This Is the Difference Between Investing and Speculating

Summary

Ramsey Everyday Millionaires: Episode Summary

Episode Title: This Is the Difference Between Investing and Speculating
Host/Author: Ramsey Network
Release Date: May 16, 2025
Featuring: Dave Ramsey, Jade Warshaw, Raquel

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Introduction

In this episode of Ramsey Everyday Millionaires, hosts Dave Ramsey and Jade Warshaw address a listener's query about purchasing their first home amidst financial considerations involving speculative investments. The discussion delves into the critical distinctions between investing and speculating, the implications of borrowing from family, and strategies for building sustainable wealth.

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Listener's Financial Dilemma

Raquel, a listener from Los Angeles, reaches out seeking advice on whether to accept a loan to buy a home or utilize their existing Bitcoin investment. At [00:23], Raquel explains:

"My husband and I are 33 and we are possibly considering buying our first home. We would like to put an offer in, but we have the possibility of borrowing $110,000 from my in-laws in order to not touch our last nest egg, which would be a bitcoin that hopefully will increase in value in the next few years."

She expresses concern over deciding whether to use the Bitcoin as a down payment or borrow money, aiming to preserve their primary savings.

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Dave Ramsey and Jade's Initial Response

Dave Ramsey immediately addresses the listener's hesitation to sell Bitcoin, recognizing Raquel's familiarity with his perspectives:

"So you kind of expect me to tell you to sell the bitcoin." [01:09]

Jade Warshaw reinforces this stance by categorizing Bitcoin as a speculative asset:

"Bitcoin's not a great investment. We would never suggest it." [01:12]

Dave elaborates on the nature of Bitcoin, distinguishing it from traditional investments:

"It's like it's, you know, speculation at best. It's not an investment." [01:27]

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Investing vs. Speculating

A significant portion of the discussion focuses on defining and differentiating investing from speculating.

Dave Ramsey outlines the characteristics of a true investment:

"Investing is when you have a five-year or ten-year time horizon with an investment that has a track record... something like a rental property or a mutual fund that's been open for decades." [02:17]

Conversely, he categorizes activities like day trading, house flipping, or holding Bitcoin for short-term gains as speculation:

"When you buy something for a short hold to flip it, that's called speculation. It's not called investing." [02:17]

Jade Warshaw echoes this sentiment, emphasizing the volatility and high-risk nature of speculative assets compared to steady, long-term investments.

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Risks of Borrowing from Family

The conversation shifts to the personal risks associated with borrowing money from family members. Dave Ramsey discusses how such loans can strain relationships:

"The borrower is slave to the lender. When you borrow money from someone, you by nature change the quality and the texture of the relationship with them." [04:02]

He underscores the emotional and relational toll, noting how financial obligations can alter family dynamics, especially with in-laws.

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Evaluating Current Financial Position

Raquel provides further details about her financial standing:

"We have $250,000 in gold and silver... The Bitcoin is just like $100." [05:27]

Dave Ramsey suggests leveraging their substantial savings to strengthen their home purchase without resorting to speculative investments:

"You could cash all this and have, like, $300,000 towards the property for the down payment." [05:39]

He advises using proven, stable assets to minimize risk and avoid jeopardizing their financial security on volatile investments.

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Encouraging Diversified and Stable Investments

Both Ramsey and Warshaw advocate for a balanced investment portfolio prioritizing low-risk, long-term growth over high-risk speculation. Dave Ramsey stresses the importance of the "tortoise" approach—steady and consistent investing:

"The tortoise wins the race every time... the people that build wealth are not the ones that take as much risk as y'all are taking." [06:15]

He compares the unpredictability of Bitcoin, gold, and silver to the steady returns of mutual funds, reinforcing the value of patience and discipline in wealth building.

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Final Recommendations

In conclusion, Dave Ramsey and Jade Warshaw strongly advise Raquel and her husband to:

1. Liquidate Speculative Assets: Sell Bitcoin and any other high-risk investments to avoid unnecessary financial risks.
2. Utilize Stable Savings: Use their substantial savings in gold and silver to make a significant down payment on their first home.
3. Avoid Family Loans: Refrain from borrowing from in-laws to maintain healthy family relationships and financial independence.
4. Adopt Long-Term Investment Strategies: Shift focus towards low-risk, long-term investments to ensure sustainable wealth growth.

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Notable Quotes with Timestamps

• Dave Ramsey:

  • "It's like it's, you know, speculation at best. It's not an investment." [01:27]
  • "Investing is when you have a five-year or ten-year time horizon with an investment that has a track record." [02:17]
  • "The tortoise wins the race every time." [06:15]

• Raquel:

  • "We would like to put an offer in, but we have the possibility of borrowing $110,000 from my in-laws... about 250,000 in gold and silver." [00:23], [05:27]

• Jade Warshaw:

  • "Bitcoin's not a great investment. We would never suggest it." [01:12]
  • "If you want to speculate on bitcoin, it would be a small percentage of your portfolio." [04:59]

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Conclusion

This episode of Ramsey Everyday Millionaires provides invaluable insights into the perils of mixing speculative investments with significant financial decisions like purchasing a home. By emphasizing disciplined, long-term investing and the importance of maintaining clear and healthy financial relationships, Dave Ramsey and Jade Warshaw offer listeners a roadmap to building and preserving wealth effectively.

For more insights on building extraordinary wealth while living within your means, avoid debt, and invest responsibly, tune into future episodes of Ramsey Everyday Millionaires.

Transcript

[Raquel]

Foreign.

[Dave Ramsey]

This episode is brought to you by Smartvestor. Connect with an investing pro near you at ramseysolutions.com Smartvestor Raquel is with us in Los Angeles. Hi, Raquel. How are you?

[Raquel]

Hi, folks. I'm great. Thank you. Thank you guys for taking my call. How are you guys?

[Dave Ramsey]

Better than we deserve. What's up?

[Raquel]

Amen. So the question I have for you is my husband and I are 33 and we are possibly considering buying our first home. We would like to put an offer in, but we have the possibility of borrowing 110,000 from my in laws in order to not touch our last nest egg, which would be a bitcoin that hopefully will increase in value in the next few years. We can use that bitcoin, but we are wondering whether or not it would be wise and we would like your advice.

[Dave Ramsey]

Okay, so you're brand new to the show.

[Raquel]

Brand new. Okay, well, not brand new today. Ramsey, I know that you're not a big bitcoin. I've been listening to you on and off my whole life, since, you know, my mother.

[Dave Ramsey]

So you kind of expect me to tell you to sell the bitcoin.

[Jade]

We.

[Raquel]

Yeah, we kind of. We kind of.

[Dave Ramsey]

That would be. That'd be fairly predictable if you've been listening at all. Yeah. Okay.

[Jade]

For different reasons, though. I mean, first off, yeah, bitcoin's not a great investment. We would never suggest it.

[Dave Ramsey]

It's like it's, you know, speculation at best. It's not an investment.

[Jade]

And the second reason is if you have the money, use your money. Why take. Why take a loan and risk a relationship being tainted by this right from the in laws, especially when you've got the money today?

[Dave Ramsey]

Let's reframe it for a second. Raquel. Here's an interesting way to look at it. If you didn't have a bitcoin, would you go and borrow 110,000 from your in laws to buy a bitcoin?

[Raquel]

No. For sure. No.

[Dave Ramsey]

That's what you're doing.

[Raquel]

Okay.

[Dave Ramsey]

By not selling it and instead borrowing to do the other thing is the exact same movement. You just skipped a step and acted like it didn't happen. But in essence, you have borrowed the money to buy the bitcoin since you could have sold it and not borrowed the money. You see what I'm saying?

[Raquel]

Yeah.

[Dave Ramsey]

From a decision framework perspective. And so, yeah, that's that. That reveals how much risk is involved here. So a couple things we've discovered is there's a difference between investing and speculating. Investing is when you have a five year or ten year time horizon with a, an investment that has a track record, a history of 10 years or so or 30 years or whatever. For instance, if you're buying a rental property, you would say, okay, I can look at properties in that general area and say over the last 20 years or 30 years they've done this. So and I'm going to, and I have a holding period of 5 or 10 or 20 years on a rental property that's an investment, a mutual fund that's been open 10 or 15, 20 years and you say the track record is X. And based on that I'm going to buy it not for a short hold, but for a long hold. When you buy something for a short hold to flip it, that's called speculation, it's not called investing, it's not called domestic. And so you're giving the wrong names to these things and that tells us that you put the wrong weight on it. And the fact that the only money that you have is a high risk speculative investment. See, I almost did it. A high risk speculative item is very dangerous for you. That's point number one. Point number two is the borrower is slave to the lender. When you borrow money from someone, you by nature change the quality and the texture of the relationship with them. Your Thanksgiving dinner tastes different when you owe your in laws 110 grand.

[Raquel]

Right?

[Dave Ramsey]

They look at you going on a cruise differently. When you owe them 110 grand, they than if you don't owe them 110 grand. And even if they don't say anything, you can feel the eyes bearing into the back of your soul. You know what I'm talking about, right? And so don't change the quality of that relationship. Number one, like Jade said, number two, don't have your nest egg in something that's built for speculation. If you want to speculate on bitcoin, it would be a small percentage of your portfolio because you're trying to make quick money on it. It's not a long term investment horizon. And that doesn't make. So if you want to speculate on it, I'm not going to yell about it. But where I get upset about Bitcoin is when you've got everything you own in it and you're counting on that. And if you go back and look at what short track record we do have on bitcoin, it's extremely volatile, right? So I mean you like went to Vegas with your nest egg.

[Raquel]

This would be like the last thing like we have our Assets and, like, our savings in mostly other things. But, like, this Bitcoin is, like, the last thing. We're like, oh, we could keep it because it's speculation.

[Dave Ramsey]

Okay, so how much do you have? How much do you have in your real nest egg? You called that's your nest egg?

[Raquel]

Yeah. And our real, like, savings, which would be cashing out most of our, like, gold and silver. And like, that's mostly where our money is. Is going to. Is 250,000.

[Jade]

You have 250,000 in gold and silver?

[Raquel]

Yes, we do.

[Dave Ramsey]

And how much is The Bitcoin is 100.

[Raquel]

Yes. And then the Bitcoin is just like 100. And that's why.

[Dave Ramsey]

So you could.

[Raquel]

You could.

[Dave Ramsey]

You could put. You could cash all this and have, like, 300,000 towards the property for the.

[Raquel]

Yes. For the down payment.

[Dave Ramsey]

That would be a really good move.

[Jade]

Do you have anything in just, like, mutual funds or. Just like.

[Raquel]

We're not. We're newer to mutual funds, but. And we know. We listen to the ramp show, but we haven't. We mostly are, like, the tactile, like, gold and silver.

[Jade]

What bothers you about them? What. What spook spooks you about mutual funds? I'm just curious.

[Raquel]

Nothing's. Nothing spooks us. I just don't think that, like, my husband's administrator, I don't think he's just, like, gotten to the point where he's like, okay, let's sit down and, like, actually, you know, like, invest in them and buy them. Because we've just done everything else.

[Dave Ramsey]

Like, you know, you've done. You've done ultra high risk things that are extremely volatile in all three categories compared to more standard investments. And the tortoise wins the race every time. I read the book the Tortoise and the Hare, and you've got everything over in the hair bucket instead of in the tortoise bucket. And the people that build wealth are not the ones that take as much risk as y' all are taking. So if. If. If I could talk you into it, and I doubt I can, because I've got the wrong person on the phone and the other guy's the one doing it, so. But if I could talk you into it, Jade and I both instantly said, sell it all.

[Jade]

Yeah, that's right.

[Dave Ramsey]

And pay, you know, pay a huge down payment on this house and get you something that's stable. I mean, investment. I mean, owning a home in Los Angeles, freaking great investment. A great investment. And that's the direction we would go if we woke up in Your shoes. I don't know if I can get you there in one phone call.

[Jade]

Yeah, well, yeah, she didn't seem like she had any aversion to it. It sounded like the spouse was kind of the one.

[Dave Ramsey]

Yeah, he's the administrator. Yeah. And so that's. Yeah, he's the one that's doing all this stuff, so he's not going to let go of it as quick as she did.

[Jade]

But I have thought and I don't know if I'm. I mean, they're 33, they're trying to buy their first house, and my guess is they're trying to make a lot of money fast. It's get rich quick 100.

[Dave Ramsey]

Yeah.

[Jade]

And they've been lucky so far, but that is the word.

[Dave Ramsey]

Yeah.

[Jade]

Luck.

[Dave Ramsey]

Yeah. Because again, if you chart gold, silver and bitcoin and you look at the peaks and the valleys, that, that, that jump up and jump down, that represents risk. And you put an overlay on that, like with real estate. Real estate would look seriously boring if you put an overlay on that with a good growth stock mutual fund compared to the peaks in the valleys. You just see these huge mountains and huge valleys on bitcoin, gold and silver. And you would see mutual funds going real steady over like a 10 year period of time. Yeah. And you would just be, you'd be dizzy with the craziness of gold and the craziness of bitcoin.

[Jade]

Yeah.

[Dave Ramsey]

And so it's just a high risk speculative thing. It's not a good investment. For that reason, if you want to play roulette, if you want to play Texas hold' em, if you want to speculate, if you want to do house flips, if you want to do day trading of single stocks, those are all things that fall under the heading of speculation, which speculation is not gambling, but it's more akin to gambling than it is investing. We use the Vegas metaphor, but it is closer to a Vegas roulette wheel than in terms of risk profile, of course, than standard investing. And that's why we would always take you there. So it's an interesting call. Thank you, Raquel. Good call. Yeah. And thanks for clarifying with us where you were, but yeah, I don't own any bitcoin, I don't own any gold, except one watch. That's it. And I'm, you know, I own real estate that's worth probably 600, $700 million worth. And I don't buy gold and I don't buy bitcoin and I don't speculate. I don't day trade stocks and I don't do quick flips. I'm just a long term boring tortoise. It's worked really, really well.