This Is Not Investing, It’s Gambling! – Dave Ramsey Rant

[Music] brought to you by the every dollar app start budgeting for free today so uh let's do some Finance 101 all right couple of things the first thing they teach you in finance class one of the first things they teach you is what's called risk return ratio the more risk you take the higher return you should get so when you put your money in an FDIC insured Bank no risk virtually but they pay you almost nothing fair enough right if you uh move it around a little bit mess with a little bit uh you could put it in a good high yield savings account which we'll sidebar on that for a second we were talking about this offir a little bit we'll come back to the risk return ratio in a minute but we'll just turn left for a second and park there a high yield savings account is exactly what it says it is it is a savings account in a bank that pays a better rate ding ding that's it okay a CD a certificate of deposit is a savings account at a bank MH and they give you a certificate yes and you have to like perfect attendance you remember that one yeah but you you can't touch that one yeah but you can touch it but you won't get all of the high yield okay the high yield savings accounts fully liquid pays more than CDs do right now CDs have just about been run out of the out of town by the sheriff okay uh 10 years ago we didn't call them high yield savings accounts at the bank we had a savings account at the bank that the bank labeled wrong but they did it for marketing reasons the bank called it a money market account at the bank it was a savings account at the bank that paid a higher rate like a high yield saving account does same exact thing it's a savings account that paid a better rate that mimicked real money markets but the bank did not sell money markets they had a savings account called a money market account that had an interest rate that was similar to a real money market account a real money market account was only available through and still is only available through something like a mutual fund company so you could go to Fidelity or American fund or whatever and open an actual money market account now you can have money market accounts with those that have check writing privileges uh even a debit card attached to them and those kinds of things but the high yield savings account has uh as a marketing methodology it's a better marketing actually than money market because it says I'm going to give you more money high yield it says I'm going higher interest savings account that's what it says it is what it says it is actually and the money market account was just to misnomer yeah but it was all for marketing it's all banks selling their Wares so uh high yield savings account simple savings account little better interest rate but almost no risk so back to the risk return ratio um if you want to double your money you know you're you're pretty much going to leave investing and go to gambling or speculating yeah now some people call speculating investing but it's really not speculating is where I want a short quick return on my money that's speculating day trading stocks is not investing that's buying and selling stocks on a daily basis or a weekly basis that is speculating when you build a when a builder a home builder builds a home that does not have a buyer M he they called spec houses speculating they're speculating they building an unsold piece of inventory they hope to sell now they're not investing for 10 years when they build that house prays they pray they're not investing for 10 years they they hope you're going to buy the house when you so that's why they're called spec houses they're speculating the builders are speculating that's not investing it's right next to gambling and you can make a lot better money speculating but you're taking the ultimate high risk it's it's kind of an All or Nothing play usually it's why I don't buy Commodities like gold and um wheat futures or whatever I I because it's all speculating it's shortterm plays with a gain it's why we don't do Bitcoin it's a short-term play with a potential gain and it's got a no track record the only track record it has is filled with fraud and go to jail do not pass go right and so it's just a mess so the whole the whole Marketplace is High ultra high risk speculating it's not even investing but along the spectrum of investing the more risk you take the more money you ought to make so if you put M money in mutual funds I've got a mutual fund that opened in 1934 uh it has had like in that 80 or 90 years it's had like I don't know 10 years at lost money out of 80 or 90 years or something like that not consecutive not consecutive years but in the entire time 10 different individual times individual years no back never back toback not a single back and there always major occurrences 911 something yeah since 1934 okay and it's averaged 12.2% since 1934 okay now if I can make that investment by simply pushing enter on my computer that's all I got to do hit push a button there's no I don't have any effort to go with it then if you're going to do if you're going to flip houses that's speculating mhm all right you're hoping to make a quick Buck you dad gum better well make more than 12% on your money you ought to make 20% at least ought to be your margin it ought to be more but at least a minimum of 20% otherwise you're taking too much risk versus the 12 you could make with no with a 1934 historical track record okay yeah um you you gota the risk ratio on that is way different and where does the effort play into it too yeah and effort and the effort plays into it and and the worry because all speculating involves jumping in and out and involves a level of fretting over it and ringing your hands over it mental calories um mental Calories burning investing even in high-risk things doesn't involve the same level of calorie burn yeah that speculating does but where you guys mess up sometimes out there in The Tick Tock land of Finance is they they confuse speculating with investing investing is always longterm mhm speculating is a quick gain but a higher much higher risk gain at best and then past that is actual gambling I mean when you're specking on a house flipping a house or you're speculating even on bitcoin it is not the same as playing the roulette wheel it's it's less risk than the roulette wheel because you know you're going to walk away from Vegas the house wins 100% okay house wins balagio did not put those light fixtures in there uh you know they did not put those 10 million doll light fixtures in there with anybody's money but yours if you were in bagio okay I mean it's Vegas is built on the back of losers um people who lose money that's what I mean and that's that's how that's how the math works so I'm saying you're physically personally a loser I'm saying you lost your money there right you're a loser so yeah you lost your money so that's it so that but that's the Spectrum okay you go all the way from savings account with no risk no effort no calorie burn to the r roulette wheel all the way to the roulette wheel and the more risk you take you should make more money if you're not you're missing on the very basic tenant of Finance one1 risk return ratio more risk should always equal more return if it doesn't well that's dumb don't do that MH so our last caller doing the flips she needs to be making 20% and it didn't seem like she was H she don't know she might be she might have made 30% she didn't know that's true she didn't know she didn't know but you got to know number one and then number two you need to be making that I mean a good residential Builder is going to make 20 plus percent uh most of the time depending on what type of prop property they're doing if they're doing specs MH and if you're not you're setting yourself up for problems because you're going to hit these slow times when it takes a little while to sell a speculative piece of real estate you are speculating you are a Speculator look it up in the dictionary so is this what we can expect from your investing yeah I might go on the same rent I might put it in there in the invest live investment event yeah I'm going to do that what is it may 2122 I'm doing 2 hours each night mhm 2 hours of it'll be on real estate I'm going to go a whole lot deeper into real estate for sure and I but I'll probably put this rant in there because I've kind of noodling on it lately I think it's a problem that people misidentify these things and they call speculating investing when it's not create your free every dooll budget today the simplest way to budget for your life