What Does Dave Ramsey Say About Gold?

Dave Ramsey is a prominent financial personality who offers guidance on personal finance, debt management, and wealth building. Many people seek to understand his perspective on various investment options, particularly concerning assets like gold. His straightforward approach to financial planning often sparks questions about how specific assets fit into his broader philosophy.

Dave Ramsey’s View on Gold as an Asset

Dave Ramsey generally advises against investing in gold for wealth accumulation. He does not consider it a suitable investment for building long-term wealth. His assessment highlights that gold typically does not generate income, such as dividends or interest, which is a significant factor in his investment philosophy. Its value relies entirely on market price fluctuations, meaning investors depend solely on its price appreciation.

Ramsey also points to gold’s historical performance, stating it has a “lousy long-term track record” compared to other investment avenues, like equity mutual funds or index funds. Gold prices can be highly volatile, influenced by emotion, speculation, and scarcity, leading to unpredictable swings. This unpredictability makes gold a risky choice for individuals seeking stable, consistent growth.

Underlying Principles Guiding His Stance

The foundation of Dave Ramsey’s stance on gold stems from his emphasis on income-producing assets. He advocates for investments that generate cash flow, such as businesses or real estate, rather than those whose value is purely speculative. Gold, as a commodity, does not provide this essential component of wealth generation. His philosophy centers on predictable returns, which gold’s price, being largely driven by fear or greed, lacks.

Ramsey’s view is also shaped by the fact that the U.S. dollar is no longer backed by gold, a change that occurred in 1971. He argues this historical shift diminishes gold’s traditional role as a stable investment or a hedge against inflation. He places gold in the same category as other commodities, like agricultural futures or gemstones, which he advises against for investment purposes due to their non-income-producing nature.

Recommended Investment Approaches

Given his position on gold, Dave Ramsey outlines a clear path for long-term wealth building, beginning with foundational financial steps. He stresses eliminating consumer debt and establishing an emergency fund before investing. This involves saving an initial emergency fund and building a larger one, while systematically paying off debt using methods like the debt snowball.

Once these initial steps are complete, Ramsey recommends investing 15% of a household’s income for retirement. His primary recommendation for long-term wealth growth is through growth stock mutual funds. He suggests diversifying investments across four categories of mutual funds:
Growth
Growth and income
Aggressive growth
International

These investments are often held in tax-advantaged accounts like 401(k)s and Roth IRAs to maximize long-term growth. He emphasizes a long-term perspective and regular, consistent investing to harness the power of compound growth.