Dave Breaks Down Rebalancing Investments

Summary

Ramsey Everyday Millionaires – Episode Summary

Episode: Dave Breaks Down Rebalancing Investments
Date: February 9, 2026
Host: Dave Ramsey (with Rachel Cruze)
Guest Caller: Derek

---

Episode Overview

This episode centers around the concept of rebalancing investment portfolios and how disciplined financial habits lead ordinary people to significant wealth. Dave Ramsey and Rachel Cruze take a call from Derek, a self-described "data nerd" and Baby Steps millionaire, to discuss his investing process and life strategy. The conversation breaks down how frequent rebalancing fits into the Ramsey investment philosophy, why international funds matter even when they underperform, and the broader principles of wealth-building—living below your means, avoiding debt, and focusing on diversification.

---

Key Discussion Points and Insights

1. Derek’s Story and Rebalancing Routine

• Derek is a Baby Steps millionaire, invested in four types of mutual funds (growth, growth & income, aggressive growth, international), and rebalances his portfolio every December 29th to restore equal allocations.
• He asks if this is the right strategy and if he needs to do it more often.

Quote:

• "Every year on December 29, I rebalance those investments so that they are even to start the new year off. Am I doing that right?" – Derek [00:21]

2. Dave Ramsey’s Take on Frequency of Rebalancing

• Dave affirms that annual rebalancing is more than enough—he himself rarely does it unless things are way out of balance.
• He emphasizes personal comfort: Derek finds regular rebalancing fun and reassuring, while Dave prefers a big-picture view.

Quote:

• "I think once a year is more than enough... I'm more big picture person." – Dave Ramsey [00:43]

Memorable Moment:

• Dave jokes, "It gives you peace to do that? It would cause me an ulcer." [01:24]

3. Performance Trends in Mutual Funds

• Rachel Cruze asks Derek whether certain types of funds (like international) regularly go out of balance.
• Dave and Derek both note that international funds have underperformed over many years but can offset swings in other funds.

Quote:

• "International has come up short for the last eight years, and it just... started taking off in the small cap..." – Dave Ramsey & Derek [02:01]

4. Why Keep Underperforming Funds?

• Dave shares that, despite international funds' poor performance, careful analysis showed removing them actually lowered overall returns due to their complementary (inverse) behavior relative to other funds.
• He concludes: diversification matters more than chasing past performance.

Quote:

• "...when we ran the hypotheticals without [international], we didn't make as much money, which was weird because the stupid thing's underperforming, but it kind of was almost like a math riddle..." – Dave Ramsey [02:11]

5. Derek’s Wealth-Building Journey

• Age: Derek (53), wife (52)
• Net worth: ~$2 million (retirement + house, currently finishing a $150k cash-paid addition)
• No inheritance
• Household income (with wife retired): $130,000
• Key strategy: Never gone into debt, lived below their means, prioritized savings over lifestyle.

Quote:

• "We don't go into debt. People think we're crazy, but we do not go into debt." – Derek [03:59]

Memorable Moment:

• "Because you don't have to work if you got $2 million. Yeah, I got it." – Dave Ramsey [04:28]
• "Well done, Derek." – Rachel Cruze [04:33]

6. Ramsey Philosophy on Investing & Diversification

• Dave explains rebalancing for new listeners: Maintain four mutual fund types, each at 25%. If one fund grows faster, reallocate yearly to keep balance.
• Rebalancing doesn't cost anything in most retirement accounts.
• Emphasizes diversification—investing across hundreds of stocks within each fund gives safety and reduces risk versus putting all eggs in one basket.

Quote:

• "That's what rebalancing is, resetting it to a fourth each—25% each. Because that's our portfolio mix... It's what all of my retirement is set up on..." – Dave Ramsey [05:38]

7. The Power of Diversification

• Dave uses a vivid metaphor: "Money's like manure. It's better if it's spread. It grows things, okay? And so spread it around. Don't put it all in one thing." [06:26]
• Diversification is protection—risk is much lower across 400–800 stocks in four mutual funds than in a single-company stock, even if it's a stable giant like Apple.

---

Notable Quotes by Timestamp

• 00:43 – Dave Ramsey: "I think once a year is more than enough... I'm more big picture person."
• 01:24 – Dave Ramsey (to Derek): "It gives you peace to do that? It would cause me an ulcer."
• 02:01 – Dave Ramsey: "International has come up short for the last eight years..."
• 02:11 – Dave Ramsey: "...when we ran the hypotheticals without it, we didn't make as much money, which was weird..."
• 03:59 – Derek: "We don't go into debt. People think we're crazy, but we do not go into debt."
• 04:28 – Dave Ramsey: "Because you don't have to work if you got $2 million. Yeah, I got it."
• 05:38 – Dave Ramsey: "...resetting it to a fourth each—25% each. Because that's our portfolio mix..."
• 06:26 – Dave Ramsey: "Money's like manure. It's better if it's spread. It grows things, okay?"

---

Important Segment Timestamps

• 00:16 Derek introduces his rebalancing strategy
• 00:43 Dave discusses frequency of rebalancing
• 01:42 Rachel asks about consistent trends in fund performance
• 02:11 Dave and Derek discuss long-term underperformance of international funds
• 03:23 Derek shares his age and net worth
• 03:59 Derek outlines his no-debt, disciplined saving strategy
• 05:38 Dave explains the basics of rebalancing for listeners
• 06:26 Importance of diversification and risk reduction

---

Overall Tone and Takeaways

The tone is supportive, practical, and motivational, with Dave Ramsey’s trademark humor and easy metaphors making financial concepts accessible. The conversation illustrates that steady habits, not flashy investments or high income, are key to long-term financial success. Derek’s story underscores the value of discipline, debt avoidance, and methodical investing—even if it bucks social norms.

Bottom line:
Annual rebalancing is fine, diversification is critical, and you don’t need inherited wealth or a six-figure job to become a millionaire—you need discipline, patience, and a willingness to go against the grain.

Transcript

[Dave Ramsey]

Foreign. This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor Derek is in Tampa. Hi, Derek. How are you?

[Derek]

Living and giving like no one else.

[Dave Ramsey]

Love it, brother. Love it. How can we help?

[Derek]

My wife and I are. My wife and I are baby steps millionaires. We are invested in the four mutual funds, Growth Growth and Income Aggressive Growth and International. And every year on December 29, I rebalance those investments so that they are even to start the new year off.

[Dave Ramsey]

Okay.

[Derek]

Am I doing that right?

[Dave Ramsey]

There's nothing wrong with that.

[Derek]

Do it more often.

[Dave Ramsey]

No, I think. I think once a year is more than enough. You know, you're a detailed dude for sure, and. But it doesn't harm anything. I don't rebalance mine unless I look up and they're way out of balance. Like, if I looked up and saw, you know, 70% was in one thing or something, then I was going, whoa, that's a little heavy over there. I need to reset that. But 27% down to 25%. No, I don't. I don't do that. I don't fool with that. I just don't want food. But I'm not as. I'm not as detailed a person as you are. I'm more big picture person.

[Derek]

I'm a data engineer. So, yes, I am.

[Dave Ramsey]

And so it gives you peace to do that? It would cause me an ulcer.

[Derek]

Look at the numbers and I can see the numbers move the next year and it's kind of more exciting for me.

[Dave Ramsey]

That's kind of fun. Yeah, I like that part. From a math nerd. I like that part. I like saying, oh, look at that. And now it's out of balance again.

[Rachel Cruze]

Isn't this working a consistent trend, Eric, because you're deep in it. I mean, like the fact that you've been looking at it every year. Do you see the. Do you see certain ones imbalance over, you know, different ones each year?

[Dave Ramsey]

Let me give it. Let me give a guess for your answer. International. The international has come up short for the last eight years, and it just.

[Derek]

Started taking off in the small cap is kind of. Yes. Yeah. What you're saying is correct. Yep, it's one. Yeah, I see them ebb and tied together.

[Rachel Cruze]

Yeah. Yeah.

[Dave Ramsey]

Okay.

[Rachel Cruze]

So interesting.

[Dave Ramsey]

Very good, Very good. Okay. And that's. We almost redid our suggestion after 25 years. About five or six years ago, I went down the rabbit hole with our SmartVestor Pro, who's a friend of mine, and he and I are math riddle nuts. And so we pulled up a whole bunch of hypotheticals of what if you went 20 years because the international has underperformed the other four categories substantially over a long period of time. It's the worst of the four. Okay. And you've experienced that. That's why it was easy to guess. And so but I was thinking about just pulling it out. But what we figured out was that it's offsetting because it runs at the inverse of some of the others. And so when we ran the hypotheticals without it, we didn't make as much money, which was weird because the stupid things underperforming, but it kind of was almost like a math riddle, like I said. So. But anyway, we ended up leaving it in because the hypotheticals that we ran out ran it out two or three different ways over two or three different age groups and so forth. And it just didn't make. It made more sense to leave it. So. Yeah, but you rebalance. It does help offset the fact that the stupid thing has had a really lousy decade.

[Derek]

Yeah. Yeah, Agreed.

[Dave Ramsey]

Very cool, man. How old are you?

[Derek]

53 and my wife's 52.

[Dave Ramsey]

Yeah. And what's your net worth?

[Derek]

1.3. Give me a second. 1.3 in our retirement and our house. I got a tricky answer for you there. Our house is worth about six, but we just. We're almost done with an addition that 150 grand we're paying for in cash.

[Dave Ramsey]

Okay. All right. And so you got about 2. About $2 million net worth of 52. Did you inherit any money?

[Derek]

No.

[Dave Ramsey]

All right. Way to go, guy. Way to go, man.

[Derek]

Thank you.

[Dave Ramsey]

What do you tell people that. How did you do that? What was the trick? Did you make a pile of money or did. Are you just smart or what? How'd you do it?

[Derek]

We don't go into debt. We are. People think we're crazy, but we do not go into debt. We've been. We moved from a three bedroom house to a two bedroom house and been here eight years saving to do this. And people think we're crazy, but we don't go into debt. And we see the benefits from it tremendously.

[Dave Ramsey]

Yeah. And what's your household income?

[Derek]

My wife retired 130.

[Dave Ramsey]

Okay.

[Derek]

She was a. She was a special needs teacher and.

[Dave Ramsey]

She retired at 50.

[Derek]

She's. Dude, she retired 48. She's doing some side jobs just to kind of.

[Dave Ramsey]

Because you don't have to work if you got $2 million. Yeah, I got it.

[Derek]

Okay.

[Dave Ramsey]

Proud of you, man.

[Rachel Cruze]

Well, Done, Derek.

[Dave Ramsey]

Way to go, Derek.

[Derek]

Thank you, guys.

[Dave Ramsey]

Thanks for letting us interview you, too. Wow. Very cool. So if you don't know what rebalancing is, guys, we teach people to put a fourth of your income in growth, a fourth in growth and income. A fourth in international, which we were talking about was being the one that was sucking wind, and a fourth in aggressive growth. When you're doing your 401k, if one of them grows substantially more than another during the year, in his case, he does it once a year. Sometimes people reset it to a fourth at the end of the year. So you might get to the end of the year and one of them has 32% and one of them has 18% because one of them didn't grow much and the other one took off. Right. And so what he's doing is he's smoothing it out each year and going back to 25%, moving them around inside the 401. Doesn't cost anything to do it. And then it restarts, and then his contributions are still at a fourth, and. And then he gets to look at it again at the end of the year. He's a data guy and he likes watching it happen and so forth. And that's a cool thing. So that's what rebalancing is, resetting it to a fourth each. 25% each. Because that's our portfolio mix that Rachel and I use. Both Rachel and Winston, Dave and Sharon. It's what we've suggested here for 30 years. It's what all of my retirement is set up on, but mine is not sitting at 25. 25, 25. Because I don't rebalance as often as he does. Again, I don't, because I'm just not that into the details. I don't care. It's just a big old pile of money. It's all I'm worried about. Right. And so I'm that guy. But. But it's kind of cool that he's doing that. And especially if you like all the nerdy math stuff, which I actually do. So I probably would enjoy doing it, right. Because I enjoy that part of it.

[Rachel Cruze]

I like to see the trends and the patterns, you know, we're talking about over time, over a decade, and seeing, okay, which ones are continuing to not perform as much or as well as others.

[Dave Ramsey]

So, yeah, so that's what we teach folks to do. And what that does is each mutual fund has 90 to 200 stocks in it. So if you've got a growth fund that has 90 to 200 a growth in income that has 90 to 200, an international that has 90 to 200, and an aggressive growth that has 90 to 200. So you've then got somewhere between 4 and 800 stocks, roughly, except for the overlap that you're invested across. And that's a lot of safety, because the chances of all of those as a group going down over an extended period of time is really close to zero. Okay? That's called diversification. When you spread it around, it's diversification. It's a big financial word. Sounds like Charlie Brown's teacher. Okay. But all that means is spread your money around. Money's like manure. It's better if it's spread. It grows things, okay? And so spread it around. Don't put it all in one thing. When you put it all in one thing, you increase your risk. And so if you buy Apple stock with a million dollars or you put it in 800 different stocks with a million dollars, the safety factor is way different. Even though Apple is pretty stinking cool and incredible and stable, but still your risk level is way up. When you're in one or two stock.