Fin Ed Definition A mutual fund is already diversified. Generally, a mutual fund is a diversified assortment of stocks, bonds, or other so-called assets. When a person buys a diversified portfolio of mutual funds, in many cases, they are buying the same stocks in different mutual funds. This is not diversification. This is concentration. 7. Debt-Free I always chuckle when someone says to me, “I am debt-free. My house and car are paid for, and we pay off our credit cards the moment we use them.”
Rather than disturb their dream, I say, “Congratulations,” and move on. Let them live in their oxymoron.
What I want to say is, “Have you seen the size of the national debt? How can you be debt-free when you and I are paying the principal and interest on nearly $75 trillion in debt? How can you be so naïve?”
In 2010, every U.S. citizen’s share of the national debt was $174,000 per person or $665,000 per family.
A Crash of People The subprime crash of 2007 was caused by excessive debt owed by subprime borrowers.
A Crash of Nations The next crash will be caused by excessive debt owed by subprime nations. So far, the world has supported the crash of smaller countries, such as the PIIGS (Portugal, Ireland, Italy, Greece, and Spain).
If Germany had not bailed out Greece, the crash would have spread. The first major country to go will probably be Japan.
Why is Japan in trouble? Debt. Japan has the largest percentage of debt-to-GDP ratio of the major world powers. The irony is that Japan is a highly educated, hardworking, homogenous population, with one of the highest savings rates in the world. In spite of these 137
by Rich Dad, Robert Kiyosaki