What Type of Mutual Funds Should I Be Investing In?

steve is with us steve's in new york city hi steve how are you hey dave and john thanks for taking my call i appreciate it sure what's up uh well recently retired about a year now 53 years old i have my work retirement but uh my mom had passed away uh 18 months ago we sold her house and i inherited a 150 000 that way [Music] now it's up to me to uh to invest it through mutual funds i'm not super duper comfortable with it and i have some ideas but uh i don't i don't know between regular mutual funds tax deferred mutual funds uh do i go all in with the 150 or do i piecemeal it and uh do you have any dad um currently just my one son's college she's a senior how much do you owe on that uh we probably owe another 35 000 for him okay we need to set that aside right uh yeah we have that and we have some savings okay and so there's no debt associated with the college you just have an obligation correct okay do you have a home mortgage uh not any longer no good for you good for you okay couple of things on investing um let's start at the top number one you don't invest in things that you don't understand never invest in things because some goob on the radio like me said do it or some goob on the internet that's even worse said do it okay so you understand it the bible says in the multitude of counsel there is safety and what that means is you get some experts around you to give you advice and the advice is not that you follow the expert the advice is so that you understand something you didn't understand before so your financial people need to have the heart of a teacher so that when you sit down with your financial person and you get up and leave you need to know something you didn't know before you sit down every time every time i spent an hour and a half in my office yesterday with our chief digital officer and three of our top uh senior uh tech guys and they were trying to teach me oh jeez that's why you're in such a great mood today about a digital about our digital platform and i don't i do not have to be a digital expert to be the ceo of this digital company but i do have to grasp the vernacular and i do have to grasp enough of it to help them to make wise decisions under their help so the multitude of counsel these experts are in my office teaching me about my company yesterday in this case they're teaching you about your money that you inherited from your the passing of your parent right and so you're gonna gather that up you do not have to have an mba in finance in order to make easy financial decisions basic investing decisions now so rule number one is you don't do it unless you understand it rule number two is you put somebody in your life that has the heart of a teacher you can click smart vester pro at daveramsey.com or smart investor and find the person in your area we recommend they don't work for us um they pay us an endorsement fee and they have to agree to approach your investing the way that we teach and with the heart of a teacher i personally invest steve inside my retirement accounts in four types of mutual funds growth growth and income aggressive growth and international outside of retirement accounts those funds all create taxes each year as they grow that's a problem there's two ways to avoid that with your 150 000 my preference is and the one that i personally do is i invest in mutual funds growth stock mutual funds that have what's called a low turnover ratio now you ready for the teaching part okay here we go if you buy a rental house for 200 000 and it goes up in value to 300 000 and you still own it you do not owe taxes on that 100 000 in growth because you've not sold the house agreed correct so you've got capital gains growth but you don't have any taxes because you've not sold it stock is the same way if a share of stock goes from fifty dollars to seventy dollars you don't pay taxes on that twenty dollar gain until you sell it same is true inside a mutual fund the turnover ratio is when they sell the stock inside the mutual fund if it has a ninety percent turnover ratio that means almost all the stocks get sold every year and so all those gains are going to be taxable every year if they have a five percent if they have a five percent turnover ratio which is a low turnover ratio that means you're not going to pay taxes on the increase in value until you sell the mutual fund because they aren't selling the stocks inside the mutual funds hardly at all much like that rental house or that share of stock did that make sense it definitely did so uh that low turnover what number am i looking at is it under 10 you want an under 10 turnover ratio under 10 percent yeah because anything that turns over the gain is they're going to send you a tax bill on the gain every year every every year yes okay so you want it to not turn over hardly at all so that it only grows without taxes until you sell it now if you hold it a year when you sell it you're going to be taxed at capital gains rate 15 rather than the ordinary income rate 30 40 percent so the tax rate the tax rate is also much lower for you so it's tax efficient two different ways one is you're not taxed till you sell it and two is when you do sell it it's taxed at a capital gains rate your smartvestor pro can help you with every bit of that and finish teaching you what i did in five minutes but that's the whole thing all you gotta do is learn some basic things like that they're not it's not rocket science you just gotta have somebody knows their stuff and they show you how and then you know your stuff so you do it smart

Channel: The Ramsey Show - Highlights

Views: 204,678

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 Type of Mutual Funds Should I Be Investing In?, mutual funds, best mutual funds, mutual fund, investing, mutual funds for beginners, money, dave ramsey show

Id: bByJ4u_KqEA

Length: 6min 17sec (377 seconds)

Published: Sat Feb 20 2021