What Dave Ramsey Doesn't Like About Investing In ETFs

foreign Debra is with us in Los Angeles hi Deborah welcome to the Ramsey Show hey thanks so much I've been listening to you guys for years and appreciate all you do well thank you I have you're very welcome um I have a question for you I've been listening for a long time and yesterday I went into um to adjust my own Investments because I am we've been focused on other things I wanted to get everything set up in the four different types of mutual funds you mentioned and the guy who is not a not a Ramsey uh Certified Financial Pro but he um he mentioned a term that I'd never heard before when I brought up mutual funds he asked me if I'd considered ETFs and I have no idea or I hadn't heard what that was he explained it to me and it sounds very similar to mutual friend so I was just wondering if you could clarify what the difference is and why a mutual fund is better than an ETF I don't know that a mutual fund is better than ATF ETF just means extreme exchange traded fund and for purposes you would use it for uh they're very very similar they're almost identical uh it's a group of you know a group of stocks and if you're buying an exchange you know typically what people will do for an ETF is something like an index fund like an S P 500 and so it'd just be a group of stocks in there now sometimes uh Brokers will try to get you to buy and sell in your portfolio a lot and they like an exchange traded fund for that better um and so if you're setting it up to do like you'd set up a brokerage account to buy and sell stocks in I would not use it for that but if you're using it like a mutual fund just to buy and hold you're going to find it's almost identical that you didn't really you're not going to notice any difference in the Practical use of it so uh sometimes I hear things like well Dave Ramsey's against ETFs I'm not against ctfs I don't mind what I want you to have is a diversified portfolio mutual funds ETF is either one of those give it to you what I don't want you to do with an ETF is start buying and selling all the time and I don't want you to use any vehicle of investing that that prompts you to constantly be jumping in and out jumping in and out jumping in and out because every time the the you know the the news is good by the time the news is good on the stock market you're late you should have already been in by the time the news is bad it's already too late for you to get out and so people that try to jump in and out based on the news and you're not saying that Deborah I'm just saying but in general if you're trying to use an ETF to time the market we call it then then that use is not something that you know that we would tell people to do ever because I don't time the market I just buy and hold I never sell it let's buy and keep it and uh and well the stock market went down yeah I know stock market went up yeah I know and if I just sit there uh then I'm fine and so but but for your purposes Deborah I think he's fine as long as you're going to stick with it and as long as he's not your your planner is not recommending the ETF for purposes of timing the market or buying and selling or constantly trading on your funds I don't be trading on my funds all the time I buy them and hold them the only time I sell a fund is if uh it's just completely underperformance category over a long period of time and I don't remember the last time I sold one it's been a long long time because I just I play long ball all the time play long ball I'm always thinking what's this going to be 10 years from now what's it going to be 20 years from now not 10 days from now not 10 months from now the emotions don't drive it and again Deborah you're not being accused of any of that but I'm trying to couch my ETF answer here so I don't get misunderstood again because I'm not anti-etf I'm anti-timing and and I'm anti-constantly trading because it's effectively gambling if you try to play the market you can really get no longer investing you're speculating that's correct yep and and you are you know from a statistical standpoint not a spiritual standpoint you are gambling right you know and so uh and sometimes I hear people say in the CR in the Christian world that I'm in you know they'll say stuff like well all all stock market is is gambling and you shouldn't be doing that well you don't understand what gambling is gambling is not based on gambling is based on a it's a game of chance meaning you don't have any control or any insight that's right over the over the output that's right investing as you buy a piece of real estate why because real estate's always gone up and real estate in that neighborhood it's a great neighborhood it's got nice trees and it's going to be good and whatever you know and or if you're in Arizona nice cactuses or what I mean whatever it is right and so you know we're gonna but we have actual outputs that we're measuring and and we can look at the probabilities and it's not just a deck of cards it's not a slot machine there's a complete difference and there's a difference in the spirit by which you go at those things so none of that has to do with Deborah but but Deborah thanks for the question

Channel: The Ramsey Show Highlights

Views: 260,548

Keywords: the dave ramsey show, budget money debt cash, real estate, insurance, how to make money, dave ramsey, save, credit card, compound interest, buying house, buy, snowball, What Dave Ramsey Doesn't Like About ETFs

Id: DxEE-4tzyuA

Length: 5min 11sec (311 seconds)

Published: Fri Jul 28 2023