Capital Gains

People who play the game of capital gains are often hoping the price of their home will go up or that the stock market will go up. However, someone who invests for cash flow does not really care if the market or the price of a house goes up or down.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

Patiently, rich dad reminded me of the differences between capital gains and cash flow. It was a good reminder. Every time I flipped a property, I was investing for capital gains. Rich dad informed me that the tax laws were different for capital gains and cash flow, just as they are today. "Invest for cash flow were rich dad's words. "Remember the lessons I taught you years ago from Monopoly. Investing for capital gains is gambling."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

"Good," said rich dad sternly. "Don't ever forget that. Invest for cash flow, and you'll never worry about money. Invest for cash flow, and you will not be wiped out in boom and bust markets. Invest for cash flow, and you'll be a rich man."

"But," I began, "it's easier to make more money with capital gains. Real estate prices are skyrocketing. Finding investments that create cash flow is hard."

"'I know," said rich dad. "Just hear what I am saying. Don't let greed and easy money interfere with becoming a rich and financially wise man. Never confuse capital gains with cash flow."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

I would have made a lot more money if I had invested for capital gains, and if I flipped real estate. It was hard to invest for cash flow while everyone else was investing for capital gains. In 2009, however, I appreciate rich dad's lessons more and more. I know why he insisted on teaching me to focus on cash flow and not to get sucked into the frenzy of buying low and selling high.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

There are a number of reasons why most people invest for capital gains, and not cash flow. Some of the reasons are:

<ol>
<li>Most people do not know the difference.</li>
<li>When the economy was growing, it was easy to play the capital gains game. People automatically assumed their house and stock portfolio would go up with inflation.</li>
<li>Cash flow investing requires more financial sophistication. Anyone can buy something and hope the price will increase. Finding cash-flowing deals takes knowledge of both potential income and expenses, and how to project the performance of the investment based on those variables.</li>
<li>People are lazy. They live for today and ignore tomorrow.</li>
<li>People expect the government to take care of them. This was my poor dad's attitude, and he died a poor man. For my poor dad, it was easier to expect someone else take care of him. Today, there are over 60 million Americans, my fellow baby boomers, who are about to follow my poor dad's footsteps.</li>
</ol>

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich