In the book “Rich Dad, Poor Dad” Robert Kiyosaki outlines the profile of two different types of investor.  The first type of investor (Type I) is primarily interested in packaged investments like mutual funds, bonds, and CD’s.  These investors are generally looking for a passive strategy that allows them to generate modest compounded returns with minimal active management.  Being a Type I investor requires consistent budget discipline to continually save a sufficient amount of funds for contribution to their investment plan.

The second type of investor (Type II) is a ‘deal maker’ that is looking to find opportunities that are not being exercised by the majority of investors.  Generally speaking, Type II investors are interested in finding creative methods for financing deals and bringing together multiple stakeholders to get a deal put together.  This type of investing tends to involve higher risks and higher rewards.  A Type II investor must be willing to invest in a large breadth of education on investment strategies, and is also willing to actively deal with the difficulties of getting deals closed.

An important thing to consider is that both types of investor can be quite successful.  Type I investors can create a significant asset base if they are willing to invest diligently over a long period of time.  Conversely, Type II investors can grow wealth very rapidly by structuring ‘deals’ but also run the risk of losing significant sums of money on deals that do not go as planned.  Somebody who is looking to pursue a Type II strategy must be willing to accept the failure of a deal and then move on to the next deal.

Many people naturally want to find a ‘best’ strategy, but it is much better to think of the context of a strategy that is best for you.  Some people are more naturally inclined toward a strategy of steady compounding, whereas others are willing to take the risks necessary to be a deal maker.  The exact profile you choose to pursue is less important than being honest with yourself about which strategy most closely fits your personality.