosaki has predicted at least 15 out of the last 3 recessions. In fact, if you follow his account, you would think he was short the S&P 500 because he definitely believes that a reckoning is coming to the US financial markets.
A crash did not happen and the biggest drop was ~7% from the recent highs.
And while most crypto investors agree that there are few fundamentals to invest in with US stocks, most of us in crypto do NOT try to predict when it will happen. Just that it will eventually and we need to be in other asset classes like Crypto.
So this means looking at other asset classes that can give us the passive income we need. Passive here means we are not directly working for the money or trading our time for money. It means we are using our assets to make money.
Staking is a Great Way to Follow Rich Dad Principles and Earn Passive Income
Staking is a great investing method to hit this goal. Some platforms have aggressive rates to stake their tokens. From our Staking Rewards website, we can see examples like this.
Wildly popular game Axie Infinity pays 116% APY to stake their coin, AXS.
Or DODO, which is a DeFi protocol and liquidity provider, pays you 29.65%, when adjusted for inflation on the release of new DODO tokens.
And for those that like more established projects, the #3 market cap coin Binance Coin (BNB) pays a healthy 12.88% or 15.12% based on if you run your own validator or not.
Back to the Rich Dad Poor Dad principles, on the same base of assets, say $100,000, it’s clear you will earn more passive income at higher interest rates. BNB at 12.88% will beat most income-producing real estate that averages a net return of 6-8%.
More importantly, as we’ve shown in other Passive Income articles here, our base of assets can be smaller and still get us a good income when we do things like staking crypto. In our above example, we earn $6-8000 per year from $100,000 in real estate. With the BNB investment, to earn $6000, we only need $46,583 to earn the same amount.
Our knowledge of staking lets us start with less and still get to our passive income goals sooner.
RDPD Principle: Assets > Jobs
Income from an asset is ALWAYS better than income from a job. With a job, your income is locked into the place you work and the amount. Assets have much more flexibility. You can often move assets from a poor-performing investment to a better-performing investment easily.
Not always, of course. You can’t move a rental house from a terrible neighborhood to a middle-class neighborhood. But many assets you can move around. And with a job, you can never do that. You are always limited by the salary you negotiate and company policies. This is even true for commission-based earners who earn more money in some years and less in other years.
One of the great things about crypto as an investment, especially staking, is you can start small. You can start with only a few hundred dollars. And you certainly can’t do that with a rental house in most cases. The BNB example shows how you can get your assets working harder for you by staking even when you are investing less money.
RDPD Principle: Assets > Liabilities
Kiyosaki explains this one concept better than any accounting book I’ve seen. An asset puts money in your pocket. A liability takes money out of your pocket.
And this is why, as we will see in the next principle, that it’s smarter and less risky to think of your house as a liability instead of an asset. More details to come on that.
Building those assets is something that only happens over time. Another place where crypto shines as an investment option is the ability to shorten that time.
Crypto is an asymmetric bet on the future of the digital economy. What we mean by asymmetric is that the returns can be enormous compared to the risks you are taking. This reason alone is why young people in the Millennial and Gen Z groups are flocking to crypto as an investment. That’s a trend that will continue that we cannot ignore.
And within that asymmetry, one of the safest ways to grow your assets is staking. Because you are not only buying crypto you believe in, but you are also earning more money in that crypto.
Staking is Low Risk Yet Often Misunderstood
For some reason, this concept is misunderstood by many. I mean do you think Mastercard is a risky investment? They are a toll company for the most part. They maintain the Mastercard network and charge a small fee (the toll) for payment on every single transaction that goes through their network. It’s an amazing business model.
And with staking, YOU get to be Mastercard. Let’s say you are convinced that Solana has a bright future competing with Ethereum. Then staking SOL means you are earning a piece of every fee the network charges to send SOL from one wallet to another. You are Mastercard. Instead of paying the card issuer, the card issuer is paying you. Because staking is holding an asset.
Isn’t that a nice place to be if you believe in cryptocurrency?
RDPD Principle: Don’t be fooled into thinking your personal residence is an asset when it’s really a liability
As we just explained above, if a liability takes money out of your pocket, then your home is a liability. I mean who pays when you need a new furnace or if you add a deck to it? You do. And the regular maintenance for upkeep can get expensive.
The other main reason your personal residence is a liability is the fact that you have to live somewhere. You would be paying something one way or the other. Now income-producing real estate is one of Kiyosaki’s favorite assets to get us to that passive income goal.
But how does that compare with Crypto, especially with Staking crypto?
|Feature||Income Producing Real Estate||Staking Cryptocurrency|
|Liquidity||Very illiquid||Completely liquid except for lockup periods|
|Investment Principal||Locked into the Property||Maybe subject to short lockups of 1-3 months. Then easy to move elsewhere|
|Income||In your ‘home’ fiat currency||In the crypto that you stake|
|Your Market||Locked in||If fundamentals change, you can sell your ADA and stake SOL instead easily|
|Return Potential||Average 6-8% net||Many established projects pay more than 10%, some MUCH more|
|Additional Costs/Maintenance||Yes, repairs and upkeep||No|
So you can see that staking cryptocurrencies has advantages over real estate. And that’s with us admitting that real estate is a good investment option compared to most. One of our favorite benefits is that we benefit from the network effects from the cryptos where we stake. You already believe in the specific crypto if you’ve bought it. Why not help it grow and participate in the fees that protocol generates?
Its beauty is its simplicity.
And this is why although Rich Dad Poor Dad predates the cryptoeconomy, Kiyosaki is a big fan of it. It meets all his parameters of an asset class worthy of investment.