Why Index Funds Are the Most Christian Way to Invest (And What Dave Ramsey Got Wrong)

A few months ago, a man in my congregation stopped me after a Sunday service. Mid-twenties, recently started his first real job, a little money left over at the end of the month for the first time in his adult life. He'd been listening to Dave Ramsey. He was ready to start investing. He wanted to know which mutual fund to buy.

He wasn't wrong to be asking. Most men his age aren't thinking about investing at all. The fact that he was already looking forward - already thinking about what to do with the surplus - put him ahead of the curve. I was glad he'd asked.

But I had to tell him something he didn't expect: the specific investing vehicle Ramsey recommends is probably not the right one. Not because Ramsey is bad - he's genuinely helpful on debt, and I'd rather a man listen to Dave Ramsey than no one - but on this particular question, the advice doesn't hold up. The stakes are high enough that it's worth saying clearly.

The good news is that the right answer is simpler, cheaper, and better-supported by the evidence than what Ramsey recommends. It also turns out - and this is the part that surprised me when I looked into it - to be more consistent with what the Bible says about faithful stewardship.

We're talking about index funds.

What Index Funds Actually Are (And Why They're Boring on Purpose)

An index fund is a type of investment that tracks a market index - the S&P 500 (the 500 largest US companies), the entire Canadian stock market, or a combination of global stocks. Instead of a fund manager picking individual stocks in an attempt to beat the market, an index fund simply holds everything in the index. You own a tiny slice of thousands of companies at once.

Your returns match the market. Whatever the market does, you do roughly the same. No one is picking winners. No one is trying to outsmart anyone. The whole thing is, by design, boring.

Boring turns out to be very good.

The Parable of the Talents and What Faithful Investing Looks Like

The parable of the talents in Matthew 25 is a story about stewardship. A master leaves three servants in charge of his money. Two of them put it to work and grow it. One buries it to keep it safe and returns the same amount he was given. The master praises the ones who grew his money and rebukes the one who didn't.

It's not a perfect one-to-one analogy for modern investing - Jesus was making a point about the kingdom, not advising anyone on an ETF allocation. But something in it speaks to the ethic of stewardship: you are responsible for what you've been given, and responsible stewardship involves putting it to work, not letting it sit.

The deeper question for a Christian investor isn't just "should I invest?" It's "how do I invest faithfully?" And faithful, in this context, means: growing what you've been given, not taking unnecessary risks, and not handing a large portion of your returns to someone who is unlikely to earn them.

That last point is where the fee conversation comes in. And the fee conversation is where most Christians - including most who follow Ramsey - are losing money they don't realize they're losing.

If you want to dig into what the parable of the talents teaches about money and stewardship more broadly, the full article on this site is worth your time. The short version: the servant who buried his talent wasn't praised for being cautious. He was rebuked for being faithless.

There's also something in the parable about proportionality. The master distributed his money according to each servant's ability - different amounts, same expectation of faithfulness. That pattern holds across income levels and net worths. The man with $500 in his TFSA and the man with $500,000 in his RRSP are under the same obligation: to steward it faithfully, grow it over time, and not lose large portions of it to unnecessary costs.

The fee question is not just a math question. It is a stewardship question.

Fees Are a Stewardship Issue, Not a Technical Detail

In Canada, actively managed mutual funds - the kind Ramsey recommends - typically carry a Management Expense Ratio (MER) of 1.5 to 2.5 per cent per year. This is the annual fee charged to manage your money, automatically deducted from your returns whether the fund performs well or poorly.

Index funds - specifically the exchange-traded funds (ETFs) that hold them - typically carry MERs of 0.10 to 0.25 per cent. The gap looks small. It isn't.

Consider two investors. Both start with $10,000. Both earn the same gross market return of 7 per cent per year. One pays a 2 per cent annual MER. The other pays 0.20 per cent. After 30 years:

• The investor paying 2% in fees ends with approximately $43,000.
• The investor paying 0.20% in fees ends with approximately $71,000.

Same starting amount. Same market return. A difference of $28,000 - nearly three times the original investment - lost entirely to fees over three decades. On a $50,000 investment the difference approaches $140,000. On a full retirement portfolio the gap is staggering.

This is not a minor technicality. It is a stewardship question. Paying an extra 1.5 to 2 per cent annually to a fund manager who is statistically unlikely to outperform the market is not faithfulness with what you've been given. It is paying for a service that probably won't deliver, at your own expense, compounded for decades.

The Data Problem with Active Management

Here is the uncomfortable fact: most actively managed funds lose to their benchmark index over time.

The S&P Indices Versus Active (SPIVA) scorecard tracks this annually. Over a 10-year period, roughly 85 to 90 per cent of actively managed US equity funds underperform the S&P 500. The Canadian numbers are similar - over 10 years, the majority of active Canadian equity funds underperform the S&P/TSX Composite index.

This is not because fund managers are incompetent. Markets are efficient enough that consistently beating them - after fees come out - is genuinely difficult, even for professionals. The manager who beats the market one year has roughly a coin-flip chance of doing it again the next. The fee, however, comes out every year regardless of performance.

Most of the time, you'll pay the fee and end up with less than what the market would have given you for free. The data isn't subtle about this. It is simply very inconvenient for anyone selling actively managed funds.

This is why most institutional investors - pension funds, endowments, university foundations - have moved significant portions of their holdings into passive index strategies. Not out of ignorance. Because the evidence has been consistent and overwhelming for decades.

What Dave Ramsey Gets Right (And Where He Goes Wrong)

Dave Ramsey has helped millions of people get out of debt. His Baby Steps framework - small emergency fund, pay off all debt, full emergency fund, then invest - is sound. I'd rather a man in over his head with credit cards follow Ramsey's debt plan than have no plan at all. The man does real good, and I mean that without irony.

But on investing, Ramsey recommends something specific: put 15 per cent of your income into four types of actively managed mutual funds - growth, growth and income, aggressive growth, and international - and work with a financial advisor from his endorsed network.

Two problems. First, those advisors often sell front-end load mutual funds. That means you pay a commission of 3 to 5 per cent upfront, before your money has grown by a single dollar. Second, as the data above makes plain, the actively managed funds he recommends are unlikely to outperform their index benchmarks over any meaningful time horizon.

Ramsey also regularly cites a 12 per cent average annual return in his examples. The historical long-term nominal return of the S&P 500 is closer to 10 per cent. The real return - after inflation - is closer to 7 per cent. Running projections at 12 per cent produces numbers that feel encouraging but lead to systematically underestimating how much you actually need to save.

None of this makes Ramsey dishonest. He's writing for a mass American audience, his content is primarily about debt, and his commercial relationships with advisors shape what he recommends. But it does mean that his specific investing advice - the fund types, the advisor model, the return assumptions - deserves scrutiny before a Canadian Christian adopts it wholesale.

If you've been following Ramsey's Baby Steps and you're partway through the debt elimination phase, stay the course. That part of his framework is genuinely excellent. But when you get to Baby Step 4 and start thinking about where to put the 15 per cent he recommends investing, the "four types of actively managed mutual funds" instruction is the place to pause and think carefully. The debt advice got you here. That doesn't mean the investing advice carries the same weight.

There's also a Canadian-specific wrinkle worth naming. The actively managed mutual funds commonly available through Canadian banks carry some of the highest management fees in the developed world - often 2 to 2.5 per cent MER. Canada's large bank-owned fund industry has historically been very profitable for the banks and very expensive for the investors holding the funds. If you have money sitting in a bank mutual fund right now, check the MER. Then look at what that fee will cost you over 25 years.

The Canadian Approach: What to Actually Do

In Canada, the simplest and most effective approach for most investors is the all-in-one ETF. These are single funds that hold diversified portfolios of global stocks and sometimes bonds, at very low cost.

Three you'll see recommended consistently:

• VEQT (Vanguard All-Equity ETF Portfolio) - 100% global equities, MER 0.24%
• XEQT (iShares Core Equity ETF Portfolio) - 100% global equities, MER 0.20%
• VGRO (Vanguard Growth ETF Portfolio) - 80% stocks, 20% bonds, MER 0.24%

These are one-decision investments. Buy them inside your TFSA or RRSP. Set up automatic monthly purchases. Don't touch them for decades. You own a tiny slice of thousands of companies across the world and let compound interest do the work. No stock picking. No fund manager research. No timing the market.

You can buy these through Wealthsimple Trade or Questrade, both of which allow commission-free ETF purchases. The cost of entry is low. The cost of ongoing management is minimal. The required expertise is roughly: have a savings account, open a TFSA, click buy.

This is not exciting. It does not require sophistication. It requires only that you start, stay consistent, and leave it alone.

Why Boring Is a Spiritual Virtue

There is something worth naming about the appeal of complexity.

Many men - especially men who feel they should be more engaged with their money - are drawn to the idea of picking investments, finding opportunities, or working with an advisor who is actively managing their portfolio. It feels like stewardship. It looks like taking the talent seriously. The more effort you put in, the better the outcome - this is how most things work, so it seems reasonable to apply it to investing.

The evidence says otherwise.

Investing is one of the few places where this intuition reverses. More activity, more research, more switching between strategies - the data consistently shows it produces worse results, not better. The additional cost of actively managed funds, the drag of trading fees, the tax consequences of frequent buying and selling - all of it adds up against you. The man doing nothing except buying a single ETF each month is, on average, outperforming the man working hard at it.

The man who quietly sets up a $300/month automatic contribution into VEQT inside his TFSA, never touches it, and doesn't check the balance more than once a quarter will, by the data, almost certainly outperform the man who spends weekends researching fund managers and switching strategies when the market gets choppy.

The biblical model of patient accumulation is not flashy. The ant in Proverbs 6 stores provisions slowly across a whole season. The investor in Proverbs 31 makes long-term land and trade decisions, not speculative plays. Patient, consistent, low-drama accumulation is the pattern across the wisdom literature.

Index investing is the financial equivalent of that posture. You accept market returns. You minimize fees. You hold for the long term. You don't let short-term market noise drive decisions. It is boring by design.

That is not a flaw. It is the point.

A Concrete Step Forward

If you have never invested before - or if you've been putting it off because the complexity felt overwhelming - here is what I'd suggest.

Open a TFSA at Wealthsimple or Questrade. The account setup takes about 15 minutes online. Fund it with whatever you have available. Buy shares of a single all-in-one ETF: VEQT or XEQT for a long time horizon (more than 10 years out), VGRO if you want slightly less volatility as you get closer to needing the money.

Set up automatic monthly contributions if you can. The exact amount matters less than the habit. Then leave it alone.

If you want a fuller picture of how investing fits into a Christian approach to money - the RRSP versus TFSA decision, how to think about investing alongside giving, what to do if you're starting late - the Christian Investing Guide on this site covers the ground carefully.

The goal is not a perfect strategy. The goal is to start being faithful with what you have.

The Quiet Work of Faithful Stewardship

The man from my congregation sent me a message a few weeks after our conversation. He had opened a TFSA with Wealthsimple, bought his first shares of XEQT with $500, and set up a $250/month automatic contribution. He said: "I feel like I finally did the thing I'd been putting off for two years."

He wasn't holding a winning lottery ticket. He wasn't on the path to early retirement at 40. He had simply begun doing something small and faithful with what he'd been given. That is what stewardship looks like at the beginning.

Investing should not be the centre of a Christian man's life. It should be one quiet practice among many - something running faithfully in the background while you give your attention to the things that matter more. A growing TFSA is not the point of your life. But it is part of caring well for your family, building generosity over time, and not wasting what you've been entrusted with.

Index funds are boring. Buy the whole market. Pay as little in fees as possible. Leave it alone for decades.

That is the most faithful investing advice I know how to give.