Velocity of Money

Source: Rich Dad’s, Robert Kiyosaki

Professional investor’s who want to accelerate returns understand the benefits of using other peoples money (OPM).  The common source is the banks’ or other investors’ money and both want to accelerate the velocity of their money.  They do not leave the money parked on the table.

The professional investor follows the following formula:

1. Invest money into an asset.
2. Get the original investment money back.
3. But keep control of the original asset.
4. Move money into a new asset.
5. Get investment money back.
6. Repeat the process.

This process is called the velocity of money.  Financial institutions understand how important it is to expand their money supply in order to increase their earning power.  Most investors do not realize they too can expand their own money supply and thereby expand their earning power.  Financial institutions do this by making their money move.  The more times a dollar moves, the greater the money supply and the greater their earning power of that dollar.

In lieu of parking your money and saving, you become your own banker with the ability to increase the velocity of your money.  This allows you to benefit from the same system that the government benefits from, and enables you to take control of your financial situation.  Consider control and how it differs among different types of asset classes.

• Owning your own business        You are in control?
• Owning real estate                     You are in control?
• 401(K)s                                        Who is in control?
• Mutual Funds                                Who is in control?
• Equalities (stocks)                         Who is in control?

Other than being able to change investment allocations or buying and selling, you have little to no control over investments in 401(k)s, mutual funds, and stocks.  The individual companies have presidents and boards of directors who have control over the operation of the underlying business.    Professional investors want CONTROL over their assets and their cash flow.