Investing Like a Millionaire | Dave Ramsey's Greatest Hits

Hey guys, I'm your host Rachel Cruz and welcome to Dave Ramsey's Greatest Hits, where we look back at the best moments from the last 10 years of the Ramsey Show on video. This episode features Dave's most viewed clips on taking control of his finances. and

investing

for the future, he's about to get some great wealth-building advice and spoiler alerts. Dave even shares his own

investing

process. Check it out, you know that I firmly believe in what the Bible says to the borrower. He is a slave to the moneylender because his most powerful tool for generating wealth is his income and when he has not committed his income in the form of payments to everyone else, he can invest it and become rich.

Really, the average car payment in America today is $53, that's just, crazy, that's crazy, if you invest $500 in a decent growth stock mutual fund from age 30 to age 70, you'll have over $5 million, that thing will make you worth $5 million, knowing how a car pays the price and staying out of it. Isn't it so surprising? That's why 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 it increases their ability to invest and become rich, which also increases their generosity and change your life change your family tree change 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 to invest is the best way short and what surprises me is that almost the entire financial industry focuses on one part of the equation and that is the investment part of the equation and everyone has a lot of theories now that I have had all the letters and licenses after my name.

I have a degree in finance. He had all the licenses in the business. I abandoned them all because I didn't want to be regulated. What I could say here in the air. The only license I have. I still have my real estate license active. I've had it since I was 18 and they don't regulate much, so I'm going to keep that one, but you know, the rest of it is just amazing, the number. of people in the financial world, whether they're financial advisors, writers, bloggers, whatever they do, who have opinions about money, who don't have money, and whose track record of teaching people how to invest and getting them to invest sucks at 3%. of the public.

It's where all those people make money with rich people, they make all their money with rich people and most advisors won't fool you if you don't have some money, they don't want to sit down and I talked to you and of course we started teaching you people ask all these years how we invest and then as we have met many, many thousands of

millionaire

s over the years, how they invested, what they are doing well, we suggest and I personally invest. In good growth stock mutual funds, I spread it into four types: growth and income growth, aggressive growth and international, and I buy mutual funds that have at least a 10-year track record.

Well, Dave, shouldn't you just buy index funds? Well you can do that if I want index funds basically an S&P 500 fund reflects the market which is basically the stock market so you're going to do exactly what the stock market does good or bad the mutual funds I buy they outperform the S&P 500 and they really aren't. It's hard to find many mutual funds that don't beat the S&P 500, so if you're going to buy that well, it would be foolish to buy an S&P 500, but I buy mutual funds that beat the S&P 500 and my portfolio combination I just described It almost always beats the market because I buy funds that beat the market.

You know, it's not that hard to do. You open the prospectus and there are two little lines on the chart, one of them is the S&P 500 if the mutual fund you are looking at, if that line is below the S&P 500 line, don't buy that fund, this is really difficult, not so much, but Dave, just tell people to buy those loaded funds, yeah, pay a commission, that's fine. Someone in your life who helps you invest, all the data says you're going to continue investing doing that, but when you jump in, you know for yourself with all your theories and they, you know, some idiot news anchor shows up.

The Evening News predicts the end of the world. What are you doing? You withdraw all your mutual funds at exactly the wrong time because you don't have anyone on your side telling you, "Don't jump, don't jump." there with your own emotions and the news anchor and that's how you choose when you enter or exit the market and that's just nonsense so all the data says that a decent portfolio of well performing mutual funds wins and the most important thing is actually invest money. in mutual funds that actually invest. Research shows that 74% of the reason for successful retirement is doing it.

It's called the savings rate. year year after year month after month week after week from your check to your 401k over and over and over and over and over again that's how you get rich, you don't get rich by saving on fees because fees don't stop you from getting rich it's ridiculous These are theories promoted by people who do nothing and most of them have no money so I'm a billionaire 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 someone who is an advisor.

I know a lot about mutual funds but I don't choose my own. I let them choose four or five. I'm not going to use 8,000 mutual funds. I have what is known as a life. Actually, I'll have you pick three or four guys and I'll sit down with you and we'll watch them. I'm going to choose what I take. about 30 seconds and let me tell you that I choose mutual funds about 80% of the choice in my mutual fund 85% is based on its rate of return its history I look if the records are tied and I am trying to look look for the one with the longest track record who been doing it for a long time I like neighborhoods with big oak trees when I'm buying real estate you see what I'm saying I like a long track record somewhat stable I don't like Risk I like making money risk equals not making money for me a big risk anyway and I I I you know I pay the fee and I'll look at the fees and I'll see if the fees are unusually high and I might pick a fund if all else is equal it has a lower fee, but I'm not so now You know, some people are flipping over $5 bills trying to make pennies worrying about these fees, you know, I save $57 out of every thousand woo, you're getting rich, you know, that's not what makes you rich, buddy, It's the fact that the fund is invested in something that is going up in value and you do it over and over and you don't just go in and out of the market based on what's going on, it's going down, I'm afraid it's going up I'm high I'm greedy you know that's called chasing comeback returns this is the best way to lose your ass you know get in there and stay there and just ride it and ride it and ride it let's talk a little more about these four types of mutual funds when we get back thanks for joining us .

America, this is the Dave Ramsey show, phones open at 8825 5225, participate, we will talk about your life and your money. Talking about mutual funds and how to invest to get rich, we should spread it into four types: growth and income growth, aggressive growth and international, well let's talk about that for a second because there are all kinds of names for mutual funds and the name of the fund mutual. It tells you what's deep inside. Well, a growth and income fund is also called a large cap fund or sometimes it is also called a blue chip fund and the Blue Chip is the most expensive chip on the poker table which means these are big companies in this. large cap is short for large cap large cap means these are big companies and therefore their growth and income uh funds are big companies boring of the four types of mutual funds I invest money in and recommend This volatility in this fund compared to the stock market, you can see, it is much calmer than the market and therefore it is your friend when things go down, In other words, it's your stable, it's the big old dinosaur companies, it's boring when things are going up. by the way, it's also boring, it's not exciting when things go up, it's depressing, you look at that thing, why isn't it doing well when the rest of the market goes up?

CU is slower than the market up and slower than the market. down because it's stable ground stable ground a growth fund is right in the middle the s&p500 index fund would be considered a growth fund a growth fund are companies that are growing, they're kind of a midsize company, so you could call, hear it call Mid Cap Fund, uh, and you know, these are just standard growth stock mutual funds. There are a lot of these, tons of funds that fall into this area, so the idea is pretty simple: the growth fund that you know, is right there in the middle, you want something in the middle when you're pretty much going to do 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, although they are not so volatile that they outperform the S&P 500, then there is the aggressive growth fund, this is the wild brother, okay, it's the crazy one, so you can guess that it is also will call small cap funds, these are the small companies, the startups. a lot of tech companies would fall there very crazy, all the weird fun stuff is there and that means some fail and go to zero so it's a crazier combination, it's going to be a lot more volatile than the stock market so it's 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 uh there as um let's see aggressive small cap growth oh Emerging Market lo you would call that also means that international funds means that the stocks in it are foreign companies, not American companies.

It has a cousin called global fund. If you think of a globe, what is it? It is all that would have international and American funds. companies in a global fund and would be a cousin to an international fund because of the way U.S. companies generally outperform other international companies and generally as a group, so your international fund will be the worst performer of the four in recent decades . and a global fund will outperform an international fund because you put some spice into it, usually you put in some American companies and therefore they are a little bit better, but at least you have some things overseas and you are not betting 100% on the The American economy is not that I'm anti-American, I'm not, this is not a patriotic thing, it's a diversification thing, so you know you want to have some BMWs and some Mercedes in there, you want to have some LGs and some other things.

Although some of those things are made in the United States, they are foreign companies, so you look for companies that are based abroad, they could be a French company, they could be whatever and they are in an international fund and then you distribute your investment between those four types. and so, you know, very simple here, very simple, the thing is to do it, that's what everyone talks and talks and talks and talks and talks about investing the problem is Nobody does it, the people we talk to in the Time for the

millionaire

topic, they are millionaires. they know how they became millionaires, they did it and they never, when I ask them how they became millionaires, they never say, oh man, I hit the home run, I got this mutual fund that had low fees, they never say that because it never happens, oh Dave.

I achieved the Home Run. I got this mutual fund that went straight up and made all my money in one good purchase. You know, my golf buddy gave me some advice on SC stocks. I don't know millionaires who have done it. I hear stories about but a golf buddy with a stock tip is like a golf buddy with a fishing story. The one who got away. I mean, it's just that everyone has an opinion and it's all a bunch of crap, so you just have to stop and go slow. and constantly investing is the way it is the way it is the only way to follow it is the only way to follow so that there is growth and growth in income aggressive growth International do not chase returns do not invest money in things you do not understand they scam the people when they invest money in things that someone told them are good and they trusted the person instead of knowing what the fuck they were doing, you know, all these athletes you read about the NFL stars and they lost $10 million or they made $100 million and It's all gone and 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 are shocked to find out that person was a criminal, that's how the money is lost.

It's your money just like your kids, which means you have to make it behave the way you have.than to make your children behave, you have to do that if you want good children, that's how it will happen if you want money, that's how it will happen, you have to understand it now, you don't have to have a master's degree in finance, this is not rocket science, really It's not that hard and you really, really, you have to do this and you have to understand what money is. It's not going to make you put money in that's why when you buy insurance when you get a mortgage when you invest in mutual funds that's why when you do all that you have to understand what you're doing and the only way you're going to do that is when you choose 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 who is not a salesman, but they may be selling, they may earn a commission, but they have the heart of a teacher, not the heart of a salesman, so they do not sell by twisting their arm. or make you buy something you don't understand, instead they sell it by making you understand what you're doing and then choosing to do it.

I'm an easy sell once I understand something but until I understand it, without putting a dime into this I'm not going to move forward with this it's that simple so don't put money into things you don't understand always use an investment professional Having 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 problem here is to pick some mutual funds, start investing and do it every month. If you need help, consult our smartvestor professionals, click smartvestor on DAV

ramsey

. .com and you can find a list of people we support in your area.

They don't work for me, but I have their back and they have the heart of a teacher and will help you. This is Dave Ramsey's show. The money thing is very interesting guys, it is very interesting because very few things are what they seem as you get older and uglier like me and my ears continue to grow just like other parts of my body continue to grow. My wife says my belly is I'm getting more and more surprised at how dumb she was and how she didn't really understand that very few people who seem to have money actually make the huge car, the expensive car. a very expensive bag very expensive vacations on Instagram very expensive fill in the blanks are rarely real indicators of wealth, especially the first level of wealth.

I would call the first level of wealth your F, your first your first 10 million if you have a net worth of $1 to 10 million the average person in that category is not average to begin with they are well above average but the typical person, I guess I should say, a typical family that has a net worth of one to 10 million, is very underrated. they buy their clothes in unimpressive places and their unimpressive clothes uh, they have good vacations but they rarely post them for you to see on Instagram because no no they didn't take you on vacation they wanted to go on vacation Christmas gifts for the Trees are very reasonable, the car they drive is discreet and the valet is rarely impressed until he receives the tip.

It's usually a used Camry or a nice used Honda or a nice old truck of some kind because the people who achieve that first layer of wealth. that $1 to 10 million the way they did it is they didn't do it for you they aren't mad at you but they don't care what you think they weren't living their life to impress others they loved their life not yours They weren't trying to emulate or be the neighbors, they just didn't care what you thought. There's something real about that ISS when you stop worrying about what people think and you're actually living life for yourself and your family and that makes you make completely different purchases and live a completely different lifestyle.

One of the biggest compliments I ever had was that a very important gentleman who is a high level corporate executive at one of the largest companies in our area came to visit us one night at our house and said he was interested in meeting you, he said he would like to meet you. had been observing. I've been asking around the city of Nashville about Dave Ramsey and he said, you know what I always hear. I told him I'd be interested to know that. Be interesting, you know what? You're not assuming hm, that's a nice compliment, it's another way of saying, I don't really do things for what you think, um, I can do a lot of good things, but I'm not really doing them. any of them for you and I don't mean that in a bad way, just know that I didn't buy the house I live in for you, I bought it for myself and I don't care what you think about it.

One way or another, the same goes for my boat, my car, my vacation or whatever, and my net worth these days is well over the $10 million level, so I'm starting to enjoy some things. at a different level and people. I know that they are in the 100 million to $200 million range, they have some things that are striking and that are not simple, um, they do it because they can afford it, it is a very small percentage of their world. I have a friend who, worth around $200 million, bought his wife a $5,000 Coach bag, which my Antioch Tennessee brain couldn't even fathom the idea of ​​doing that until I made it for my wife more Late, but I mean it, but it blew my mind. someone would pay that for a bag.

I still don't understand it, but it's just swi. Sharon wants it, but you know, I realize it's an Uber who should spend that on a bag. Well, probably no one should, but the truth is that it is. a small percentage of the world of that guy who has 1 million dollars 200 million dollars 5,000 dollars is saliva, you don't even know it, you know it, it's not like you, it's like you bought a cookie, right, it doesn't even appear, so what are the proportions at that time, but what's my point. This is the first level of wealth, not the guy with 100 million or 200 million or the girl who's a billionaire or something, it's a different world and, you know, it's a different kind of spending and a different kind of lifestyle. because when they buy a car, it's a smaller percentage of their world than when you know most people buy a car right, so it's a really different world at that point, but the 1 to 10 million of that first layer of Wealth are typically people that if you walked past them at Walmart, you would have no idea that we were leaving a church that I was speaking at in Orlando, Florida the other day, and I walked past this guy, tall and thin, long hair.

Grey, I guess 65 years old, blue. jeans that are pressed with a crease in the middle really nice cowboy boots and a big Texas belt and an ironed shirt I mean, he looked like a million dollars, he was wearing blue jeans and cowboy boots, but when I walked past him, I I said to one. Of my boys I said, "That's an everyday millionaire. I could see it now because he looks like just a guy in jeans and boots, but they were really nice and he was clean and pressed and you know he took care of himself, he obviously was." he had cut his hair, you know, the razor had touched his face, you know all that kind of stuff and that kind of stuff you just know, but you could tell that even though there was nothing flashy about it, he was still put together, you could feel that I I can feel them.

I can feel the everyday millionaires now, not all of them, but I just met a lot of them over the decades of doing this and working with you, so my point is my friend Tom Stanley, who wrote the book Millionaire Next Door. another book later called stop acting Rich, it's a great thing to act on your damn salary Jeff is with us in Phoenix Hi Jeff, how are you? I'm fine Dave, thanks for your time today sir. Sure, how can I help? I have a question about 401K for retirement Mom, I watched a documentary on PBS and it showed pretty compelling evidence that investing for retirement in 401k is because all the fees associated with it can erode those fees over 50 years. like two-thirds of your original investment and they highly recommended the advantages of being in something called a market index fund versus a mutual fund, so I guess my question is twofold: exactly what is a market index fund and what is your opinion on it? . you should be retired, okay, a market index, an index is anything that models, an index fund is anything that models one of the particular indexes, the best way to do it is to give you an example, the S&P 500 is an index , the Dow Jones.

Jones Industrial Average that cites what the stock market has done today in the news as an index, the best, the best example is the S&P 500 and what is standard and poor is a company that S&P rates does all kinds of ratings and research on the stock market and have ranked the 500 largest companies on the New York Stock Exchange, which are the largest companies, in other words, the P, the largest publicly traded companies in the United States, so those 500 companies, what their stocks really represent, in a very real way, what the stock market is doing is an index fund.

Well, you could get an index fund that's trying to measure or mirror some of the international markets or some of the small cap stocks like on the Chicago Stock Exchange, but the most commonly known one they would refer to would be something like an S&P 500 now, so if that's F, if those 500 stocks are the index, if you want to index them, they're the measuring stick for what we're trying to do if we're creating an S&P 500 index fund is we're trying to create an background that reflects what those stocks do as a group; I may or may not have the 500, but they are doing their thing.

It's best to do exactly what that index does with that mutual fund. Well, then an S&P 500 fund will actually give you a rate of return pretty close to the exact rate the stock market is giving you, no better and no worse. In fact, it is Consider the baseline when comparing to see if another type of mutual fund is outperforming the market. You see what I'm saying, that's considered 1.0 in a beta, meaning it's the baseline and if your fund is charting yes. you are the line your fund growth is above the S&P then you outperform the market if you are below the S&P you underperform the market ok a lot of mutual funds underperform market, but there are many that outperform and outperform the market. and so, uh, the problem with the PBS special is that the number one reason people retire with no money is not because of the rate of return and it's not because of fees, it's because they don't put any damn money in the retirement, that and We have tons of research showing that and all these guys that start raising fees or worrying about the 401K structure, from a liberal political perspective, they're trying to figure out what's wrong with America today and that capitalism is somehow bad way. or something like that and they have that as a background on a lot of these things, they're never allowed to charge a fee for anything in their minds, um and it's the background and it's PBS, so we know it's there, but other than that.

The truth of the matter is that research indicates that getting people to invest is the first thing you do, the second thing you do if they want to win is the rate of return they get on their money, the last thing that is an indicator of whether they end up with money it's the fees well I listen to your show and I mean it tells me I need to be at my job it has the 401K with a match and your show tells me that's where I need to be yeah and I. I heard you mention that there are four different types of mutual funds, everything you know is related to risk and return, so I guess I'm asking this and that.

The last part of the question is: Do I think it's okay? Let me finish the One last thing, if the main reason people don't have money for retirement is because they don't put money into it, making it easy to invest for retirement payroll deduction is the easiest way if we're talking. about philosophy to get people to do anything, that's why the IRS gets away with taking all of our money as necessary and we act like it's okay because if you had an IRS guy standing at the front door and If you had to give him cash like you went out every day without your money, you know there would be a revolution with what we pay in taxes, but we are all stupid about the payroll deduction, the 401K allows that same automatic way of doing it, so then, philosophically I'm a 401K fanatic, that's why I now put money into my 401k, yes I put money into my personal 401K, is that the only thing I do to build wealth?

No, it's not the only thing, but it keeps the government's hands off of taxes and if it's a Roth IRA a Roth 401k is growing tax free and yes, I recommend four types of stock mutual funds. growth, none of them were index funds by the way, growth, growth and aggressive income growth and international now in about 401k the selection of funds you are looking at is so bad that your growth fund category could be filled with the S&P 500 your growth aggressive could be filled with a Russell index, which is theIn that, then you should have a little bit of savings to live on while you earn other income doing other things starting out. at 40 years old, but I want you to stop.

I mean, I don't know why you work from 24 to 40 years old at something you hate. I would not do it. What I want to say is that I am 56 years old. I have no desire to retire. I am financially prepared to live 25 years. I mean, you know, no problem, but I have no desire to retire and I'm going to work until it makes no sense here on the air. You know, what some people say it already is. it's happening, but you know no, no, I don't want to quit, I'm having fun, now, what I do can change in terms of I run this company as CEO every day and that.

That won't happen when I'm 80, but there's a good chance I'll be talking or dating or, you know, Kelly and I will still be arguing. They know it could still happen. Hello guys, I hope you see that investing and generating wealth is simple. But it takes intentionality once you are debt-free and on a solid financial foundation, then investing consistently over time is where real, lasting wealth comes from; In other words, the best way to get rich quickly is to do it slowly. Okay, stay tuned for the next episode of the series because it could possibly be the most dramatic one yet and don't forget to share this video with a friend who will enjoy it as always thanks for watching and see you next time.