Dave Ramsey Says This Is a Crucial Factor to Be a Successful Investor. Is He Right?

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If you’re investing your money, you should read this Dave Ramsey advice. 

You should be investing your money in an effort to grow your wealth. Without investing in the stock market, there are few opportunities to earn generous returns that enable you to take advantage of compound growth.

Investing can be stressful, though — especially if you see some of your investments not performing as you had hoped they would. There are a few key things you need to do in order to maximize your chances of your brokerage account balance growing. And finance expert Dave Ramsey offered some advice on one of the most important of those tasks.

This is a must for investing success, according to Ramsey

So, what is the key component of investing success that Ramsey explained?

“To be a successful investor, it’s important to know how to deal with the emotional side of investing so you can avoid making mistakes,” Ramsey said, going on to explain that these mistakes could cost you “thousands of dollars” if you don’t have a hold of your emotions.

How could this happen?

One big issue is that you might give into your “knee-jerk reaction” to sell your assets when the market starts dropping if you aren’t good at managing your fear. This could end up causing you to lose money because of the difficulty of timing the market. If you sell at a loss when the market is on the decline, you would lock in those losses, when staying invested could have enabled you to earn back the money over time. And you might not be able to get your money back in until the market has gone much higher — which means you’d end up always selling low and buying high (the opposite of what you want to do).

Another problem is that not managing your emotions might lead you to stop investing during downturns. This could mean passing up the chance to buy assets at a bargain price. “When the market drops, your mutual fund shares are on sale — you’re getting them for a lower price because the market is down. It’s the time to buy — not sell,” Ramsey said.

Is Ramsey right?

Some of Ramsey’s investing advice isn’t great. For example, he recommends mutual funds when ETFs are typically a better option for most people who don’t want to invest in individual stocks.

But, when it comes to his advice about keeping the emotions out of investing, he is absolutely correct. It’s really hard to watch your portfolio balance go down without taking action. And it is even more difficult to keep putting money into investments that seem to be going down by the day. But if you don’t do these things because your emotions cause you to make an irrational decision, then you’re less likely to build wealth over time.

The good news is, you can follow Ramsey’s advice if you adopt a simple investing strategy. You should commit to buying assets you believe will stand the test of time and then just simply leave your portfolio alone. And if you use a technique like dollar-cost averaging and regularly buy assets on a set schedule, you don’t need to worry about deciding whether to buy assets in a down market since you’ll just stick to your schedule.

If you can master this advice and keep your emotions out of your investing choices, this will go a long way toward helping you build real wealth.

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