Dave Ramsey Explains His Investing Process

well you guys know by now that I'm a firm believer in what the Bible says that the borrower is slave to the lender because your most powerful wealth building tool is your income and when you haven't committed your income in the form of payments to everybody else you can invest it and become wealthy really the average car payment in America today is 503 dollars that's just pray that's nutty if you invest $500 in a decent growth stock mutual fund from age 30 to age 70 you'll have over five million dollars that one thing to make you worth five million dollars and now the blended car payments are staying out of them isn't that amazing and so I've become known for getting people out of debt and the only reason I get people out of debt is because it increases their generosity and increases their ability to invest and become wealthy which also increases our generosity and it changes your life it changes your family tree it changes your retirement you retire with dignity you don't have to buy that cookbook 72 ways to prepare Alpo and love it you can retire with dignity but you have to do it on purpose and getting out of debt in order to invest as a shortest way and what is amazing to me is that the almost the entire financial industry focuses on one part of the equation and that's the investing part of the equation and they all have a bunch of theories now I've had all the letters and licenses after my name I have a degree in finance I've had all the licenses in the business dropped all of them because I didn't want to be regulated what I could say here on the air the only license I still have active my real estate license I've had it since I was 18 and they don't regulate much so I'm I'm going to keep that one but you know the rest of it is just it is amazing the number of people in the financial world whether they're financial advisers writers bloggers whatever they do that have opinions of money that don't have any money and whose track record on teaching people to invest in getting them to invest sucks 3% of the public is where all of those people make their money off wealthy people they make all their money off wealthy people and most of the advisers out there won't fool with you if you don't have some money they don't want to sit down talk to you and so we start teaching people of course all these years ago how we invest and then as we've met with many many many thousands of millionaires over the years how did they invest what are they doing well we suggest and I personally invest in good growth stock mutual funds I spread it across four types growth and income growth aggressive growth and international and I buy mutual funds that have at least a 10-year track record I'll Dave shouldn't you just buy index funds well you can if you want index funds basically an S&P 500 fund mirrors the market that basically is the stock market and so you're going to do exactly what the stock market does good or bad the mutual funds that I buy I'll perform the S&P 500 and they're really not that hard to find a lot of mutual funds don't outperform this and P 500 so if you're going to buy that well that'd be dumb just buy an S&P 500 but I buy mutual funds that outperform this and P 500 and my portfolio mix that I just outlined is pretty much always beats that market because I bought funds that outperform the market it's you know not that hard to do you open up the prospectus and there's two little lines on the graph one of them is the S&P 500 if the mutual fund you're looking at if that line is below that S&P 500 line don't buy that fun does this is hard really not that much to this but Dave you you just tell people by those loaded funds yeah a commission that's fine have somebody in your life helping you do the investing all the data says that you'll continue to invest doing that but when you jump when you're you know out there by yourself with all your theories and they you know some idiot newscaster comes on the evening news predicting the end of the world what do you do you cash out all your mutual funds at exactly the wrong time because you don't have anybody in your corner saying don't jump don't dupe instead you're just out there with your own emotions in the newscaster and that's how you pick out your when you jump in or out of the market and that's just dumb so all the data says a decent portfolio of good performing mutual funds wins and the big thing is actually putting money into the mutual funds actually investing one piece of research shows that 74% of the reason of retirement success is doing it it's called savings rate a number of you that put money in versus talk about it and continually put money in year after year year after year year after year month after month week after week out of your check into your 401 K over and over and over and over and over again this how you get wealthy you do not get wealthy by saving on fees because fees don't keep you from getting wealthy it's ludicrous these are theories promoted by people who don't do anything and most of them don't have any money so I'm a multi-millionaire and I pay mutual fund fees to my broker boom just like that you hear that and you know why because I need a broker in my life I need somebody that's an advisor I know a lot about mutual funds but I don't pick my own I let them pick out four or five I'm not going through 8,000 mutual funds I have what's known as a life I'm going to actually have you know pick out three or four dude I'm going to sit down with you we're going to look at them I'm going to pick out that takes me about 30 seconds and let me tell you I pick mutual funds about 80% of the choice on my mutual fund 85% is based on its rate of return it's a track record I look if the track record is tied and I'm trying to look I look for the longest track record who's been doing it a long time I like neighborhoods with big oak trees when I'm buying real estate see what I'm saying I like a long track record something stable I don't risk I like to make money risk equals not making money for me big risk anyway and I you know I pay the fee I'll look at the fees and see if the fees are unusually high and I might pick a fund if everything else is equal has a lower fee but I'm not so you know some people are stepping over $5 bills trying to pick up pennies worrying about these fees you know I've seen 57 dollars out of a thousand whew you're getting rich you know that's not what's getting arrested it's the fact that the fund is invested in something that's going up in value and you do it over and over and over and over again and don't jump in and out of the market based on what's going on it's going down I'm scared it's going up I'm hot I'm greedy you know that's called chasing returns this is the best way to lose your butt you know get in there and just stay in there and just ride it and ride it and ride it we're going to talk about these four types of mutual funds a little bit more when we come back thank you for joining us America this is the Dave Ramsey show open phones a triple eight eight two five five two two five you jump in we'll talk about your life and your money we're talking about mutual funds and how to invest to become wealthy we should spread it across four types growth and income growth aggressive growth and international well let's talk about those for a second because there's all kinds of names for mutual funds and the name of the mutual fund tells you what is in the fund okay a growth and income fund is also called a large cap fund are sometimes also called a blue chip fund the blue chip is the most expensive chip on the poker table so that means these are big companies in this large cap is short for large capitalization large capitalization means these are large companies and so your growth and income funds are large companies boring of the four types of mutual funds that I put money into and I recommend this is the calmest if you were to chart this volatility on this fund versus the stock market you would see it's a lot calmer than the market and so it's your friend when things are going down in other words it's your stable it's the big old dinosaur companies they're boring when things are going up by the way it's also boring it's not exciting when things are going up it's a downer you look at that thing going why is it not doing well when the rest of the market is going up because it goes slower than the market up and slower than the market down because it's a stable and stable land a growth fund is right in the middle the SP 500 index fund would be considered a growth fund a growth fund is companies that are growing they're kind of medium-sized company so you might call it here at call mid cap fund and so you know these are just standard growth stock mutual funds there's a whole lot of these out there ton of funds that fall in this area so the idea is pretty simple the growth fund you know that's kind of right there in the middle you want something in the middle and it's pretty much going to do about what the market does in terms of volatility but you can get mutual funds that are growth stock mutual funds that outperform the S&P 500 you can even get growth and income funds even though they're not as volatile but outperform the S&P 500 then there's the aggressive Growth Fund this is the wild brother okay it's the crazy one and so you might guess it's going to be also called a small cap funds these are the small companies the startups a lot of tech companies would fall into they're very crazy all the fun weird stuff is in there and that means some of it fails and goes to zero and so it's a crazier mix it's going to be much more volatile than the stock market is so it's going to go up faster than the market goes up but it's going to go down faster than the market goes down small-cap aggressive growth stock mutual funds also known in there as I'm a small cap aggressive emerging market you would call it that too as well international funds means that the stocks in it are our overseas companies they're not American companies it has a kissing cousin called a global fund if you think of a globe what is it it's everything so that would have international and US companies in a global fund and it would be a cousin to a an international by the way American companies generally outperform other international companies and by and large as a group and so your international fund will be your worst performing of the four over the last several decades and a global fund will outperform an international fund because you put some spice in there you put some American companies in there usually and so they're a little bit better but at least you got some stuff overseas you're not a hundred percent betting on the American economy not that I'm anti-american I am NOT this is not a patriotic thing this is a diversification thing and so you know you want to have some BMW and some Mercedes in there you want to have some LG and some other stuff even though some of those things are made stateside those are foreign companies and so you look for you know companies that are overseas base could be a French company could be whatever and that are in an international fund and then you spread your investing across those four types and so I'm you know very simple here very simple the thing is do it that's the thing everybody talks and talks and talks and talks and talks about investing the problem is nobody does it people we talk to on the millionaire theme hour that are millionaires you know they got to be millionaires they did it and they never want to ask them how they became millionaires they never say oh man I hit the homerun I got this mutual fund had low fees they never say that because it never happens all day if I hit the homerun I got this mutual fund that went was straight up and I made all my money and won one goodbye you know my golfing buddy gave me a Scott stock tip I don't meet millionaires that are did that I hear stories about it but a golfing buddy with a stock tip is like a golfing buddy with a fishing story the one that got away I mean it's just everybody's got an opinion and it's all a bunch of crap and so you just have to really stop and go slow and steady actually investing is the way it's the way it's the only way to go it's the only way to go so growth and income growth aggressive growth international don't chase the returns do not invest money in things you do not understand people get ripped off when they invest money in things that someone told them is good and they trusted the person instead of knowing what the flip they were doing you know all these athletes you read about NFL stars and they lost ten million dollars or they made made a hundred million dollars and it's all gone and you know you know how they lose their money because they give it to someone else to handle and they don't even look at it and then they're shocked to find out that person was a crook that's how you lose your money it's your money it's like it's your kids which means you have to make it behave there's like you have to make your kids behave you have to do that if you want good kids that's how it's going to happen if you want money that's how it's going to happen you have to understand it now you don't have to have a master's degree in finance this stuff is not rocket science it is really not that difficult and you really really seriously have to do this and you have to understand what the money is going into do not put money in that's why when you're buying insurance when you're getting a mortgage when you are doing your investing in mutual funds that's why when you do all of that that you have to understand what you're doing the only way you're going to do that is when you're picking someone to help you in one of those areas you're doing your estate plan if it's complicated you're doing your taxes if they're complicated that kind of thing you need someone sitting on the other side of the table that is not a salesperson but that is they may be selling they may make a commission but they have the heart of a teacher not the heart of a salesperson and so they're selling not by twisting your arm or getting you to buy something you don't understand instead they sell by getting you to understand what you're doing and then you choose to do it I'm an easy sale once I understand something but until I understand it I'm not putting a dime in it I'm not going forward with this it's that simple so don't put money in things you don't understand always use an investment professional that has the heart of a teacher don't be afraid to pay some commissions you don't want to overpay but that's not the end of the world the big deal here is pick out some mutual funds if you're investing going and do it every month if you need some help check our smart investor pros click smart investor at Dave Ramsey comm and you can find a list of the people we endorse in your area they don't work for me but I endorse them and they have the heart of a teacher and they'll help you this is the Dave Ramsey show hey guys thanks for watching if you enjoyed this video click the subscribe button to get the latest content and check out these other great clips from the show [Music] [Applause] [Music]

Channel: The Dave Ramsey Show

Views: 974,372

Rating: 4.8703165 out of 5

Keywords: investing process, Dave Ramsey Explains His Investing Process, explains, ramsey, dave ramsey, dave ramsey live stream, the dave ramsey show, dave ramsey live, dave ramsey show, investing, show, dave ramsey debt free scream, smartvestor, debt free scream, dave

Id: rrBLkfWg_MI

Length: 17min 10sec (1030 seconds)

Published: Tue May 02 2017