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Rich Dad, Poor Dad - what is an asset (in the UK?)

I get the feeling I am going to regret this post (lots of food for the trolls and sarcastic?s), but here goes anyway.

I was reading a book or two over the last few months about money (such as Rich Dad, Poor Dad), and a lot of the ideas made sense. But a lot of the different books talked about having assets rather than liabilities (well, yes, obviously). But, what assets are there in the UK that fall into that camp - money generating assets.

There is property (buy to let) but the market for lending for that has all but dried up at the moment, and there is high risk B2B loan type systems, but apart from that, what else is there? There are investments in terms of ISAs, stocks, shares etc, but they don?t really fall into the ideas of money generating assets ? you put you cash into them, and they sit there, with a little growth after a long(ish) period of time. They are not money generating assets.

So for anybody who has read similar books, what money generating assets are there? Bear in mind, I am also a regular joe, so the only money generating asset I can think of is buying a business (lots of cash needed) or starting another company (the 1st one is taking all my time).

So thought it would be an interesting discussion. I will follow this up with another discussion along the same, but slightly different lines.

Reply to
JaffaB
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I don't know. but in RDPD he also said that most people who make money go bust at some point or other.

And the sheer volume of rental property now means yields are coming down.

Business property? But only that which you won't pay rates on when it's empty.

Reply to
mogga

Are they? I don't think so.

During the BTL boom they did come down a lot, so much so that they were lower than interest rates, meaning that BTL had become a mug's game.

But now interest rates have plummeted much lower than rental yields. Yields aren't what they were in their heyday, but anyone who hasn't cashed in their BTL is now earning much more from their investment than they would from keeping the sale proceeds in the bank.

Reply to
Ronald Raygun

Dividends?

Tim.

Reply to
Tim Woodall

I was aware of the hype and idiotic investment ideas surrounding RDPD and finally got around to reading it a few years ago prompted by a review by someone on Amazon claiming that it was 'dangerous'. As an experienced investor (equities & bonds (IRR 17.8%, 9 years), property (IRR 13.1%, 11 years) I was lining it up for a savaging, but instead found it rather harmless. Kiyosaki communicated in the form of a story (aiming at the immature?), saying some common sense things, but as Americans are wont to do, losing them in a mass of repetition and rambling (why use a thousand words when a million will do ?). This led to the conclusion that it was the type of people it was aimed at who had given the book it's controversial reputation. Judging by the copius posts on various messageboards during the boom, these people were inexperienced investors who didn't know how to measure the value of investments. Because Kiyosaki had had success buying property, his accolytes all jumped on the bandwagon and got into BTL at a time when yields were near cash and in no way compensated for the risk. He explicitly said in his book that it didn't have to be property, it was just that, at the time he was considering investments, it was, he percieved the best value for money investment.

Any asset which provides an income stream is an income generating asset. Equities have historically offered the best returns over the long term

- 5.3% annualised over and above inflation, over the last 110 year, but can suffers decades of relative underperformance. Anyone who thinks that they are going to earn more than that over their lifetime, is either very good, or deluded.

The obvious themes I see are - Extreme debt levels in the UK, US & Japan. Managable only because interest rates are so low. Cash is an asset, demand and supply are reflected in the yield (interest rate). Government bond running yields are artificially low, and the probability is that they will rise significantly, therefore short, but hedge the corresponding currency risk.

Plan investments on the basis of the medium Gilt yield, the risk free rate, currently circa 4.5% -

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As a rough guide, I work on multiples of this, depending upon the type of investment. For property I'd want twice this ie 9% due to the gearing and lack of diversivication. For equities I'm happy with ~1.25 times ie 5.625%. When I bet 10% of my portfolio on RBS debt stock at

13 cents in the dollar, it yielded 48%.

Here's a thorough analysis of RDPD -

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hth

Reply to
Daytona

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