Page 281 - Why We Want You To Be Rich - Donald Trump, Robert Kiyosaki.pdf

WHAT IF I AM ALREADY RICH? WHAT ADVICE Do You HAVE FOR ME? I 275

commitment. We got our money back plus a 40 percent return in
lessthan three years. The dollar requirements and returns vary with
the investment group you entrust your money to.

5. Hedge funds: Hedge funds are different from mutual funds in that
they use leverage (borrowed money) and are not restricted in
investments and investment methods as mutual funds are. I have
had varied luck when investing in hedge funds. Again, most ofthe
success ofa hedge fund depends upon the management.

6. Derivatives: The world ofderivatives is a world few people know
about. Yet, they are a concern to all ofus. Warren Buffett refers to
derivatives as "weapons ofmass destruction."

I do not know much about this investment class. Yet, I do know
what a derivative is. A derivative is something that is derived from
something else. For example, orange juice is a derivative of an
orange. A mortgage is a derivative of real estate. So I believe the
reason Warren Buffett is concerned about the world ofderivatives
is that many people, even those involved with them, probably do
not fully understand them, and they are leveraged instruments on
steroids. Ifthere is aglitch, the whole world ofmoney might collapse
like a house ofcards.

A friend explained it this way to me. He said, "It is like being
unemployed and borrowing money to invest in something, using borrowed
money as collateral to borrow the money." That sounds like people who
refinance their homes to payofftheir credit card debt but continue to use
their credit cards. If that is what the shadowy world of derivatives is, then
maybe this world ofglobal high finance really is a house ofcards - credit
cards.

In Conclusion
~ If you are rich, your job is to hang on to your money and hopefully

ttnultiply it. Rega<dless of what you do. it is v"'y important to have the

l . t TIA'~ MENe_?NE ~ES=-A~E_._