The Stock Market Cash Flow
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If you purchase this book without a cover you should be aware that this book may have been stolen property and reported as “unsold and destroyed” to the publisher. In such case neither the author nor the publisher has received any payment for this “stripped book.”
This publication is designed to provide competent and reliable information regarding the subject matter covered. However, it is sold with the understanding that the author and publisher are not engaged in rendering legal, financial, or other professional advice. Laws and practices often vary from state to state and country to country and if legal or other expert assistance is required, the services of a professional should be sought. The author and publisher specifically disclaim any liability that is incurred from the use or application of the contents of this book. All investing and trading in the securities markets involves risk. Any decision to place trades in the financial markets, including trading in stock or options, is a personal decision that should only be made after thorough research, including a personal risk and financial assessment, and the engagement of professional assistance to the extent you believe necessary.
Copyright © 2013 by Andy Tanner. All rights reserved. Except as permitted under the U.S. Copyright Act of 1976, no part of this publication may be reproduced, distributed, or transmitted in any form or by any means or stored in a database or retrieval system, without the prior written permission of the publisher.
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First Edition: October 2013
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122013
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Acknowledgments
None of us can claim sole discovery of everything we have learned in life. Most of what I’ve learned as a student and share in this book comes from what I’ve been given from various mentors, teachers, and business partners. It seems that people were placed within my circle at important times so that I could receive vital lessons along the way.
Many people have mentored me personally. Others I have admired from afar. To those who have helped me personally, I wish to say a word of thanks.
Thanks to Brett Eliason and Noah Davidson for their mentorship in paper assets over the years.
Thanks to Robert and Kim Kiyosaki and the Rich Dad Advisors for lessons of context. I feel privileged to serve on the Advisor team.
Thanks to Mike Denison and Alfred Quinn for their contributions to this book. Mike and Alfred help me to say what I want to say when I can’t find the words.
Thanks to Mona Gambetta for sharing her talent and expertise in the creation of this book. Making the jump from teaching to writing was a challenge for me. Mona made it possible.
Thanks to Cindy Geddes and Jennifer Costanza for proofing and editing.
Read The Book That Started It All
Robert Kiyosaki has challenged and changed the way tens of millions of people around the world think about money. With perspectives that often contradict conventional wisdom, Robert has earned a reputation for straight talk, irreverence and courage. He is regarded worldwide as a passionate advocate for financial education.
Rich Dad Poor Dad will...
•Explode the myth that you need to earn a high income to become rich
•Challenge the belief that your house is an asset
•Show parents why they can’t rely on the school system to teach their kids about money
•Define once and for all an asset and a liability
•Teach you what to teach your kids about money for their future financial success
Rich Dad Poor Dad — The #1 Personal Finance Book of All Time!
Order your copy at richdad.com today!
Contents
Forewordby Robert Kiyosaki
Introduction
Chapter One
Become a Great Investor by Becoming a Great Student
Chapter Two
Paper Assets in Your Wealth Plan
Chapter Three
Introducing the 4 Pillars of Investing
Chapter Four
Pillar 1: Fundamental Analysis
Chapter Five
Pillar 2: Technical Analysis
Chapter Six
Pillar 3: Cash Flow
Chapter Seven
Pillar 4: Risk Management
Chapter Eight
Your Next Steps
Foreword
by Robert Kiyosaki
Many people believe investing is risky. So they turn their money over to an expert and hope that expert really cares about their money.
That is beyond risky. In today’s financial environment, it’s suicidal.
Between 1987 and 2006, investing was less risky. Whenever the stock or real estate market got into trouble, Alan Greenspan, the Chairman of the Federal Reserve, would bail out the speculators. It was not long before the public began to believe that investing in stocks and real estate was a guaranteed path to riches.
In October of 2007, the stock market hit an all-time high at over 14,000 and then crashed, bringing down the global economy. Bear Sterns and Lehman Brothers, pillars of the investment community, disappeared. Merrill Lynch, the stock brokerage firm that millions had entrusted their money to, went bankrupt.
In 2008, the new Federal Reserve Board Chairman, Ben Bernanke, began cutting interest rates all the way to zero, hoping to prevent the new Depression. He then began creating money out of thin air.
Who Do You Trust?
It seems incomprehensible to me that people trust their money, their hopes, and the
ir dreams with those who have run the financial industry into the ground. How can they do that? How anyone can trust people who were paid million-dollar bonuses (rather than being fired) is beyond me.
Believing that these professionals, many of whom earn far more than you or me, care more about your money than you do, is delusional.
This is why I am thrilled and excited about this book by Andy Tanner. And his timing couldn’t be better. If you know that it is time for you to take control of your financial future, this book is for you.
CASHFLOW Games
In 1996, my wife Kim and I launched our financial education board game CASHFLOW® 101. CASHFLOW101 is also known as “fundamental investing.” Warren Buffett is probably the most well-known of all fundamental investors.
We created the game to help people who know it’s time to take care of their own money.
A few years later, we released CASHFLOW 202, which is known as “technical investing.” Technical investing is investing based upon the market trends, the ups and downs of markets. One of the most successful technical investors is George Soros.
Some investors are exclusively fundamental investors. They look at the financial statement of a business, often investing for the long term because they believe in the future of the business. Some investors are exclusively technical investors. They could care less about the strength or weakness of the business. All they care about is the mood, emotions, or sentiment of the market. For example, Apple was the darling of the stock market for years. Then suddenly, market sentiment changed and—although Apple had great fundamentals, great products, and over a billion dollars in cash—the price of Apple shares plunged. Investors who bought stock based upon Apple’s strong fundamentals lost.
Smart investors invest based upon both fundamental and technical input. This is why Andy’s book is a great book. Andy draws on both fundamental and technical insights before making his investing decisions. I know because I call Andy for his guidance before I invest my money.
And not only is Andy a great investor, he is a great teacher…which means I learn a lot every time I seek Andy’s guidance.
What Is Risky?
Millions continue to blindly turn their money over to “experts” they do not know to manage it for them. They seem to have the “buy, hold, and pray” investing strategy. I wish them luck, especially in this volatile and unpredictable world. To me, turning your money over to total strangers is very, very risky.
Andy states, “Risk is the lack of control.” This book gives investors like you and me more control in a market that often seems out of control.
If it’s time for you to reduce your risk by taking more control of your money, the wisdom in this book is priceless.
The Best News
There is an old saying that goes, “The bull goes up by the stairs and the bear goes out the window.”
That means, bull markets are slowing going up and bear markets come down like a rock.
This is good news for people who are both fundamental and technical investors because they know how to make money regardless of whether markets are going up or down.
The best news of all is this: If you are prepared, educated, and experienced, the next time the market crashes—and most investors are praying the bull goes back up the stairs—you may be making your fastest fortune ever, as the bear leaps out of the window yet again.
Simply said, as you read this book, you are holding your financial future in your hands.
Good luck,
Robert Kiyosaki
Introduction
It was many years ago that I first picked up the book Rich Dad Poor Dad by Robert Kiyosaki. In that book, I found the teacher and coach I’d been looking for.
Now, I don’t come from Wall Street. It’s a nice enough place to visit, but I don’t want to live there. I sure don’t want to work there. I’m like Robert; I don’t want to work as an employee.
I don’t come from college, either. I’m a broken-down basketball player who got a scholarship not because I was some kind of elite athlete but because I could foul. But I knew enough to learn from my coach. And what I learned was how to study the fundamentals from someone who knew more than I did, practice in the real world, and keep my skills sharp by putting them into play. But most importantly, I learned how to win. I took a few classes too—though not enough to get a degree. I left just a few credit hours shy of my degree. I never did learn much sitting in a classroom.
After college, I discovered there wasn’t a lot of room in the workforce or the NBA for an ex-college athlete with bad knees and an attitude about punching a time clock.
Thank goodness.
Like most people, I was taught my whole life that I needed to go to school and get good grades so I could get a high-paying job. If I’d been good at that—at going to school, showing up every day just because it was expected, taking tests, repeating whatever the teachers had to say whether or not it made sense—maybe I would’ve gotten straight As and found that high-paying job. But I wasn’t, and I didn’t.
Growing up, I struggled with my seeming inability to toe the line and do what was expected. But now, as the economy has collapsed and those “good” jobs have dried up, as all those people who were trained to do what someone else told them are waiting around for someone new to come along to tell them what to do next, I find myself grateful for my struggles.
From the very beginning, I found I didn’t value what I was told I should value. I didn’t value just getting good grades. I wanted to understand the subjects that interested me. I didn’t value being in class if I saw an opportunity to do something more interesting. I didn’t value a degree in a subject that was assigned to me by a counselor who saw me as no more than a dumb jock.
Later, after I was out of school and happily married with a great little family to support, I didn’t value financial advisers who wanted to charge me for stock tips and one-size-fits-all advice. I didn’t value money plans designed to make me dependent on someone else’s knowledge.
I didn’t understand then that there was any other way to make it in the world. I didn’t have a rich dad. I didn’t have a mentor to show me the way. It was reading Robert’s books that made me realize there was a whole movement in the financial industry of other people who shared my values. And you know what? They were getting rich off those values. I’d found my team.
Starting out it seemed unlikely for me to speak knowledgeably on any topic, let alone paper assets, but today I’m Robert’s paper asset Advisor, and I’ve embarked on a path to never stop learning—and never stop teaching. I don’t want anyone else to feel that frustration of knowing that the way the world tries to teach us isn’t right but not knowing any alternative.
Mastering the Fundamentals
I got my basketball scholarship because I could foul, sure. I’m a big guy, and even now, even in a pickup game on a Saturday, guys feel it when I set a pick. But I guarantee you I never would’ve survived playing in college without knowing the fundamentals. My coach never tolerated lazy players. We all ran drills, we all showed up for practice, we all ran full-court, with sore knees or swollen ankles, during overtime or extra points, through bad calls or lucky breaks, on home court or away, whether we were stars or players no one recognized. We all knew every play, every drill, every strength and weakness of every opponent. When it came to hoops, we were all serious students.
I’m a serious student when it comes to money. I will never stop learning. I will always be passionate; I will always be engaged; I will always be active. I will never be an expert. In fact, now that I’m a serious student, I don’t want to be an expert. An expert is supposed to know everything. As soon as I think I know everything, I will stop learning. I never want to stop learning now. I have finally realized what a real education is all about.
My hope is that this book becomes part of your ongoing education. It’s written with the assumption that you are familiar with books such as Rich Dad Poor Dad and Rich Dad’s CASHFLOW Quadra
nt. Like all books in the Rich Dad Advisor series, it is written to help you increase your financial education. This is the Rich Dad Mission: to elevate the financial well being of humanity. I hope it inspires you to become or continue to be a serious student, the same way Robert’s books have inspired me.
Fundamentals
I’m all about the fundamentals. While I like understanding the high-end topics and can happily spend days studying the most esoteric concept, going down the rabbit-hole of economic theory, history, geopolitics, and socioeconomic analysis, I always start by breaking everything down into the fundamentals. My college counselor would’ve told you it was the jock in me. (He didn’t think I was very bright and liked to talk to me in a way that always let me know it). My wife says I’m a natural-born teacher, and I’ve got 15 years of teaching successful workshops to give her that impression. My sons say it’s because I speak cartoon and can make anything sound funny. Whatever the reason, I like to reduce difficult subjects to their simplest building blocks.
I’ll be doing that in this book too. I will introduce you to my 4 Pillars of Investing. The 4 Pillars are the basic building blocks to all investing. Once you’ve mastered them, you will find everything you do is based on one of these four vital areas of study. Let me make it simple for you. It’s how I learned. And if I could learn it…well, just ask that college counselor.
As we go along through the book, we’ll build on each pillar. You’ll go from learning the difference between capital gains and cash flow to understanding financial statements, reading stock charts, and even shorting stock. It will all make sense by the end of the book. And it will all seem easy as you are learning it.
Walking the Walk and Talking the Talk
I like making things simple. I’m going to explain the concepts that you should learn first. And I will try to make these concepts simple so you truly understand them and how they apply to your investments. Keep an eye out for Build on It graphics that summarize core concepts throughout the book. Watch as the number of concepts in the graphic grows to mirror the way your understanding will build your financial education.