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The 7 stages of Investors

The author and speaker Robert Kiyosaki, known from the bestseller ‘Rich Dad, Poor Dad‘, has described in one of his other books, ‘Cashflow Quadrant’ the 7 stages of investors. This model will give you insights in yourself and where you are at this moment as a (future) investor.

Are you curious of your level of investor? Read the whole article.

Robert Kiyosaki has used the thoughts of the investor stages from John Burley, who is famous as being one of the smartest people in investing in property.

In this article I will describe the 7 stages according to the cashflow Quadrant. I am curious of what you recognize from it and if you are willing to take your next step and grow to the next stage in your investing journey.

Stage 0. People who have nothing to invest.

According to the book of Robert Kiyosaki, 50% of the people belong to this group. My feeling says that this percentage is slightly higher.

So, at this stage you will find people who have nothing to invest. They spend all they earn, or they even spend more than they earn. They simply do it this way probably because they are used to do so or they don’t know how to manage their money in another way. To be in this stage has overall nothing to do with not earning enough. You’ll find these people in every layer of the society.

7 stages of investors

Stage 1. Loaners.

People in this category solve their financial problems by taking loans. Their way of dealing with money is simply filling gaps by creating another gap. They are not aware of their money and their way of spending. They have used their credit card a lot of the time. They buy stuff that immediately lower in value, such as things to put into their homes, a boat, a swimming pool, cars, holidays. They think that these liabillities can be seen as activa. If they go to the bank again for another loan, they are suprised to get rejected.

They like shopping. That is their favorite way of fysical exercise. They say to themselves, if they bought something again: “you deserve it”. Or “you are worth it”. They keep fooling themselves all the time.

People in this stage are people who seem to be rich. Big houses, nice cars. If you look better, they often have bought it with borrowed money.

People in this catagory argue a lot with their relatives about money. They completely live in a financial denial and they hope that their financial problems are being solved suddenly.S

Sometimes there are former business people in this stage. They think to know how to deal with money and hope to become rich by putting effort in moving from ‘Business Owner’ to ‘Investor’ according to the Cashflow Quadrant. They seem to forget that you’ll need other skills and experience in the B-quadrant than in the I-quadrant. The only way to get out of stage 1, is to change your mindset and live according to your new mindset.

7 stages of investors

Stage 2: savers.

Especially Dutch people will recognize themselves in this stage. It is in our culture to save as much as you can. Our grandparents and parents did this and so do we.

People in this stage have put away money on a bank account with a very low interest rate. And with a low risk as well. They often save money to be able to spend it for a holiday, a new tv or a new car. They are afraid to have debts and believe in cash payments. They love the ‘security’ of money on the bank.

They often see messages on tv or on social media about banks lowering their interest rates again or even talk about negative interest – that you have to pay the bank to put your money on your account). Even then they are not willing to take risks. Yes. I agree that you need some money to cover your bigger expenses. If that exceeds a certain amount, the question is if is wise to not do anything with it.

In earlier years it was a good idea to save a lot of money, especially when the interest rates where a lot higher than now. When governments left the connection of money with gold, the whole financial system broke down and it still is broken down.

In this stage people spend a lot of time with getting discounts on stuff they buy. They could have made the choice to learn to invest instead.

You also often here people in this stage saying: “I am saving money for my children”. That is nice, of course. Often there is an insecure feeling about money and the lack of knowledge to make other, more profitable choices.

As I said, of course it is a wise decision to have some savings. For example, to have 3-6 months of your monthly expenses available when possible.

In this stage you do have 2 possibilities: you leave it this way, don’t think about it too much and the banks will like you. Or, you have the choice to educate yourself in investing and the possibilities to find out what suits you the best for the long term, mid term and short term.

For years I was a saver. Simply because I did not know better than that and I did not know anyone who did it in another way. The only option I saw was go to a bank and ask an advisor what I could do to to earn more on my money. They could offer me products of the bank. But somehow that felt strange. Later, I knew why. As you can read in the cashflow kwadrant as well, it is strange to get financial advice from someone who has a job and would never invest in those product himself.

7 stages of investors

Stage 3: ‘smart’ investors.

In this category you will find people who are aware of doing investments. Often these are people who have invested in funds. Those are intelligent people with often a higher education. It is the middle class. If you look to their level of investments however, their education in this area is low. They seldom have read numbers from the funds or companies they have invested in. They are simply not developed in the world of investing.

This level can be divided into 3 stages.

3a. ‘Don’t disturb me’.

They think that they don’t understand money and they will never do. For instance, they say “I am not good with numbers”. or “investing is risky. Or “I will never understand how it works”. Or (this one I have heard a lot) “my husband decides what to do with our money”.

These people ignore their financial future, work long hours and say “at least I do have a sort of pension arranged”. I hope they do!

Myself, I was on this stage for a long time as well. I was not good with numbers and I have been ignoring a lot.

7 stages of investors

3b. The cynical person.

These people know a lot of arguments, why doing investments will not work. They are dangerous to be surrounded with. They sound intelligent often, speak bigg with a kind of authority but they are the biggest risk avoiders. They can tell you why you cannot trust anyone. It gives you a feeling of fear as soon you have spoken to them.

Strange enough these people follow the market all the time. They have read the financial pages of the newspaper and will tell you everything they know about this topic. On social media and websites they will search for stocks which are meant to be succesful. The problem is, however, that they always buy too late. The reason is that as soon as you have found the information from a site or a newspaper, the momentum has gone already. The smart investor should have bought them. The cynical investor does not know that. They think they are in the middle of the game but they are just the observer here.

3c. The gambler.

Where the cynical one is not careful enough, the gambler is not careful at al. Gamlers look at stockmarket and investing possibilities at the same way as a night out in a casino. This group has no strategy to deal with their money at all. They want to act as ‘the big guys’, so they pretend, till they have made it. Or have lost everything they have. They are always looking for ways to be rich in one day without knowing what they are doing.

If you ask them how they are and how it goes, they will tell you that they earn ‘even’ with their money or ‘a little bit in the plus’. In reality they have lost a lot of money. This level of investor loses in 90% of the time. They don’t talk much about it and they will only remember the ‘big amount of money’ they have ever earned with one deal.

7 stages of investors


Stage 4. Long term investors.

These are investors who are aware of the urge to invest. They do have a long term planning with which they can achieve their goals.

They have invested in their financial education before they take their first or next step. They surround themselves with financial planners.

This type of investor is not a big one. The chances are low that this is a property investor or an investor in startups. They prefer to choose for a long term approach.

If you are not yet a long term investor, start now with becoming one. This means that you have to

  • Educate yourself
  • Make a plan
  • Keep your expenses low
  • Minimalize your debts

Live within your financial means and find ways to increase your income. Make concrete goals like: at what age you want to be able to stop working. And what are your goals for 5 years, 3 years and 1 year from now? Keep it simpel at this level. Don’t do anything crazy with your money right now. Learn how to start with smaller amounts.

Money has the nice habit to raise your financial intelligence. Take care of not letting your fear en doubts be the leader.

It is interesting to know, that most millionaires come from this level 4. The average millionaire drives an average car, has his own company and lives within his financial possibilities. Like Warren Buffet does.

This level of investor is patient and has started now to create wealth for the future.

At the moment I ‘financially woke up’ in 2013 and have invested in my financial education, it was a big change. I have bought my first cashflowing propery in 2014 and from that moment, everything changed.

Stage 5. Developed Investors.

This type of investor can handle the risk of investing in more risky possibilities. That is because of their stable financial habits and they are well educated.

They are focussed and don’t spread their risk mostly. They have a long list of winning consequently. They also have lost enough money so they were able to learn from their mistakes. These investors have worked with larger amounts of money. The ratio between their debts and their savings are in control, they are well developed in the world of investing and they are searching actively to new information. They understand how money can truly work for them. They don’t like to gamble. They reinvest their profit and have spent a lot of money on professional advice.

I myself like to work on this level. I also like to other people forward with their financial future with investing in property, by coaching, mentoring and training.

Stage 6. Capitalists.

Few people will reach this stage of excellent investing. A person in this stage is an excellent business owner and an excellent investor, if you see if from the Cashflow Quadrant. For the capitalist it is meant to earn more money by cooperate with others, by using other people’s money. True Capitalists don’t need money to make money. They are able to create investments for themselves and others by using other people’s talent and time. A true capitalist usually will invest in something where most people say “it is too risky”.

7 stages of investors

And how to proceed now?

You will often recognize something of yourself in every stage of this model. If you manage it, by educating yourself and look into your financial mindset, to reach stage 4, that will be great to create your financial freedom. If you are not there yet, don’t worry. Reserve some time in your agenda every day to learn. You don’t have to take enormous steps. Even taking babysteps can bring you forward. See how your financial mindset is at this moment. Talk about it with like minded people. Be aware of listening to people who don’t help you to reach that level 4 or above. You know what they say about surrounding yourself with people who challenge you or people who will pull you back. What do you prefer? Be aware and keep growing.


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