Saving in an index fund

Hi @Jeremy,

Would you advise what Dave Ramsey is stating in the following video. He had stated that you have a 90% chance of having gains if you park your money in an index fund.

For example if I am saving up to buy a rental property in the next 6-7 years, am I better off keeping the money in an index fund in a taxable brokerage? Or just save it in an money market account?

So it would either be keep saving money or keep investing. What is your opinion on this?

2 Likes

I’m 100% in agreement with Dave on this video (other than him pushing higher fee actively managed for longer term investments).

I think the 5 year mark is basically where I switch from “savings account” to “invest it”, for the same reason. For just a year, there’s too much volatility and not enough upside. Around 5 years, it starts to shift towards “very likely to make money” and enough upside to make the risk worth it.

That said, I probably wouldn’t do 100% S&P 500 index fund. I think the diversity of an international index fund and likely even a bond portion would benefit your total growth and minimize volatility. So I might even consider a target date index fund for based on the date you want to buy a property! (That will move to about 50% stocks 50% bonds the year you want to buy, to avoid a big crash right when you want to spend the money)

1 Like