Dave Ramsey Mutual Fund Allocation Guide

Dave Ramsey's mutual fund allocation guide is a straightforward approach to building a solid investment portfolio.

Dave Ramsey recommends investing 10% to 15% of your income in a retirement account.

He advises against investing in mutual funds that charge high fees, instead opting for low-cost index funds.

Dave Ramsey suggests creating a 3-6 month emergency fund to cover unexpected expenses before investing in mutual funds.

The Dave Ramsey Portfolio is a straightforward and effective way to invest your money. It's based on a simple asset allocation strategy that divides your investments into five main categories.

The first category is U.S. Stocks, which accounts for 30% of the portfolio. This is the largest allocation, and it's made up of a mix of large-cap and small-cap stocks.

Next up is International Stocks, which takes up 20% of the portfolio. This category includes investments in companies based in countries outside the United States.

Real Estate is the third category, making up 10% of the portfolio. This includes investments in real estate investment trusts (REITs) and real estate mutual funds.

U.S. Bonds are the fourth category, accounting for 20% of the portfolio. These investments provide a steady income stream and are generally considered to be lower-risk.

The final category is Cash and Equivalents, which takes up 20% of the portfolio. This includes money market funds and other short-term investments.

Dave Ramsey's mutual fund allocation philosophy recommends dividing your portfolio into four categories: Aggressive Growth, Growth, Income, and International.

These categories serve as the foundation for a well-rounded investment strategy.

The industry often uses different names for these categories, making it confusing to select the right funds.

As a fiduciary, we prefer you to be confident in your investment strategy, just like we are.

Each category should be held at 25% of the entire portfolio, with the amount spread over several funds for optimal growth and diversification.

Some mutual funds can fit into multiple categories, allowing for flexibility in your investment choices.

Dave Ramsey's mutual fund allocation strategy emphasizes simplicity and low-cost investing. He recommends a total stock market index fund as the core holding in a portfolio.

Dave Ramsey suggests allocating 25% of your investments to international stocks, which can be achieved by investing in a total international stock market index fund. This helps to diversify your portfolio and reduce risk.

A total bond market index fund can make up another 25% of your portfolio, providing a stable source of income and reducing overall portfolio risk.

Stock mutual funds are a type of investment where a group of investors pool their money to invest in a diversified portfolio of stocks.

They typically offer a lower cost of entry compared to buying individual stocks, with a minimum investment requirement often ranging from $100 to $3,000.

Investors can choose from a wide range of stock mutual funds, including those that focus on specific sectors, such as technology or healthcare.

These funds can provide a steady stream of income through dividend payments, with some funds offering yields of up to 4% per year.

Investors can also benefit from the expertise of professional fund managers who actively research and select stocks to include in the fund's portfolio.

Stock mutual funds can be a great option for beginners who want to invest in the stock market but don't have the time or knowledge to research and select individual stocks.

Dave recommends investing equally among four mutual fund types: Growth and Income, Growth, Aggressive Growth, and International. These fund types are not standard terms used to describe mutual funds, so we need to interpret what Dave means.

According to several others who have explored this topic and Dave's own words, his mutual fund recommendations can be broken down into more common categories.

Growth and Income funds aim to provide a balance between growth and income, but the exact balance can vary. They often invest in a mix of stocks and bonds to achieve this balance.

Growth funds, on the other hand, focus on long-term growth and may take on more risk to achieve higher returns. Aggressive Growth funds are a type of Growth fund that takes on even more risk in pursuit of higher returns.

International funds invest in stocks and bonds from countries outside of the investor's home country.