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Dave Ramsey, renowned financial expert, author, and radio host, has long been a proponent of mutual funds as a solid investment option. Ramsey cautions against investing in Exchange-Traded Funds (ETFs) and instead advises his followers to consider mutual funds for their investment needs. In this article, we will explore Ramsey’s rationale behind his recommendation.
One of the primary reasons Ramsey prefers mutual funds over ETFs is the investment strategy they embody. Mutual funds are actively managed by professional fund managers who aim to achieve the fund’s investment objectives. These managers conduct in-depth research, identify potential investment opportunities, and may adjust the fund’s holdings accordingly. On the other hand, ETFs passively track an index, which means they have a predetermined set of holdings mirroring a particular market benchmark. Ramsey argues that the active management of mutual funds allows for greater flexibility and potential for better returns compared to ETFs.
Another crucial factor Ramsey emphasizes is the cost associated with investing. Mutual funds generally have higher expense ratios compared to ETFs, but Ramsey contends that the extra expenses are justifiable. According to him, the higher costs are a result of the active management provided by professionals. Ramsey believes that this management can potentially lead to better investment decisions and outperformance in the long term. He argues that trying to save on expense ratios by opting for ETFs may not be a wise decision if it compromises the quality of management and research involved.
Furthermore, Ramsey highlights the importance of personalized financial advice. He suggests that individuals seeking professional guidance should opt for a qualified financial advisor rather than relying solely on ETFs. Mutual funds, with their actively managed nature, provide individuals with the opportunity to work closely with an advisor who can tailor the investment strategy to their specific needs and risk tolerance. Ramsey argues that this personalized approach is crucial for long-term financial success and security.
Ramsey’s recommendations also stem from his belief in mutual funds as a means to diversify one’s investment portfolio effectively. Mutual funds offer investors access to a wide range of securities, such as stocks, bonds, and other assets, which can help mitigate risk. While ETFs can also provide diversification benefits, Ramsey argues that the expertise and active management of mutual funds further enhance the potential for risk reduction and returns.
It is essential to note that Ramsey’s recommendations are focused on long-term investing and building wealth steadily over time. He advises against trading individual stocks or attempting to time the market, emphasizing the significance of disciplined, consistent investing. Ramsey believes that mutual funds offer investors a straightforward, reliable, and proven strategy for achieving their financial goals.
In conclusion, Dave Ramsey’s preference for mutual funds over ETFs is rooted in their active management, potential for higher returns, personalized financial advice, diversification benefits, and proven track record. While ETFs can be a suitable option for some investors, Ramsey’s recommendations align with his philosophy of long-term, methodical wealth-building. As always, it is essential for individuals to do their own research and carefully consider their specific financial goals before making any investment decisions.
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It's not so much about timing the market, its about getting in at the right area
If you can buy mutual funds that outperform the S&P 500 after fees…then can't you buy a EFT that outperforms the S&P500 after fees? Is Dave saying that you CAN'T do that?
No one will find the golden ticket mutual funds unless you pay big money to someone to find them . Am I wrong ? Then pay 25 percent ? In tax ?
What if you sell your house , invest it in the sp500 and live under the overpass for 15 years ?
I don’t jump in and out of ETF’s. I’ve also found them performing better than the S&P 500. Some as much as 14%+ over 10 years
Dave is as a shameless shill for Mutual Funds. He can NEVER justify the ludicrous fees Mutual Fund Managers charge. I like Dave for most things, but he's lying – or legitimately just stupid/unaware of the reality of fees – when blathers on about 12% returns on Mutual Funds.
I've done some research on this, good ETFs that generally match Dave's growth, aggressive growth, growth and income, and international have lower costs and, as many people in the comments pointed out, different tax implications which generally favor young lower income people. I personally was not able to find passively managed index mutual funds that corresponded to Dave's categories AND that in a portfolio beat the S&P 500 in total return. Was able to find actively managed funds that did, but the fees and expense ratio at that point can really dig into your return.
I invest in an ETF's if you play the long game you make money through divdends paid to you and if you want to sell sell when they are at a high. I'm glad that Dave acknowledges that ETFs are not bad.
Good video Sir
BPTRX, ROGSX, PRWAX,OBMCX, WAINX just to name a few I hope this helps some of you.
It's seems like a generational thing very half way down the middle, but we like the etf's.
Etfs are the way to go dave
If mass mutual funds did our preform the S&P500 then isn’t everything investing in mass mutual funds?
I love Dave and Ramit Sethi very much. This is that kind of video where Ramit would disagree completely just to save you the fees and use that money for your Rich Life instead.
How come he never mentions these mutual funds.
Dave, knows he's wrong but won't own his mistake.
Dave always has these funds that outperform the S&P 500 yet never shares them it's interesting
ETFs are better in taxable accounts as they are more tax efficient
Name me two mutual funds that consistently outperform the S&P.
Please DON’T listen to Dave on this- also his other advice for getting out of debt, etc is COMMON SENSE.
Just remember this, he didn’t get rich from following his advice he got rich from Selling his advice.
Well, this video was five years ago. Perhaps during that time I would agree with him regarding holding a mutual over ETFs. Maybe laws or investing structures have changed since then. Nonetheless, in the year 2021, there is no way I will touch a mutual fund. ETFs are way more profitable and tax friendly.
Full of it
What are the four mutual funds?
All over the place. You're probably being paid by the Mutual Funds people to say this
What a freaking boomer. Don't you remember the great mutual fund meltdown? Dave is doing the equivalent to eating tide pods. I look down on his generation for this kind of stuff. So irresponsible.
I was going to say the biggest problem with mutual funds- probably for most people is the minimum investment is thousands of dollars. Once I max out my retirement I'm planning to start investing in a brokerage but don't really want to wait to save afew thousand dollars above my emergency fund to dive in– so I'd be leaning towards ETFs at least in the beginning and will go from there— also it seems like ETFs have lower tax implications which would make more sense in a taxable non-retirement brokerage account to me.
If u r so confident that u can pick mutual funds that outperform S&P u would me a trillion aire. Why even bother investing in anything else. Put ur money where ur mouth is… All in mutual funds if your are that convinced?????!!
Not a good answer Dave.
ETFs offer so many perks. Liquidity, low fees, and frankly diversity. The shear amount of products that exist in that space is truly shocking. On top of that if you have experience you can hedge your positions with options. What is there to lose with ETFs
ETF's are 100 times better than Mutual Funds. Dave is trying to sell Mutual Funds and i'm not buying.
Hands crossed while talking. Interesting body language.
Mutual funds have higher fees I. Order to manage the fund and in addition the fund managers often rebalance the mutual funds (selling off poor performing stocks inside the funds) and you pay Taxes on the sale when they do that. QQQ is probably the best ETF ever created by the way.
He must be getting paid by major mutual fund companies.
Dam alot of you disagree
I agree with many of his videos, but this one right here is a well example that he isn't always right.
Throughout the entire portfolio construction process, it is vital that you remember to maintain your diversification above all else.
Man he must get kickbacks from the mutual fund managers. I’ll keep my money, buy and hold ETFs, thanks.
I do very well with most of my stock funds being index funds. Love Dave but don’t like high fees and front end loads. I don’t need a financial adviser. Or as I call them ,The middle man.
I think Dave is dead wrong about this one.
etfs are better change my mind