In recent posts on X, financial influencer Robert Kiyosaki has predicted an impending stock market crash. He believes that this is the best time to build wealth and get rich – by investing in assets like gold, silver and Bitcoin at a discounted price after the crash.
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Here’s why Kiyosaki believes now is the best time to get rich and what you might want to consider before following his advice.
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Is an “everything crash” imminent?
Kiyosaki sees crashes as an opportunity to build wealth. In a recent post on X, he noted, “Crashes are the best time to get rich. Bargains will surface.” And he’s not alone in that sentiment. “By continuing to buy stocks when the market is down, you can lower the overall price you pay per share and position yourself for growth when stocks inevitably rebound,” according to Forbes.
The hardest part about capitalizing on a stock market crash is timing it. Kiyosaki has often tried to predict which way the market will go. And while many of Kiyosaki’s arguments for a stock market crash are valid, trying to predict when the market will time it can be risky.
Kiyosaki has been predicting a crash since at least 2011. Between 2011 and today, there have been several smaller market crashes, as well as the COVID-19 crash, but overall the stock market has more than tripled.
One reason there hasn’t been another crash so far is the intervention of the Federal Reserve. It’s entirely possible that the tools the government uses to mitigate recessions could fail in the future, but predicting this can be difficult due to the multitude of factors involved.
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Why hasn’t there been a major crash in such a long time?
Economics has its rules, but it is not an exact science, and the government has the power to turn the tables and change the rules when necessary.
The Federal Reserve has tools to combat recessions. When things look bad, the Fed can cut interest rates to make credit easier and stimulate the economy. If interest rates have already been cut and the economy still looks bad, the Fed can also “print money” and buy Treasury bonds – which essentially amounts to the government borrowing money from itself. When the Fed uses any of these tools, it usually has an inflationary effect. Quantitative easing, in particular, has been shown to drive up the prices of investments like real estate.
Central banks around the world have played an important role in preventing severe recessions by providing liquidity to markets. These actions have helped sustain consumer spending and business investment during times of economic slowdown, but they could have unforeseen consequences in the future.
After the US experienced high inflation, the Federal Reserve began raising interest rates in February 2022 and has kept them high since then. It is possible that the next crash will not allow the Federal Reserve to fully smooth things out by cutting interest rates or printing money.
Investing during a crash
So what should you do if the market does crash? There’s a metaphor in financial circles that describes the risks of impulse buying during a crash: “catching a falling knife.” If you try to invest in assets that are rapidly losing value, you may end up taking a hit.
However, as Kiyosaki noted, crashes can also provide opportunities to build wealth. “The sharp declines in share prices during a crisis or recession can provide good investment opportunities. Some companies may be undervalued by the market. Others may have a business model that makes them more resilient to an economic downturn,” Fulton Bank said.
The problem is that many people underestimate a crash. If you buy in the early days of a prolonged market downturn, prices can continue to fall drastically and you may never get your money back. During the dot-com bubble market crash in 2000, many companies never recovered from their highs. Those that did, took a long time to do so. For example, Amazon stock plunged 90% and took seven years to recover.
If you choose to invest during a stock market crash, plan for the long term and choose assets that are likely to continue to rise in value in the future. However, before making any serious financial decisions, you should consult a licensed financial advisor who can provide advice tailored to your financial situation.
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This article originally appeared on GOBankingRates.com: Why Robert Kiyosaki believes the best time to grow your wealth is coming soon
