However, many average investors cannot distinguish between a security and an asset. Many people, in- cluding many professionals, do not know the difference. Many people call any security an asset." "So what is the difference?" I asked. 'A security is something you hope will keep your money secure. And generally, these securities are bound up tight by government regulations. And that is why the organization that watches over much of the world of investing is called the Securities and Exchange Commission, a.k.a. the SEC. You may notice that its tide is not the Assets and Exchange Commission." "So the government knows that securities are not neces- sarily assets," I stated. Rich dad nodded and said, "And neither is it called the Securities and Guarantees Commission. The government knows that all it can do is maintain a tight set of rules and do its best to maintain order by enforcing those rules. It does not guarantee that everyone who acquires a security will make money. That is why securities are not called assets. If you re- member the basic definition, an asset puts money in your pocket, or the income column; a liability takes money from your pocket, and that shows up in your expense column. It's simply a matter of basic financial literacy." I nodded. "So it is up to the investor to know which secu- rities are assets and which securities are liabilities," I stated, beginning to understand where rich dad was going with this. 134 Rich Dad's Guide to Investing "That is correct," said rich dad, again reaching for his legal tablet. He drew this diagram on it: "The confusion begins for most investors when someone tells them that securities are assets. Average investors are ner- vous about investing because they know that just because they buy a security, it does not mean they will make money. The problem with buying a security is that the investor can also lose money," said rich dad. "So if the security makes money, as your diagram shows, it puts money into the income column of the financial state- ment, and it is an asset. But if it loses money, and that event is recorded in the expense column of the financial statement, then that security is a liability In fact, the same security can change from being an asset into a liability. For example, I bought a hundred shares of stock in ABC Company in December for which I paid $20 per share. In January, I sold ten shares for $30 per share. Those ten shares of stock were assets because they generated income for me. But in March, I sold ten more shares for only $10, so that same stock had be- come a liability because it generated a loss (expense)." Rich dad cleared his throat before speaking. "So the way I The Basic Rules of Investing 135 look at this is that there are instruments called securities in which I invest. It is up to me as the investor to determine if each security is an asset or liability." 'And that is where the risk comes in," I said.