Investing is a business activity that interests many people. Many ways to invest. There are invest their money to buy a house for rent, buy land or bought gold and sold back to the time the price goes up and so on. Besides, if someone has enough money, investing in the stock market is also an attractive option to replicate money. Sure, everyone who interest must be equipped with enough knowledge about how to invest in the stock market.
In his book “Cashflow Quadrant” (1998), Robert Kiyosaki classifies investors into seven levels (level). Especially for 3rd-level investors, he divided into three groups, that: 3A, 3B, and 3C. So that overall there are nine levels of investors. But, It could simplified into six levels.
Level 0: Not investing
Investor Level 0 is the group of people who almost never make an investment. Who fall into this group are those who earn a mediocre (marginal) and those who cash deficit. That their marginal income is only enough for living expenses while the cash deficit is their expenditures greater than monthly income.
Level 1: Savers Investor
Level 1 completed the bank’s savers and depositors. They give priority to the certainty and integrity of money. Investors are avoiding this level of risk, smallest, so do not like the products of capital markets. Savers to forget one thing that the net interest savings and time deposits under inflation so the real return is negative. They do not understand that some of the currency has lost 72.4% of its value in the last 10 years (1998-2007).
They do not realize that inflation slowly but surely continued to undermine the real value of their money. Saving is a good habit and keep an emergency fund for 3-6 times the monthly expenses in the bank for the purpose of precaution is a wise action. But saving money is more than routine expenditures within 6 months of savings is less bright.
Level 2: Ordinary Investor (NOt Understand well)
This investor group is not taboo in stocks and bonds. They understand the interest and ORI bonds more attractive than deposit interest. They also know that stock investing can provide an annual return of 20% or more. Experienced investors usually lay low with the time and access to information is relatively limited.
Therefore, they are usually behind in buying and selling shares. Instead of implementing the strategy buy low and sell high, they actually have the opposite of buy high and sell low. Because of lack of information, when a stock worth buying, ordinary investors are still afraid. They come also buy shares when the nature of greed can overcome their fears. Perhaps because the news about this stock had published in the media such as newspaper, blog or online business portal.
The decision to buy or sell is often too late because even weaker market momentum shortly after they buy. On average, ordinary investors will return below the market. When the index rises 50%, they may return only about 30% -40%.
For investors of this level, it’s better to allocate the majority of your funds in equity funds or exchange-traded fund based LQ-45 index which is traded on the Stock Exchange since 18 December 2007.
Level 3: Long-term Investors
Investors 3-level capable rates above ordinary investors. They are more experienced and knows that buy-and-hold strategy of investing more profitable than stock trading strategy. With limited time and information owned and difficulty of market timing, they did a passive strategy that emphasizes stock selection (the selection of shares) based on fundamental analysis.
Long-term investors believe that in the long run, the value of its stock portfolio will move to follow the market index. If JCI rose 546% in the last 5 years, more or less their portfolio will also be increased by that for the same period. Robert Kiyosaki and Warren Buffet said that most successful American millionaire from investing in shares comes from this level.
Level 4: Proficient Investor
These are group winners of shares investor. They have a consistent record of victory in beating the market for several years. They may have experienced substantial losses, but they took the wisdom and lessons from the stock selection mistakes in the past that. When the index increased only 20%, portfolio investors may have been proficient, up 25%, or 5% above the market. When the index is stable, they are still able to produce a positive return. Expert investors are investors who are focused and able to utilize and combine all the information. Good information about the global economy, macro economy, industries, and information from the company’s financial statements.
They can distinguish between good stocks and good company. If ordinary investors often sell the winners too soon and hold the losers too long, they are instead of sell the losers in time and hold the winners long enough.
In practice, only a handful of investors can go in this level. If you happen to know him, do not hesitate to ask and learn from him about the stock.
Level 5: Capitalist Investor
Compared with other levels of investors, the number of investors is the level 5 the least, probably only 1-2 people in a million inhabitants. Capitalist investors really are the entrepreneurs and accomplished business people whose names we know. They were able to replicate their money into many times in a short time by utilizing the talent, time, and money of others.
They are driving the national economy to be able to grow 6% more. If investors invest for good at their own portfolios by using their own funds, investors capitalists use other people money to open investment opportunities and create jobs for the investors / others. You want to know who they are? In America, there were Henry Ford, Bill Gates, Michael Dell, and Ray Kroc. In Indonesia, we have Bakrie, Ciputra, Chairul Tanjung, Anthony Salim, and others.