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Dave Says: How to Invest with Less Risk

by | Jan. 30, 2014

Finances

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Dear Dave,

I’m a little worried about investing in the stock market due to volatility. Are there safer investments?

Matt

Dear Matt,

You’re right; the market is volatile. It’s not a volatile as some things, but you have to remember that anywhere there’s money to be made—including long-term investing—there are ups and downs.

For instance, I like real estate. It’s not as volatile as the stock market, but there are no guarantees. We experienced that big dip over the last few years, and it was probably one of largest dips ever in the real estate market, except for the Great Depression.

Aside from real estate, I also like mutual funds. When it comes to these, one way to smooth out the volatility of the market is through diversification. That means you spread your money around instead of investing in one or two things. That’s how I handle my mutual funds, and I recommend others do the same. Spread your investments across these four types of mutual funds: growth, growth and income, aggressive growth and international.

I can’t say it enough, Matt. There are no guarantees when it comes to long-term investing. But diversification can help make the ride a little bit smoother! 

—Dave 

* Dave Ramsey is America’s trusted voice on money and business. He’s authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.

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