Dave Ramsey has become a household name in the world of personal finance. From his bestselling books to his nationally syndicated radio show, countless individuals turn to Ramsey for guidance when navigating their financial lives. One of the most frequent questions posed by his followers is, “What does Dave Ramsey say to invest in?” Known for his conservative, no-debt approach, Ramsey has clear principles about where you should (and should not) allocate your money.
This article will break down Dave Ramsey’s investment philosophy and his recommended investment strategies, tailored for beginner investors, Ramsey enthusiasts, and anyone curious about building long-term wealth.
Ramsey’s Investment Philosophy
Dave Ramsey’s investment philosophy heavily emphasizes risk management, long-term growth, and financial responsibility. His advice is rooted in simplicity and stability. He encourages everyday investors to avoid complex financial instruments or speculative investments and focus on tools and strategies that promote steady, reliable financial growth.
Here’s an overview of Ramsey’s core investment principles:
- Avoid Debt at All Costs: Ramsey advocates for staying out of debt to maximize financial freedom. This applies to investments as well; he strongly advises against borrowing money for investments such as buying rental properties or trading on margin.
- Choose Long-Term Investment Vehicles: Ramsey consistently stresses the importance of long-term thinking. Rather than looking for quick financial gains, he recommends tools that allow your money to grow steadily over decades.
- Stick to a Conservative Strategy: Ramsey discourages investing in high-risk assets like individual stocks or cryptocurrency. His theory is that avoiding unnecessary risks translates to a higher chance of financial stability in the future.
What Does Dave Ramsey Say to Invest In?
Dave Ramsey has specific preferences when it comes to investments. Below, we’ll explore his recommendations across multiple avenues of investing.
1. Mutual Funds with a Strong Track Record
Ramsey champions mutual funds as his go-to investment vehicle. However, he doesn’t suggest investing in just any mutual funds. According to Ramsey, the funds you choose should have a long history of strong performance. He personally divides his investments into four distinct categories, each of which serves a unique role in building a well-rounded portfolio:
- Growth Funds: Aimed at capital appreciation, these funds invest in companies growing quickly in revenue, even if they don’t yet distribute dividends.
- Growth and Income Funds: These mutual funds balance growth potential with consistent dividend payouts, offering a mix of stability and returns.
- Aggressive Growth Funds: Focused on higher-risk, high-reward opportunities, these funds target smaller companies or emerging industries.
- International Funds: By diversifying investments into global companies, international funds allow investors to benefit from growth outside of their home markets.
Dave Ramsey believes that allocating your money evenly across these four types of mutual funds creates diversification while enhancing growth potential.
2. Retirement Accounts (401(k), Roth IRA, or Traditional IRA)
Ramsey emphasizes the importance of preparing for retirement by regularly contributing to tax-advantaged accounts like 401(k)s and IRAs. His advice is clear:
- Contribute at least 15% of your gross income toward retirement savings.
- Maximize employer matching contributions in your 401(k) before moving on to other investment options like Roth IRAs.
- Focus on Roth accounts whenever possible, as they allow tax-free withdrawals in retirement.
By consistently investing in retirement accounts, you can build a substantial nest egg over time while benefiting from compounding interest and tax advantages.
3. Real Estate (Debt-Free Only)
While Ramsey encourages real estate as an investment option, he makes it abundantly clear that you should never finance rental properties through debt. He recommends saving up and paying cash to purchase real estate outright. That way, any rental income becomes pure profit, free from the burden of monthly mortgage payments or interest.
Rental properties, when acquired responsibly (debt-free), can generate passive income and build wealth while diversifying your investment portfolio.
4. College Savings Plans
For those with children, Ramsey suggests prioritizing college savings to help lighten the financial burden of higher education. He highlights two types of accounts:
- 529 Plans: Specially designed for education savings, they allow your contributions to grow tax-free as long as they’re used to pay for qualified educational expenses.
- ESAs (Education Savings Accounts): Similar to a Roth IRA for education, these accounts also grow tax-free and provide flexibility in managing your investment.
By planning ahead and saving early, parents can set their kids up for a debt-free college experience.
5. Short-Term Investments for Emergencies
Ramsey stresses the necessity of maintaining an emergency fund before jumping into long-term investments. For any short-term savings goals (like a home purchase or a significant life event), Ramsey advises keeping your money in safer, highly liquid accounts like money market funds or high-yield savings accounts. He recommends leaving high-risk investments to your long-term portfolio.
What Does Dave Ramsey Not Recommend for Investing?
Understanding what Ramsey advises against is just as important as knowing his recommendations. Here are the types of investments he warns against:
- Individual Stocks: While they might offer high returns, Ramsey regards individual stocks as too speculative and risky for the average investor.
- Cryptocurrencies: Ramsey views cryptocurrencies as highly volatile and akin to gambling, advising his followers to avoid them altogether.
- Day Trading or Active Trading: Ramsey emphasizes that timing the market is a losing game for most people. Instead of chasing quick wins, he prioritizes consistency and long-term stability.
- Borrowing to Invest: He repeatedly stresses that debt is a financial trap and should be avoided even for potentially lucrative investments.
Why Dave Ramsey’s Investing Advice Stands Out
Dave Ramsey’s investment philosophy resonates with millions because it’s straightforward, actionable, and focuses on long-term financial health. Unlike strategies that involve complex financial products or high-risk assets, Ramsey’s recommendations stay rooted in simplicity, discipline, and consistency.
His faith-based approach, grounded in biblical principles, appeals to individuals seeking not just financial success, but peace and purpose. For beginner investors in particular, Ramsey provides a road map that’s as easy to follow as it is timeless.
The Next Step in Your Investment Journey
If you’re just beginning your investment path and wondering, “What does Dave Ramsey say to invest in?” his message is clear. Invest in mutual funds, grow your retirement accounts, and build wealth step by step with zero debt. By focusing on tried-and-true methods with a diversified, long-term approach, you can create a secure financial future.
Start small, stay consistent, and see the results over time. Want to take your investing knowledge even further? Explore resources, tools, and expert insights so you’re fully equipped to take control of your financial future.
