Here's Why Dave Doesn’t Invest in Bonds

Summary

Ramsey Everyday Millionaires: Episode Summary
Episode Title: Here's Why Dave Doesn’t Invest in Bonds
Release Date: July 18, 2025
Host/Author: Ramsey Network

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Introduction

In this insightful episode of Ramsey Everyday Millionaires, hosts from the Ramsey Network—including Dave Ramsey, Rachel Cruze, and others—delve into the intricacies of investment strategies, focusing particularly on why Dave Ramsey steers clear of bonds. The discussion offers valuable perspectives for ordinary individuals aiming to build extraordinary wealth through disciplined and informed investment choices.

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The Volatility of Bonds vs. Mutual Funds

Rachel Cruze's Inquiry (00:24):
Rachel Cruze initiates the conversation by seeking advice on bonds, expressing her initial foray into stocks and questioning the viability of investing in oil and gas bonds with her $500 HSA fund.

Dave Ramsey's Response (00:55):
Dave Ramsey articulates his skepticism towards bonds, stating, “I don't buy bonds. The bond market in general is almost as volatile as the stock market and doesn't return as well” ([00:55]). He emphasizes that bonds are often marketed as safer investments, but data indicates similar volatility levels compared to stocks, primarily due to fluctuating interest rates. Ramsey underscores his preference for mutual funds, highlighting their diversified nature with “90 to 200 different stocks” ([00:55]).

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The Power of Diversification

Dave Ramsey on Diversification (02:00):
Ramsey explains the inherent risks of single-stock investments, noting, “The volatility from single stocks comes from the lack of diversification” ([02:00]). He contrasts this with mutual funds, which spread investment across numerous companies, thereby mitigating the risk associated with any single entity’s performance.

Illustrative Example (05:06):
Using a real estate anecdote, Ramsey illustrates long-term growth through diversification: “No one ever told you that you're going to make a million dollars in 20 minutes. But in 40 years, you did make a million dollars because that's what that house is worth now” ([05:20]). This example underscores the benefits of steady, diversified investments over seeking quick, high-risk returns.

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Mutual Funds vs. Index Funds

Discussion on Vanguard Index Funds (06:00):
The conversation shifts to mutual funds and Vanguard index funds. Ramsey explains that John Bogle founded Vanguard after discovering that “some 60% of the mutual funds do not outperform the Standard and Poor index” ([06:11]). He advocates for passive investing, mentioning that while Vanguard index funds are effective for parking funds short-term, his retirement accounts utilize mutual funds that consistently outperform the S&P 500 over three decades.

Dave Ramsey's Investment Strategy (07:20):
Ramsey emphasizes the importance of investing in “401k Roth IRA loaded with good growth stock mutual funds” and paying off one's house as the most reliable path to building wealth, dismissing alternative investment trends like bonds, single stocks, day trading, and cryptocurrencies as unsupported by data ([07:35]).

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The Discipline of Long-Term Investing

The Tortoise vs. The Hare (02:30):
Ramsey likens his investment philosophy to the classic fable of the tortoise and the hare, advocating for a "buy and hold" strategy over the “betting” mentality of day trading ([02:30]). He champions being the “slow and ugly guy” who consistently invests and reaps steady rewards over time.

Steady Contributions Lead to Wealth (08:00):
Highlighting the success stories from the Ramsey Millionaire Study, Ramsey notes that consistent, disciplined investments—without chasing trends—are the hallmark of those who have built substantial net worths. He shares anecdotes of individuals who, through regular contributions and employer matches to their 401(k)s, amassed significant retirement funds without resorting to speculative investments ([08:31]).

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Conclusion

Throughout the episode, Dave Ramsey reinforces a foundational investment strategy centered on diversification, mutual funds, and disciplined long-term planning. By avoiding high-risk and volatile investments like bonds and single stocks, Ramsey advocates for a steady, reliable approach to building wealth. Listeners are encouraged to adopt similar strategies—focusing on retirement accounts loaded with growth-oriented mutual funds and maintaining financial discipline to achieve lasting financial success.

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Notable Quotes

• Dave Ramsey (00:55):
  “I don't buy bonds. The bond market in general is almost as volatile as the stock market and doesn't return as well.”

• Dave Ramsey (05:20):
  “No one ever told you that you're going to make a million dollars in 20 minutes. But in 40 years, you did make a million dollars because that's what that house is worth now.”

• Dave Ramsey (07:35):
  “It's the shortest distance to a million dollars. It's the shortest distance to wealthy. It's not bonds, it's not single stocks, it's not day trading. It's not crypto.”

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Final Thoughts

This episode serves as a compelling guide for individuals seeking to navigate the complex landscape of investments. By advocating for simplicity, diversification, and long-term commitment, Dave Ramsey provides a blueprint for achieving financial security and building substantial wealth without falling prey to the volatility and uncertainty of less conventional investment avenues.

Transcript

[Joseph]

This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor Joseph is with us.

[Dave Ramsey]

In Fort Worth, Texas. Hi Joseph, how are you?

[Rachel Cruze]

Hey, Dave. Hey Rachel. How are y' all doing today? I'm doing pretty well, can't complain.

[Dave Ramsey]

Cool. How can we help?

[Rachel Cruze]

So I wanted to get your guys opinion on bonds. I'm just starting to. I feel like I've just dipped my toe into stocks and things like that, but I looked into oil and gas bonds and I don't know if that's a good route. I have about $500 in my HSA that I want to use to invest in that. I have more money to invest, but I'm just asking specifically, I guess about that and then any other advice you have on just stocks and trading in general.

[Dave Ramsey]

Okay, I don't buy bonds. The bond market in general is almost as volatile as the stock market and doesn't return as well. So it's pitched in the financial world as being safer than the stock market. But the actual data says it's not much safer. The volatility in the bond market comes from shifting interest rates. And so I have avoided bonds. I don't own a single bond and I've got millions of dollars in the market. I don't own any single stocks because I don't like risk. I own mutual funds. A Mutual Fund is 90 to 200 different stocks. My HSA is in Mutual funds because I've never actually used it. I bought the HSA the very first year that George W. Bush put that program out and I filled it completely full every year ever since. And I've never touched it. Whatever medical we've had has been very minor and I've just paid it out of my pocket. And that basically has become a yet another retirement account that is growing tax free for medical use. And above 65, which will happen in September, I can pull it out with only paying taxes on it, no penalties, as if it were a retirement account. So I'm going to continue to fund that and I'm not even going to pull it out at 65. But anyway, so all of that to say I invest in mutual funds and I. So if I put, I don't know, 100,000 bucks into the market, 0% in single stocks, 0% in bonds, 100% in a grow in a type of growth stock mutual fund of some kind or another, and that's going to be 90 to 200 stocks in there. And so I've not Bet. The volatility from single stocks comes from the lack of diversification, meaning that if you put 100,000 bucks in one company, whatever that company does causes you to take your breath away, positively or negatively. And so it's a lot more risk. But if you're. If you're. Instead of being in one company, you're in two. Then if one company goes crazy, the other one's sitting there, you got less risk. If you're in 200, you've way limited the risk. And the only risk you're riding is just the risk of the general stock market as a whole then. And not simply betting the farm on one particular company based on your golfing buddy's hunch, which is how most people play single stocks. And so I don't trade stocks on a daily basis. I don't trade mutual funds on a daily basis. I have the buy and hold tortoise in the tortoise in the hare. The slow and ugly guy wins the race every time. I'm perfectly content being the slow and ugly guy because I win the race every time. Yeah.

[Unknown]

And I think that's the hard message for. I want to say, maybe the younger you are, the harder it is to be like, okay, this isn't exciting. You know what I mean? Like, there's all these things happening, and it's like, ooh, I could make a return there. Do this thing. There's, like, this, like, game to it.

[Dave Ramsey]

And when there's not really a station to be a player.

[Unknown]

Yeah. When there's not a game to it and you just kind of just keep investing, it's just boring.

[Dave Ramsey]

That's it.

[Unknown]

Like, there's just not that much excitement around it. Usually you're gonna end up.

[Dave Ramsey]

If you're investing, you're doing it wrong. Yeah.

[Unknown]

And kind of depressed. I mean, seriously, you're investing it. Like.

[Dave Ramsey]

Yeah. If you're. If you're. If your broke friends are impressed with your investing, you're probably doing it wrong, you know, because it's always some broke guy that runs up to me and goes, I know this guy that put $10 million in Bitcoin. And I'm like, yeah, yeah, I bet you do. I bet you don't too. I bet you're full of crap. You know, and seriously, this. People just come up with this stuff. They pull it out of their ear, people that aren't really doing it.

[Unknown]

And, you know, there are so many trends and so many things that kind of come and go. And so it is the longevity of what you're putting your money into as well. Which means it's been around for so long that no one really talks about it because it's that boring. It's not new and exciting.

[Dave Ramsey]

And so don't you wish you bought a single family house on East Ridge Drive in Antioch, Tennessee, a suburb of Nashville, in 1978. That I sold a guy when I was 18 years old, got my real estate license. I saw one of my high school buddies a house for $42,250. This is why we hate Boo Boo Boo. You know what that house is worth, right?

[Unknown]

This is why we're so mad at y'. All.

[Dave Ramsey]

You know what that house is worth right now? Yeah, don't you wish? But. But see, that's what you want to.

[Unknown]

That's who you want to be.

[Dave Ramsey]

No one ever told you that this was going to be, you know, that you're going to make a million dollars in 20 minutes. But in 40 years, you did make a million dollars because that's what that house is worth now.

[Unknown]

Yeah. Yep.

[Dave Ramsey]

So, by the way, it's an old house now, so it's a really old house.

[Unknown]

So. Worth a lot, though.

[Dave Ramsey]

It's an antique. Yeah, But I mean, that's just a cute little brick house. Nothing fancy.

[Unknown]

Okay, so for Joseph. So you're saying mutual funds. But something else that I feel like people are talking more and more about is like, Vanguard index funds, like, more the S and P and all of that, too.

[Dave Ramsey]

That's been talked about for a while. Vanguard was started by John Bogle because he discovered that some 60% of the mutual funds do not outperform the Standard and Poor index. And he said, if I just put it in the index, I beat 6 out of 10 times. I beat the average mutual fund out there. And people that follow that, that is literally passive investing. People that follow that are. We call them Bogleheads. They call themselves Bogleheads. And he started Vanguard, the whole Vanguard company on that basis. And it's very successful. And I invest in the S and P. Some. I park money there, like when I'm piling up cash to get ready to do the next real estate deal. When I make some money at Ramsey, and I'm just putting it somewhere for a year or whatever until I get enough to do the next deal and I'll park it over there. But in my retirement accounts, I can find mutual funds that outperform the S and P. And I have consistently, for 30 years, outperformed the S and P. And it's really not rocket science, but it's only 40% of them. So you just gotta look and go does this thing outperform the S and P? It's right there in the dead gum prospectus. It shows up on the website. It shows up when you're sitting with.

[Unknown]

Your and that's within your HSA 401 Roth like all the, all the just standard retirement investing. So Joseph, 15% of your income be putting in all of that. And then if you max all that out one day because you have a high income then you know there's other things.

[Dave Ramsey]

It's the shortest, it's the shortest distance to a million dollars. It's the shortest distance to wealthy. It's not bonds, it's not single stocks, it's not day trading. It's not crypto. There's no data that says it is. The only data says 401k Roth IRA loaded with good growth stock mutual funds and get your house paid off. That's what all the wealth building data says for the first one to $5 million worth of net worth. And the people that have one to $10 million net worth that we studied in the millionaire study. That's what we found over and over and over again. We did not find them playing trends. We did not find them playing fads. They were not gold bugs. They were not bitcoin boys, Bitcoin bros. They were not any of that. They were just like they're the tortoise, the boring steady. Every month the money comes out of my check into the 401k and I got a match.

[Unknown]

And then they call us at 58 and they're like well we're looking to retire. How much is in the 401k? They're like 800,492. You know what I mean? Then our Roth has this and you're like holy crap.

[Dave Ramsey]

And they call this show every day and every weekend. They have for 30 years. So that's the end of that speech. Joseph, thanks for letting me step up onto the old, up onto the old Apple box and just give it a yell.

[Joseph]

Thanks for tuning in to Ramsey. Everyday millionaires need help with your investments? Connect with a smartvestor [e-mail] smartvestor or click the link in the the show notes Ramsey Solutions is a paid non client promoter of participating pros. Learn [e-mail] SmartVestor.