Dave Answers Your #1 Investing Question

Summary

Podcast Summary: The Ramsey Show Highlights

Episode: Dave Answers Your #1 Investing Question
Date: June 11, 2026
Host: Ramsey Network (Dave Ramsey and Co-host)

---

Episode Overview

This episode addresses a common listener question: Why does Dave Ramsey recommend splitting investments across four types of mutual funds (small-cap, mid-cap, large-cap, and international) instead of simply investing in an S&P 500 index fund? Dave and his co-host walk through the logic and track record behind Dave's approach, compare it to S&P 500 performance, and emphasize that taking action on investing is more important than endlessly debating investment theory.

---

Key Discussion Points & Insights

1. Ramsey’s Four-Fund Mutual Fund Strategy

• Ramsey recommends dividing investments evenly among four types of funds:
  • Small-cap
  • Mid-cap
  • Large-cap
  • International
• This approach provides greater diversification than just an S&P 500 index fund, which mostly consists of mid-cap and large-cap companies.
  • Quote:

    “The S&P largely is a bunch of mid cap and large cap companies... it’s just not as diversified as what you’re mentioning.” (Co-host, 00:33)

2. S&P 500 Index Fund vs. Actively Managed Mutual Funds

• John Bogle, founder of Vanguard, popularized the idea of passive investing via index funds after finding that less than half of growth mutual funds beat the S&P 500.
  • Quote:

    “Half the growth stock mutual funds do not outperform the S&P. But that also means it’s kinda like there’s a 60% chance of rain, there’s a 40% chance of sunshine.” (Dave, 01:01)

• Ramsey selects funds that have consistently outperformed their respective indexes over decades; he seeks mutual funds with a long, strong track record.
  • Small cap vs. Russell, large/mid vs. S&P, international vs. foreign index.
  • Quote:

    “If I’ve got a mutual fund that for 35 years has outperformed the S&P... and I put that in my four... the four of them as a group are gonna outperform the group of indexes.” (Dave, 02:12)

3. Purpose of Diversification, Especially International

• International funds can behave inversely to the S&P 500, offering a hedge in down years.
  • Quote:

    “If you look at the S&P 500 and it’s down in a given year, the international fund usually is up.” (Co-host, 03:25)

4. Historical Performance of Ramsey’s Picks

• Ramsey claims that his selected mutual funds have outperformed the S&P 500 every year over the past 30 years as a group.
  • Quote:

    “The four I picked has always outperformed the S&P every single year.” (Dave, 03:46)

• The difference is modest (about 2-3% higher average annual returns than S&P), but over decades that compounds significantly.
  • Quote:

    “If the average in the S&P is 10 to 12, you might be seeing 13, 14.” (Co-host, 03:51)
    “I’ve not gotten 10 points more. It’s not 20%. But... I’m actually mathematically beating it.” (Dave, 03:55)

5. “Doing Something Beats Doing Nothing”

• A central message: it's far better to invest, even imperfectly, than to spend years researching and never act.
  • Quote:

    “People who invest in slightly substandard mutual funds way outperform those who never invest...” (Dave, 04:21)
    “You guys, would you shut up and invest? Because 100% of the people that invest end up with more money than those that don’t every time. And that’s the number you need to concentrate on.” (Dave, 04:37)

6. Focus on Action Over Theorizing

• Most millionaires Ramsey has studied simply contributed consistently to a 401(k) or similar plans—no sophisticated strategies were needed.
  • Quote:

    “Most of them were not super sophisticated investors... They picked out their mutual fund based on what the guy in the cubicle next to him was doing.” (Dave, 05:12)

7. How to Find Such Funds

• Ask a SmartVestor Pro advisor for mutual funds with a long-term record of outperforming their index. Less than half will meet this, but they do exist.
  • Quote:

    “You can have your SmartVestor Pro say, show me some mutual funds that have a 25-year track record of outperforming the S&P. They can do it.” (Dave, 06:13)

8. Final Summary & Encouragement

• Whether you choose index funds or managed mutual funds, actually investing is the key to building wealth.
• Dave rebuts critics who claim "Dave Ramsey made people poor," firmly stating that taking action is what matters.
  • Quote:

    “If Dave Ramsey made you poor, I mean, that's pretty wild. That's just... They say, you know, 'cause he doesn't understand... What I'm better at than you are is getting people to actually invest instead of discussing freaking theory. Theory doesn't matter until it's applied.” (Dave, 07:32, 07:45)

---

Memorable Quotes & Moments

• On investment analysis paralysis:

  “Those who analyze everything to the point that they've got an anal problem with it, right? … Would you shut up and invest?” (Dave, 04:21, 04:37)

• On critics and armchair experts:

  "It's all these life coaches that don't have a life. It's the same thing, you know? And so guys just invest. Even if you do it wrong, you're doing it better than the moron who talks about it and never does it." (Dave, 08:17)

• On the basics:

  "If you invest, you're going to have some money. And if you don't invest, you're not going to have any money." (Dave, 08:54–08:56)

• Co-host’s analogy:

  “A bunch of out of shape people talking about workout routines and which one's better. It's like, yeah, great, let's go work out.” (Co-host, 08:34)

---

Important Timestamps

• [00:09–00:33] — Listener question about four-fund investing vs. S&P 500 index fund
• [01:01–02:12] — Discussion of mutual fund performance, Bogle, and passive vs. active
• [03:25–03:55] — Diversification, international funds, and average returns
• [04:21–05:12] — The importance of taking action over endless analysis
• [06:13–06:47] — How to select funds with a long-term record
• [07:30–08:54] — Dave’s response to critics, advocacy for simple action, final encouragement

---

Additional Resources Mentioned

• Investing Essentials Virtual Event — For deeper education on picking mutual funds. (Sign up at ramseysolutions.com/events)

---

In summary:
Dave Ramsey advocates a diversified, active mutual fund approach for those willing to research a bit, but makes clear that starting to invest trumps the perfect strategy. Most importantly, acting beats endless theorizing. If you simply put your money into a solid S&P 500 fund, you’ll still likely be wealthy over time—just do it.

Transcript

[A]

If your private student loans are in default, you're not out of options. Go to yrefi.com Ramsey I'm aware of

[B]

your recommendation to invest your money evenly in four funds. Small cap, mid cap, large cap, and international. I also hear you guys regularly reference the average annual return of the S and P over the last 30 to 50 years. Can you provide some insight into how his investment protocol has performed compared to the S and P? If mimicking S and P performance is the key metric, why wouldn't he recommend just parking your money in an S and P index fund?

[A]

It's a great question.

[B]

He, I assume, meaning Dave, per your recommendation for, for many, many years now. All right, so inside, how this investment's performed compared to the S and P. Well, the small cap, mid cap, large cap, international, there's not a, a one fund that we can look at to compare to the S and P. But, but the S and P largely is a bunch of mid cap and large cap companies. If you look at the makeup of that. So it's just not as diversified as what you're mentioning.

[A]

Exactly. So here's the thing. Individual mutual funds in the growth mutual fund sector, less than half of them beat the S and P. And that was the guy that started the Vanguard S and P index fund, Bogle. John Bogle was brilliant and he discovered that. And so he came up with this idea of where you hear the phrase passive investing. That's where it first came from, where you don't have to worry about it. You just buy the S and P. Screw it. Because half the mutual funds don't even beat it. And those people that do that are passive investors versus activists, sometimes called bogleheads. Because John was actually onto something. His actual data was correct and is correct to this day. Half the growth stock mutual funds do not outperform the S and P. But that also means it's kinda like there's a 60% chance of rain, there's a 40% chance of sunshine. Hello. So I have picked in the four categories for mutual funds that have outperformed their indexes. Now, the small cap, the index would be the Russell because a small cap is not necessarily. It's more like an aggressive growth stock mutual fund. Right. A mid cap would be like a growth. That's more like a typical growth mutual fund. Large cap, typical growth stock mutual fund. Like you said, the S and P is a mix of those two. And then obviously international, a foreign fund, that's a different index. Okay, so what I want to do is pick a fund that outperforms the no brain way of doing it, the passive way of doing it. And so if I've got a mutual fund that for 35 years has outperformed the S and P, and it's a growth stock mutual fund, and I put that in my four, I've got a small cap that's outperformed the Russell, and I put that in my four and so on. Well, guess what? The four of them as a group are gonna outperform the group of indexes unless they don't do as well as they did in the last 25 years or whatever the number was of the history on the things. So my particular foreign mutual funds that most of my stuff is in that has outperformed the indexes, has outperformed the S and P. Because I didn't pick one of them. That didn't. That's why.

[B]

And the other piece of this that we're not factoring in is that that international fund, which we recommend 25%, if you look at the S&P 500 and it's down in a given year, the international fund usually is up.

[A]

Yeah, it pretty much runs the inverse.

[B]

And so even in a given year, if the index, you know, beat your mutual fund set up, you're not factoring in the long term of what could happen in the market.

[A]

But it never has. The four I picked has always outperformed the S and P every single year.

[B]

So if the average in the S and P is 10 to 12, you might be seeing 13, 14.

[A]

Yeah, I've not gotten 10 points more. It's not 20%. And here's the thing, let's go back on this too. It's very interesting. I mean, the way I'm doing it is actually mathematically beating it. So it does answer the guy's question. But the problem with this discussion is always that somebody's having this hypothetical. If I had done this thing. And when we actually have figured out that people who invest in slightly substandard mutual funds way outperform those who never

[B]

invest, or those who jump out, or those who are in single stocks, those

[A]

who analyze everything to the point that they've got an anal problem with it, right? And it's like, you guys, would you shut up and invest? Because 100% of the people that invest in end up with more money than those that don't every time. And that's the number you need to concentrate on.

[B]

And so it's not mutual funds versus index funds.

[A]

If you actually do the index fund versus the person that Believes what we believe and doesn't do anything. I'm on your side. I'm glad I got you to invest in something because if you just put money away, you'll have some money. It's magical. And so like for instance was we studied all the millionaires we studied. Most of them were not super sophisticated investors. They didn't spend a lot of time analyzing like Dylan is what this is and what I should do and da da da da. There's not a lot of theoretical mumbo jumbo.

[B]

They weren't prodigies.

[A]

They were, I got a 401k at work and I'm going to put some money in a gross stock mutual fund and now I'm a millionaire. And that's exactly what they did. I mean they really didn't. They picked out their mutual fund based on what the guy in the cubicle next to him was doing. They did not do some kind of sophisticated think tank analysis. But here's the trick. They did put money in investments. They didn't sit around and talk about it and not do it. That's the problem. So you know the percentages all go out the window until you actually do it. Yeah.

[B]

Whether it's 12 or 13% doesn't matter if you have no money in the market.

[A]

So all that to say, Dylan, I have four mutual funds that have outperformed the S and P for 30 years as a group. Not hard to do. It's really not that tough to do. You can have your smartvestor pro say, show me some mutual funds that have a 25 year track record of outperforming the S and P. They can do it. They're there. Not all of them, less than half, but they're there. Okay. And you can put that little portfolio together and if it does what it did in the past, it will outperform the S and P. Mine half. But if you don't want to do that and you just want to put it in the S and P, you're going to end up with a lot of money.

[B]

We'll all end up rich and we'll

[A]

be happy for you. We're not mad at you. But that's the answer to your overall question.

[B]

What a great nerdy discussion.

[A]

It is a fun.

[B]

And by the way, you actually cover how to pick mutual funds in our Investing Essentials virtual event. We've got one coming up later this year. So if you guys want to learn more about that, you can sign up for [e-mail] events. But that's where if you want to nerd out like this, you're interested in this kind of conversation. You want to know how to build wealth the right way, in depth. We'll walk you through it in that event.

[A]

Yeah, and. But here's the thing. I go, we have talked more people into putting money in their 401k and Roth IRAs than anybody in America because we got them out of debt so that they could do it. And then they believed us and so they went and did it.

[B]

It's a margin issue and a little bit of education.

[A]

And then there's some. Not Dylan, but there's some, you know, moron on the Internet going, well, Dave Ramsey's created more poor people. No, he didn't. He got people to invest while you're sitting with your thumb in your ear.

[B]

You weren't listening very well. If Dave Ramsey made you poor, I

[A]

mean, that's pretty wild. That's just. But that's. They say, you know, because he doesn't understand. He doesn't understand how. Yes, I do understand it, you idiot. Of course I understand it. But what I'm better at than you are is getting people to actually invest instead of discussing freaking theory. Theory doesn't matter until it's applied. You know, I really don't care what you think about swinging a baseball bat until you swing one, honey. And then we'll talk about whether you can connect. That's how this works. You got a lot of theory going on out there. You got a lot of people that have an opinion out there that have no stinking money. It's all these life coaches that don't have a life. It's the same thing, you know? And so guys just invest. Even if you do it wrong, you're doing it better than the moron who talks about it and never does it.

[B]

A bunch of out of shape people talking about workout routines and which one's better. It's like, yeah, great, let's go work out.

[A]

How about, Arnold Schwarzenegger has created more fat people. No, he didn't. No, he didn't. It's just dumb. Okay, Seriously. But here's the trick. If you invest, you're going to have some money.

[B]

And if you don't invest, you're not

[A]

going to have any money. Take the money away. You're not going to have any money. Y Refi Refinances Defaulted private student loans for struggling borrowers. Learn more at yrefy. Com. Ramsey.