Dave Ramsey still defending 12% and still angry at "nerds"
- M_to_the_G
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Dave Ramsey still defending 12% and still angry at "nerds"
http://www.youtube.com/watch?v=mHkXjEOQ ... NJQ6G6gAxw
Dave Ramsey apparently still gets very angry when questioned about his “12%” assertions, even in mid-2014. For one, he’s wrong, so I don’t see why he is sticking to his guns about 12%. I realize that the subject of Dave Ramsey has been beaten to death here on Bogleheads. But it’s interesting that he’s still sticking to his guns. In his above podcast, he claims that 70 year old mutual funds and the S&P500 have averaged 12% over the long run. Both the oldest mutual fund in America (the Wellington Fund) and the S&P500 (since inception) have averaged approximately 8% over their lifetimes to date. And with most professionals agreeing that even 8% is optimistic going forward, I’m not sure why he’s so insistent on that number. In the podcast, he becomes visibly (and audibly) very upset at “experts” and “financial nerds” who challenge him, his main complaint being that their negativity is discouraging people from investing, whereas his positivity (Pollyannaism?) inspires people to invest.
I do agree that his simple and consistent message encourages Joe and Jill Sixpack to just go out and invest, and in that sense, psychology plays a big role in things, and that some of us “nerds” can get too bogged down in the details for the average “Joe” to be able to relate. I can accept, for example, his “debt snowball” method of paying off the lowest balances first (rather than the more Boglehead-ish method of paying off those debts with the highest interest rates first). I would say the same about his insistence on getting out of debt (and especially establishing an emergency fund) before starting retirement investing. I wouldn’t advise someone in the same way, but hey… again, maybe he’s taking human psychology into account more than I am.
Where I vehemently disagree with Dave Ramsey -- and being that this is the Bogleheads forum, I’m sure I’m just convening with the choir here -- is in his insistence on using his network of commission-based financial planners… and the 12% thing. But his message reaches a huge audience, and I suppose if the alternative to using his network in many cases is people simply doing absolutely nothing, not investing, at all, or picking an advisor at random… then maybe his (and his commission-based advisors’) shaving a percentage point or two off the top is indeed “better.” And even the most recent data suggests this is still the case, i.e. people are doing nothing.
Dave Ramsey apparently still gets very angry when questioned about his “12%” assertions, even in mid-2014. For one, he’s wrong, so I don’t see why he is sticking to his guns about 12%. I realize that the subject of Dave Ramsey has been beaten to death here on Bogleheads. But it’s interesting that he’s still sticking to his guns. In his above podcast, he claims that 70 year old mutual funds and the S&P500 have averaged 12% over the long run. Both the oldest mutual fund in America (the Wellington Fund) and the S&P500 (since inception) have averaged approximately 8% over their lifetimes to date. And with most professionals agreeing that even 8% is optimistic going forward, I’m not sure why he’s so insistent on that number. In the podcast, he becomes visibly (and audibly) very upset at “experts” and “financial nerds” who challenge him, his main complaint being that their negativity is discouraging people from investing, whereas his positivity (Pollyannaism?) inspires people to invest.
I do agree that his simple and consistent message encourages Joe and Jill Sixpack to just go out and invest, and in that sense, psychology plays a big role in things, and that some of us “nerds” can get too bogged down in the details for the average “Joe” to be able to relate. I can accept, for example, his “debt snowball” method of paying off the lowest balances first (rather than the more Boglehead-ish method of paying off those debts with the highest interest rates first). I would say the same about his insistence on getting out of debt (and especially establishing an emergency fund) before starting retirement investing. I wouldn’t advise someone in the same way, but hey… again, maybe he’s taking human psychology into account more than I am.
Where I vehemently disagree with Dave Ramsey -- and being that this is the Bogleheads forum, I’m sure I’m just convening with the choir here -- is in his insistence on using his network of commission-based financial planners… and the 12% thing. But his message reaches a huge audience, and I suppose if the alternative to using his network in many cases is people simply doing absolutely nothing, not investing, at all, or picking an advisor at random… then maybe his (and his commission-based advisors’) shaving a percentage point or two off the top is indeed “better.” And even the most recent data suggests this is still the case, i.e. people are doing nothing.
Last edited by M_to_the_G on Thu Jul 31, 2014 1:30 pm, edited 1 time in total.
- Taylor Larimore
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Re: Dave Ramsey still defending 12% and still angry at "nerd
M_to_the_G:
Mr. Ramsey might benefit from reading this 2012 speech by Mr. Bogle:
Thinking About What Lies Ahead For Investors
Best wishes.
Taylor
Mr. Ramsey might benefit from reading this 2012 speech by Mr. Bogle:
Thinking About What Lies Ahead For Investors
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
- ddb
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Re: Dave Ramsey still defending 12% and still angry at "nerd
Wow, Dave managed to be offensive to a number of different groups of people in just 9 minutes!
I do agree with his bigger point, though, that one's financial success is most impacted by good habits, i.e. live below your means and save the rest.
- DDB
I do agree with his bigger point, though, that one's financial success is most impacted by good habits, i.e. live below your means and save the rest.
- DDB
"We have to encourage a return to traditional moral values. Most importantly, we have to promote general social concern, and less materialism in young people." - PB
Re: Dave Ramsey still defending 12% and still angry at "nerd
Pshaw! So called "experts" like Dave Ramsey don't know what they're talking about. The long run, stock markets clearly return 17% per year. I'm so tired of this guy raining on my parade with his pessimistic predictions.
Re: Dave Ramsey still defending 12% and still angry at "nerd
Well, he recommends mutual funds with loads, so 12% is what you're left with after subtracting the 5% load!steve_14 wrote:Pshaw! So called "experts" like Dave Ramsey don't know what they're talking about. The long run, stock markets clearly return 17% per year. I'm so tired of this guy raining on my parade with his pessimistic predictions.
Most of my posts assume no behavioral errors.
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Re: Dave Ramsey still defending 12% and still angry at "nerd
I don't believe 8% is correct; have you forgotten to include reinvested dividends?
This page shows 9.55% 1928-2013.
http://pages.stern.nyu.edu/~adamodar/Ne ... retSP.html
12% though seems to be referring to an arithmetic mean, which is innumerate of Dave.
This page shows 9.55% 1928-2013.
http://pages.stern.nyu.edu/~adamodar/Ne ... retSP.html
12% though seems to be referring to an arithmetic mean, which is innumerate of Dave.
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Re: Dave Ramsey still defending 12% and still angry at "nerd
To be fair, the S&P does have an average annual return of 12% since the 1920s. It's the compound annual return that is closer to 8%.M_to_the_G wrote:Dave Ramsey apparently still gets very angry when questioned about his “12%” assertions, even in mid-2014. For one, he’s wrong, so I don’t see why he is sticking to his guns about 12%. I realize that the subject of Dave Ramsey has been beaten to death here on Bogleheads. But it’s interesting that he’s still sticking to his guns. In his above podcast, he claims that 70 year old mutual funds and the S&P500 have averaged 12% over the long run. Both the oldest mutual fund in America (the Wellington Fund) and the S&P500 (since inception) have averaged approximately 8% over their lifetimes to date.
Re: Dave Ramsey still defending 12% and still angry at "nerd
I agree with ddb--Wow. Dave presented a strong emotional attack on virtually everyone. Does he realize he is the only one using average returns. I suppose it's much easier to convince naive investors to go with his recommend funds when he tells them these funds have returned 12% for 70 years. No retirement calculator uses average returns, so someone inputting such numbers is in for a big surprise. Dave also seems unaware that future returns could possibly be less than 12%. The second problem is he does not state he's using average returns when he pumps out that 12% stuff.
In the video Dave seems to emphasize that not investing is the worst thing one can do, and that's fine, but to tell investors, naive investors no less, that the alternative is to make 12% is worse than misleading. I had a pretty high regard for Dave Ramsey, at least for his advice on debt, but after seeing this video, I've lost respect for him.
Paul
In the video Dave seems to emphasize that not investing is the worst thing one can do, and that's fine, but to tell investors, naive investors no less, that the alternative is to make 12% is worse than misleading. I had a pretty high regard for Dave Ramsey, at least for his advice on debt, but after seeing this video, I've lost respect for him.
Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Re: Dave Ramsey still defending 12% and still angry at "nerd
Some of his audience may not know the difference between "average" returns and "compound" returns. It's something he (or someone else) should thoroughly explain. Dave just glosses over the difference in his video.
I believe that getting the word out to the masses and getting them started in investing is beneficial. My concern is... will they continue with the program when they don't generate 12% in perpetuity? (as they surely won't).
1210
I believe that getting the word out to the masses and getting them started in investing is beneficial. My concern is... will they continue with the program when they don't generate 12% in perpetuity? (as they surely won't).
1210
Last edited by 1210sda on Thu Jul 31, 2014 2:27 pm, edited 1 time in total.
Re: Dave Ramsey still defending 12% and still angry at "nerd
I think this is the problem. I think Ramsey is using the Average Annual Return instead of the Compound Annual Growth Rate (CAGR). The CAGR will be lower than the Average Annual Return.YttriumNitrate wrote:To be fair, the S&P does have an average annual return of 12% since the 1920s. It's the compound annual return that is closer to 8%.M_to_the_G wrote:Dave Ramsey apparently still gets very angry when questioned about his “12%” assertions, even in mid-2014. For one, he’s wrong, so I don’t see why he is sticking to his guns about 12%. I realize that the subject of Dave Ramsey has been beaten to death here on Bogleheads. But it’s interesting that he’s still sticking to his guns. In his above podcast, he claims that 70 year old mutual funds and the S&P500 have averaged 12% over the long run. Both the oldest mutual fund in America (the Wellington Fund) and the S&P500 (since inception) have averaged approximately 8% over their lifetimes to date.
There is an interesting article here regarding this:
http://bucks.blogs.nytimes.com/2011/05/ ... blogs&_r=0
Slow and steady wins the race.
- Phineas J. Whoopee
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Re: Dave Ramsey still defending 12% and still angry at "nerd
The S&P 500, if that's what's meant, was created in 1957.YttriumNitrate wrote:...
To be fair, the S&P does have an average annual return of 12% since the 1920s. It's the compound annual return that is closer to 8%.
Poors Publishing and Standard Statistics merged in 1941.
We only have reasonably reliable daily closing price data going back to 1926, and only for NYSE-listed stocks.
What precisely is it that has an average annual return of 12% since the 1920s, but a compound annual return closer to 8%? And is that thing, once identified, what Ramsey, the subject of the thread, is using?
I suppose I must have just outed myself as a member of the reality-based community nerd and therefore be subject to the man's contempt.
PJW
Last edited by Phineas J. Whoopee on Thu Jul 31, 2014 2:43 pm, edited 1 time in total.
Re: Dave Ramsey still defending 12% and still angry at "nerd
Dave's "Endorsed Local Providers" trailing the market by 5% per year - now *that* I can believe!baw703916 wrote:Well, he recommends mutual funds with loads, so 12% is what you're left with after subtracting the 5% load!steve_14 wrote:Pshaw! So called "experts" like Dave Ramsey don't know what they're talking about. The long run, stock markets clearly return 17% per year. I'm so tired of this guy raining on my parade with his pessimistic predictions.
- White Coat Investor
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Re: Dave Ramsey still defending 12% and still angry at "nerd
I heard the tail end of that on the radio the other night. Surprised since he seemed to be backing away from the 12% thing in recent months. I mostly like Dave and agree that overall he's doing lots of good. I wrote about my issues with his advice here:
http://whitecoatinvestor.com/how-dave-r ... ou-astray/
The other thing I've noticed he doesn't know anything about is the PSLF program. I cringe when he gets a doc on his show.
I also dislike how his idea of asset allocation is a "growth stock mutual fund and a growth and income mutual fund." It's like AA advice from the 80s or 90s or something.
http://whitecoatinvestor.com/how-dave-r ... ou-astray/
The other thing I've noticed he doesn't know anything about is the PSLF program. I cringe when he gets a doc on his show.
I also dislike how his idea of asset allocation is a "growth stock mutual fund and a growth and income mutual fund." It's like AA advice from the 80s or 90s or something.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy |
4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Re: Dave Ramsey still defending 12% and still angry at "nerd
[OT comments removed by admin LadyGeek]
- nisiprius
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Re: Dave Ramsey still defending 12% and still angry at "nerd
Corrected this post. Sorry, I just got around to trying to listen to the video... I couldn't get through to all of it... but I don't think he actually names the 70-year old funds that have averaged 12%, does he? He just says "you can find them."
2) If he thinks Wellington averaged 12%, he's wrong.
What does Vanguard say about Wellington?
3) If he thinks "the oldest stock mutual fund earned 12%," he's wrong.
The fund's own web page says 9.09%.
It wouldn't have taken Ramsey half an hour to look this stuff up.
1) If he says Wellington being the oldest mutual fund in America. It's Massachusetts Investors Trust, MITTX, founded in 1924, five years before Wellington. And there's no dispute about that. Vanguard calls Wellington, my underlining "Vanguard’s oldest mutual fund and the nation’s oldest balanced fund." MFS calls MMITX "America's first mutual fund." And Jack Bogle saysM_to_the_G wrote:he claims that 70 year old mutual funds and the S&P500 have averaged 12% over the long run.
It is a 100% stock fund. It's not the S&P 500 but it is a fair specimen of how a stock portfolio grows when managed by professionals.Jack Bogle wrote:the nation's oldest and largest mutual fund, Massachusetts Investors Trust (M.I.T.)
2) If he thinks Wellington averaged 12%, he's wrong.
What does Vanguard say about Wellington?
3) If he thinks "the oldest stock mutual fund earned 12%," he's wrong.
The fund's own web page says 9.09%.
It wouldn't have taken Ramsey half an hour to look this stuff up.
Last edited by nisiprius on Thu Jul 31, 2014 8:28 pm, edited 5 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: Dave Ramsey still defending 12% and still angry at "nerd
In the video, he is encouraging people to actually invest instead of complaining about lower market returns. I think he makes a good point that not investing gives you a 0% return. However, he's a crook/scam artist because he tries to build a client base based on hopes and dreams. He doesn't even include inflation into the numbers, this tricks people.
Re: Dave Ramsey still defending 12% and still angry at "nerd
Getting the facts straight, aka "the truth" simply does not matter to this type of person (one could cite other radio personalities of a similar ilk who focus on politics). It's all about the rhetoric. And he gets away with it, because in the context of what he does and the audience it doesn't matter. Even on this board he is cut an extreme amount of slack, apparently because of other virtues.nisiprius wrote:How many ways can Dave Ramsey be wrong?M_to_the_G wrote:he claims that 70 year old mutual funds and the S&P500 have averaged 12% over the long run.
It wouldn't have taken Ramsey half an hour to look this stuff up.
- Phineas J. Whoopee
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Re: Dave Ramsey still defending 12% and still angry at "nerd
With respect to Ramsey exaggerating reasonably expectable returns and excoriating anybody other than himself who uses math, all without mentioning the cut his recommended advisers pay him; and with respect to his claimed motivation for citing any numbers necessary to convince people to invest; and with my conceding that for many of his listeners investing would indeed be a good thing, I'd like to quote a bit of literature, if I may.
From the play Saint Joan, by George Bernard Shaw, Scene 2:
From the play Saint Joan, by George Bernard Shaw, Scene 2:
PJWThe Archbishop:
A miracle, my friend, is an event which creates faith. That is the purpose and nature of miracles. They may seem very wonderful to the people who witness them, and very simple to those who perform them. That does not matter: if they confirm or create faith they are true miracles.
...
The Archbishop:
... Miracles are not frauds because they are often--I do not say always--very simple and innocent contrivances by which the priest fortifies the faith of his flock. When this girl picks out the Dauphin among his courtiers, it will not be a miracle for me, because I shall know how it has been done, and my faith will not be increased. But as for the others, if they feel the thrill of the supernatural, and forget their sinful clay in a sudden sense of the glory of God, it will be a miracle and a blessed one. And you will find that the girl herself will be more affected than anyone else. She will forget how she really picked him out. So, perhaps, will you.
Re: Dave Ramsey still defending 12% and still angry at "nerd
Dave needs to let the 12% thing go, really.
This might be hard to believe, but closed-minded rhetoric and playing to one's audience can be found just about everywhere, including those who see themselves as enlightened types. Some of them are even not on the radio!Getting the facts straight, aka "the truth" simply does not matter to this type of person (one could cite other radio personalities of a similar ilk who focus on politics). It's all about the rhetoric. And he gets away with it, because in the context of what he does and the audience it doesn't matter.
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Re: Dave Ramsey still defending 12% and still angry at "nerd
Dave can be obnoxious (as linked above) but, for all his warts, if a single mom of 2 kids on $40K/yr hears "his wisdom" - then more good is done than harm.
He's in business to make money & he happens to have a massive infotaining radio show to hype his junk.
A lot of people are better off thanks to Dave vs a lifetime of massive amounts of debt IYAM.
He's in business to make money & he happens to have a massive infotaining radio show to hype his junk.
A lot of people are better off thanks to Dave vs a lifetime of massive amounts of debt IYAM.
Re: Dave Ramsey still defending 12% and still angry at "nerd
Agreed.pkcrafter wrote:I had a pretty high regard for Dave Ramsey, at least for his advice on debt, but after seeing this video, I've lost respect for him.
Paul
He commits multiple fallacies to try to argue his point: appeal to emotion, ad hominem, and strawman.
It's funny because the "nerds" are likely prodigious savers, carry few if any debt, and are very outspoken about teaching others the importance of saving smart and then investing smart.
Saving is only half the battle. Unfortunately, for the american public that's a huge battle. After that you need to invest wisely to avoid the tyranny of compounded fees.
Ramsey is good for half the battle, but his investment advice really is atrocious.
Re: Dave Ramsey still defending 12% and still angry at "nerd
https://www.americanfunds.com/funds/details/wmif/a.html
I believe his ELPs recommend American Mutual Funds, and he's tweeted out a link to the Washington Mutual Investors Fund before as an example of a fund that's earned 12% "average annual" over the fund's lifetime. I tend to agree that's not the best advice, but his message resonates with millions of people, in the grand scheme of things I doubt many of his listeners are counting on 12% per year in their actual planning. Many of them would likely end up in worse places (whole life insurance) than American Funds if it weren't for him.
I believe his ELPs recommend American Mutual Funds, and he's tweeted out a link to the Washington Mutual Investors Fund before as an example of a fund that's earned 12% "average annual" over the fund's lifetime. I tend to agree that's not the best advice, but his message resonates with millions of people, in the grand scheme of things I doubt many of his listeners are counting on 12% per year in their actual planning. Many of them would likely end up in worse places (whole life insurance) than American Funds if it weren't for him.
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Re: Dave Ramsey still defending 12% and still angry at "nerd
I think I heard the latest big rant on the radio, and yeah it was chock full of strawmen and bad faith..bottom line, he thinks his audience can't handle the nuances of different kinds of funds and that dithering over it will cause them to never invest at all.
But I think the same audience would panic in a bad down market too.
But I think the same audience would panic in a bad down market too.
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Re: Dave Ramsey still defending 12% and still angry at "nerd
Long time ago I had a discussion with my FA on this. He said that if people had the view of 9% ROI and their expectations financial expectations demanded 12% average ROI, he thought it was his job to get his clients to think more aggressively so that they could have a better chance in getting there. I personally knew that we absolutely needed 12% ROI to make our college fund and retirement goals-we just did not have the money to use a 9% investment mentality.
I am finally at the point where ML wants me or perhaps wants me for my DS, who can easily meet ML's minimum asset requirements. However, the ML guy is conservative and pushing 8% ROI and inverse funds.
Personally, I'd rather dislike a guy who is optimistic rather disliking guy with average thinking in their investment philosophy.
I am finally at the point where ML wants me or perhaps wants me for my DS, who can easily meet ML's minimum asset requirements. However, the ML guy is conservative and pushing 8% ROI and inverse funds.
Personally, I'd rather dislike a guy who is optimistic rather disliking guy with average thinking in their investment philosophy.
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Re: Dave Ramsey still defending 12% and still angry at "nerd
Overall, Dave Ramsey has been a wonderful asset to society. I enjoy his show.
- nisiprius
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Re: Dave Ramsey still defending 12% and still angry at "nerd
American Funds Washington Mutual A goes back to 7/31/1952, or 62 years. So that could be his "sixty-seventy years." And it has had a 12.01% proper "average" (CAGR) total return before expenses, 11.91% after sales charge.4 Iron wrote:https://www.americanfunds.com/funds/details/wmif/a.html
I believe his ELPs recommend American Mutual Funds, and he's tweeted out a link to the Washington Mutual Investors Fund before as an example of a fund that's earned 12% "average annual" over the fund's lifetime. I tend to agree that's not the best advice, but his message resonates with millions of people, in the grand scheme of things I doubt many of his listeners are counting on 12% per year in their actual planning. Many of them would likely end up in worse places (whole life insurance) than American Funds if it weren't for him.
https://www.americanfunds.com/funds/details/wmif/a.html
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: Dave Ramsey still defending 12% and still angry at "nerd
I think he could get a lot more love around here if he would just say that "Any good smallcap value mutual fund will return 12% per year".
In all seriousness, watching someone go on a big rant claiming that if an investment starts out with value of $1000, drops to $500 the next year and then goes back up to $1000 the next year means that a big profit was returned is painful.
More generally, usually the nerds in a group are more likely to tell the truth than the marketing department.
In all seriousness, watching someone go on a big rant claiming that if an investment starts out with value of $1000, drops to $500 the next year and then goes back up to $1000 the next year means that a big profit was returned is painful.
More generally, usually the nerds in a group are more likely to tell the truth than the marketing department.
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Re: Dave Ramsey still defending 12% and still angry at "nerd
I get the sense that he thinks of his audience as child-like, in danger of making big mistakes if an adult doesn't tell them what to do in terms a child can understand. I get the sense that many people have benefited from his efforts, however patronizing they may be. The defense of the 12% number seems to be that it plays a useful role in inducing good savings habits, so it doesn't matter if it is true or not. It is a useful myth, like Santa Claus.
People who listen to his investing advice are like people who read the astrology column. The truth is plainly within reach to anyone who wants it. If they don't want it, that's their choice. I don't spend time debunking astrology either.
People who listen to his investing advice are like people who read the astrology column. The truth is plainly within reach to anyone who wants it. If they don't want it, that's their choice. I don't spend time debunking astrology either.
Re: Dave Ramsey still defending 12% and still angry at "nerd
Once again it is Nisiprius who brings rationale to the discussion: Those who have really drunk the KoolAide refuse to recognize a good program because it is not a "perfect "one........Gordon
Disciple of John Neff
Re: Dave Ramsey still defending 12% and still angry at "nerd
THIS. Excellent reference, PJW. Perfect analogy to help the more factually inclined of us understand what is really going on with Dave Ramsey.Phineas J. Whoopee wrote:With respect to Ramsey exaggerating reasonably expectable returns and excoriating anybody other than himself who uses math, all without mentioning the cut his recommended advisers pay him; and with respect to his claimed motivation for citing any numbers necessary to convince people to invest; and with my conceding that for many of his listeners investing would indeed be a good thing, I'd like to quote a bit of literature, if I may.
From the play Saint Joan, by George Bernard Shaw, Scene 2:PJWThe Archbishop:
A miracle, my friend, is an event which creates faith. That is the purpose and nature of miracles. They may seem very wonderful to the people who witness them, and very simple to those who perform them. That does not matter: if they confirm or create faith they are true miracles.
...
The Archbishop:
... Miracles are not frauds because they are often--I do not say always--very simple and innocent contrivances by which the priest fortifies the faith of his flock. When this girl picks out the Dauphin among his courtiers, it will not be a miracle for me, because I shall know how it has been done, and my faith will not be increased. But as for the others, if they feel the thrill of the supernatural, and forget their sinful clay in a sudden sense of the glory of God, it will be a miracle and a blessed one. And you will find that the girl herself will be more affected than anyone else. She will forget how she really picked him out. So, perhaps, will you.
There is no mathematical proof or set of facts that anyone can ever present to him about his 12% mythology that will change his ways. His very livelihood depends on his "believers" being inspired by this contrivance and putting their financial faith in him.
It should go without saying, but I'll say it anyway - the financial faith of his believers translates into financial dollars for Dave Ramsey. I think it really is that simple.
Re: Dave Ramsey still defending 12% and still angry at "nerd
hornet96 wrote:
THIS. Excellent reference, PJW. Perfect analogy to help the more factually inclined of us understand what is really going on with Dave Ramsey.
There is no mathematical proof or set of facts that anyone can ever present to him about his 12% mythology that will change his ways. His very livelihood depends on his "believers" being inspired by this contrivance and putting their financial faith in him.
It should go without saying, but I'll say it anyway - the financial faith of his believers translates into financial dollars for Dave Ramsey. I think it really is that simple.
Did you miss the post from nisiprius? Or are you challenging its accuracy?
Time is what we want most, but what we use worst. William Penn
Re: Dave Ramsey still defending 12% and still angry at "nerd
Did you miss the fact that his post shows ONE mutual fund out of the thousands that have come and gone over the decades? I hardly think that is a representative sample of expected equity returns for a so-called professional like DR to base investment advice off of.bhsince87 wrote:hornet96 wrote:
THIS. Excellent reference, PJW. Perfect analogy to help the more factually inclined of us understand what is really going on with Dave Ramsey.
There is no mathematical proof or set of facts that anyone can ever present to him about his 12% mythology that will change his ways. His very livelihood depends on his "believers" being inspired by this contrivance and putting their financial faith in him.
It should go without saying, but I'll say it anyway - the financial faith of his believers translates into financial dollars for Dave Ramsey. I think it really is that simple.
Did you miss the post from nisiprius? Or are you challenging its accuracy?
In fact, this might make things worse. Instead of just being ignorant about the 12% figure, is he cherry picking one example and representing it as the "normal" result for his followers?
(Somewhat of a rhetorical question).
Re: Dave Ramsey still defending 12% and still angry at "nerd
Nope, didn't miss it. It shows that it's POSSIBLE.
Time is what we want most, but what we use worst. William Penn
Re: Dave Ramsey still defending 12% and still angry at "nerd
I think Ramsey is a great resource for most people. I fully appreciate the fact that there are posters who have had a lot more investing/life experience than me. However, I fully believe that for people like me Ramsey is a far better resource than even John Boggle. I do think that Boggle has had a far more significant impact in the retirement/investing world, but that is a different concept.
I think that some posters may be missing the point that some of us are not very savvy/frugal/boggleheadish. I have tried to show a handful of friends the "Boggleheads" way of investing. Showed them the Getting Started guide and the forums. Every single one of them walked away. I have success taking a completely different approach.
Different things motivate different people. Ramsey's 7 baby steps are sound. Fees, asset allocation, rebalancing, bonds etc. are all gravy for some people. I have seen the graphs with what .1% vs 1% ER does to compounding returns etc., but again that is almost irrelevant in the scope of this discussion.
-Joey
I think that some posters may be missing the point that some of us are not very savvy/frugal/boggleheadish. I have tried to show a handful of friends the "Boggleheads" way of investing. Showed them the Getting Started guide and the forums. Every single one of them walked away. I have success taking a completely different approach.
Different things motivate different people. Ramsey's 7 baby steps are sound. Fees, asset allocation, rebalancing, bonds etc. are all gravy for some people. I have seen the graphs with what .1% vs 1% ER does to compounding returns etc., but again that is almost irrelevant in the scope of this discussion.
-Joey
Re: Dave Ramsey still defending 12% and still angry at "nerd
bhsince87 wrote:Nope, didn't miss it. It shows that it's POSSIBLE.
Re: Dave Ramsey still defending 12% and still angry at "nerd
Yep!hornet96 wrote:bhsince87 wrote:Nope, didn't miss it. It shows that it's POSSIBLE.
And for the record, I am not a huge Dave Ramsey fan for other reasons.
But as far as investing hucksters go, IMO, he is not one.
Time is what we want most, but what we use worst. William Penn
- ObliviousInvestor
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Re: Dave Ramsey still defending 12% and still angry at "nerd
Aside from the 12% returns he suggests investors should expect, he also recommends:bhsince87 wrote:But as far as investing hucksters go, IMO, he is not one.
1) 100% actively managed funds,
2) 100% stock allocation for everybody, and
3) an 8% inflation-adjusted withdrawal rate in retirement.
On the other hand, he recommends against picking individual stocks and timing the market, so that's good at least.
Mike Piper |
Roth is a name, not an acronym. If you type ROTH, you're just yelling about retirement accounts.
Re: Dave Ramsey still defending 12% and still angry at "nerd
Where are you getting this information?ObliviousInvestor wrote:Aside from the 12% returns he suggests investors should expect, he also recommends:bhsince87 wrote:But as far as investing hucksters go, IMO, he is not one.
1) 100% actively managed funds,
2) 100% stock allocation for everybody, and
3) an 8% inflation-adjusted withdrawal rate in retirement.
On the other hand, he recommends against picking individual stocks and timing the market, so that's good at least.
It's not what I've heard him say. Everything I read shows he believes in establishing a cash emergency fund first. Then paying down debt. Then investing.
Time is what we want most, but what we use worst. William Penn
Re: Dave Ramsey still defending 12% and still angry at "nerd
Also, you can search my posts and see that I disagree with him on debt.
IMO,long term, low fixed interest debt can be a very good thing.
But that doesn't mean I disagree with him on his general philosophy.
IMO,long term, low fixed interest debt can be a very good thing.
But that doesn't mean I disagree with him on his general philosophy.
Time is what we want most, but what we use worst. William Penn
- ObliviousInvestor
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Re: Dave Ramsey still defending 12% and still angry at "nerd
bhsince87 wrote:Where are you getting this information?ObliviousInvestor wrote:Aside from the 12% returns he suggests investors should expect, he also recommends:bhsince87 wrote:But as far as investing hucksters go, IMO, he is not one.
1) 100% actively managed funds,
2) 100% stock allocation for everybody, and
3) an 8% inflation-adjusted withdrawal rate in retirement.
On the other hand, he recommends against picking individual stocks and timing the market, so that's good at least.
http://www.daveramsey.com/articles/arti ... investing/
http://www.daveramsey.com/article/how-t ... investing/DaveRamsey.com wrote:Dave does not own any bonds and does not suggest them as part of your investment plan.
http://www.daveramsey.com/blog/how-to-c ... =PinterestDaveRamsey.com wrote:You’re going to keep your nest egg invested and averaging 12% growth. We’re estimating inflation at 4%. So, to maintain your nest egg and break even with inflation, you will live on 8% income from your nest egg. That means if you have a nest egg of $625,000, you will live on $50,000 per year: $625,000 x 8% (.08) = $50,000.
http://www.daveramsey.com/newsletters/o ... lpinvnl_twDaveRamsey.com wrote:Dave recommends front-end load funds in which you pay fees and commissions when you make your investment.
DaveRamsey.com wrote:The S&P 500 averages about 12% long-term growth, so an ETF or index mutual fund that tracks it will give you a similar return. But you can beat the stock market's average with a good growth stock mutual fund. In fact, it's your fund manager's job to outperform the market.
Mike Piper |
Roth is a name, not an acronym. If you type ROTH, you're just yelling about retirement accounts.
Re: Dave Ramsey still defending 12% and still angry at "nerd
\ObliviousInvestor wrote:bhsince87 wrote:Where are you getting this information?ObliviousInvestor wrote:Aside from the 12% returns he suggests investors should expect, he also recommends:bhsince87 wrote:But as far as investing hucksters go, IMO, he is not one.
1) 100% actively managed funds,
2) 100% stock allocation for everybody, and
3) an 8% inflation-adjusted withdrawal rate in retirement.
On the other hand, he recommends against picking individual stocks and timing the market, so that's good at least.
http://www.daveramsey.com/articles/arti ... investing/http://www.daveramsey.com/article/how-t ... investing/DaveRamsey.com wrote:Dave does not own any bonds and does not suggest them as part of your investment plan.http://www.daveramsey.com/blog/how-to-c ... =PinterestDaveRamsey.com wrote:You’re going to keep your nest egg invested and averaging 12% growth. We’re estimating inflation at 4%. So, to maintain your nest egg and break even with inflation, you will live on 8% income from your nest egg. That means if you have a nest egg of $625,000, you will live on $50,000 per year: $625,000 x 8% (.08) = $50,000.http://www.daveramsey.com/newsletters/o ... lpinvnl_twDaveRamsey.com wrote:Dave recommends front-end load funds in which you pay fees and commissions when you make your investment.DaveRamsey.com wrote:The S&P 500 averages about 12% long-term growth, so an ETF or index mutual fund that tracks it will give you a similar return. But you can beat the stock market's average with a good growth stock mutual fund. In fact, it's your fund manager's job to outperform the market.
[OT comment removed by admin LadyGeek]
Time is what we want most, but what we use worst. William Penn
- ObliviousInvestor
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Re: Dave Ramsey still defending 12% and still angry at "nerd
I really don't know what you mean. Those are direct quotes from the website. Perhaps we're having some sort of miscommunication here.bhsince87 wrote:[OT comment removed by admin LadyGeek]
Mike Piper |
Roth is a name, not an acronym. If you type ROTH, you're just yelling about retirement accounts.
Re: Dave Ramsey still defending 12% and still angry at "nerd
Interesting article from Wade Pfau on Ramsey's 8% withdrawal rate. 2013. And for those who aren't aware, that's a starting rate with annual inflation adjustments. Comments also interesting. White coat investor posted and another poster mentioned Mike Piper's site.
http://wpfau.blogspot.com/2013/06/dave- ... -rate.html
bhsince87, Mike is correct, and Wade Pfau also mentions the same.
Paul
http://wpfau.blogspot.com/2013/06/dave- ... -rate.html
bhsince87, Mike is correct, and Wade Pfau also mentions the same.
Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Re: Dave Ramsey still defending 12% and still angry at "nerd
I just finished a good book about personal finance authors, "Pound Foolish" by Helen Olen. She goes through the inconsistencies, conflicts of interest, and money-making empires created by Ramsey, Suze Orman, David Bach, Kiyosaki, and others, as well as the power and devious methods of the financial services industry designed to scare, manipulate, and rob people of their money, such as costly annuities, get rich seminars, and hooking susceptible seniors through free lunches and sales pitches. But everyone has an angle to make money in the finance world, whether it's a DFA advisor recommending slice and dice, economics professors and Ben Stein getting paid to tout annuities, a blogger getting ad and ebook revenue, or even VG sending out constant 'stay the course, don't panic sell and take away our assets' messages.
The Ramsey 12% magic is the only way he can promise fabulous wealth, the pie in the sky for people sunk in debt, just as David Bach promised that skipping a daily latte would make one a millionaire (also with manipulated statistics and over-generous return projections). The bigger problem is when pension funds and municipalities use overoptimistic return projections to forecast future pension needs, since the shortfalls will have to be made up through increased revenue or cuts to benefits or other government services.
The Ramsey 12% magic is the only way he can promise fabulous wealth, the pie in the sky for people sunk in debt, just as David Bach promised that skipping a daily latte would make one a millionaire (also with manipulated statistics and over-generous return projections). The bigger problem is when pension funds and municipalities use overoptimistic return projections to forecast future pension needs, since the shortfalls will have to be made up through increased revenue or cuts to benefits or other government services.
Re: Dave Ramsey still defending 12% and still angry at "nerd
Dave is giving "Balanced" advise to his flock -some good some bad- you pick the allocation. We nerds can't stand the fact that people still go for it. I knew a colleague in 07/08 who loved Ben Stein... I did not follow up though.
Having freedom, food and roof is being 90% lucky in life and so is index investing. So, don't let the remaining 10% bother you.
- nisiprius
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Re: Dave Ramsey still defending 12% and still angry at "nerd
Thanks, but all I thought I was doing was, doing my homework--grudgingly posting some facts that don't happen to fit my preconceptions--and not having the guts to call it a "retraction" or use the icon.gwrvmd wrote:Once again it is Nisiprius who brings rationale to the discussion: Those who have really drunk the KoolAide refuse to recognize a good program because it is not a "perfect "one........Gordon
I have a TERRIBLE problem with regarding correct numbers as unimportant details. For example, in 1929, John Jakob Raskob, who seems to have been something of a rogue, gave an interview published in the Ladies' Home Journal, with the title "Everybody Ought To Be Rich." He made a specific claim with specific dollar amounts--that if any ordinary wage-earner invested $15 a month into "good common stocks,"
It turns out that that the numbers were based on Raskob's personal claims of what his personal stock-picking performance had been over a period of a decade or so, and represent about double the market average. The article came out in August of 1929, and Raskob became a target of vilification. OK, that's Raskob. Jeremy Siegel, I think in every edition of Stocks for the Long Run but certainly the current one, opens the book with the claim that Raskob was right, even though the market returns only half of what Raskob said it did, because "investing over time in stocks has always been a winning strategy, whether one starts such an investment plan at a market top or not." He's excusing Raskob's making a specific performance claim, based on obtaining double the market average, as being in the interests of a greater good--convincing the public to invest in stocks even at market tops. If what it takes to do that is to dramatize by saying things that aren't so, then in Siegel's view, and in Ramsey's, it doesn't matter. The ends (convincing the investor to do what is in his best interests) justify the means (saying things that aren't so).he will at the end of twenty years have at least eighty thousand dollars and an income from investments of around four hundred dollars a month.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: Dave Ramsey still defending 12% and still angry at "nerd
ObliviousInvestor wrote:I really don't know what you mean. Those are direct quotes from the website. Perhaps we're having some sort of miscommunication here.bhsince87 wrote:[OT comment removed by admin LadyGeek]
bhsince87: I too would like to know what you mean. Could you please explain
1210
Re: Dave Ramsey still defending 12% and still angry at "nerd
In other words, the "you can't handle the truth" theory of investing!nisiprius wrote: I think in every edition of Stocks for the Long Run but certainly the current one, opens the book with the claim that Raskob was right, even though the market returns only half of what Raskob said it did, because "investing over time in stocks has always been a winning strategy, whether one starts such an investment plan at a market top or not." He's excusing Raskob's making a specific performance claim, based on obtaining double the market average, as being in the interests of a greater good--convincing the public to invest in stocks even at market tops. If what it takes to do that is to dramatize by saying things that aren't so, then in Siegel's view, and in Ramsey's, it doesn't matter. The ends (convincing the investor to do what is in his best interests) justify the means (saying things that aren't so).
Most of my posts assume no behavioral errors.
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Re: Dave Ramsey still defending 12% and still angry at "nerd
Hilarious he's mad at "math nerds" given he, himself, claims to be oneM_to_the_G wrote:http://www.youtube.com/watch?v=mHkXjEOQ ... NJQ6G6gAxw
Dave Ramsey apparently still gets very angry when questioned about his “12%” assertions, even in mid-2014. For one, he’s wrong, so I don’t see why he is sticking to his guns about 12%. I realize that the subject of Dave Ramsey has been beaten to death here on Bogleheads. But it’s interesting that he’s still sticking to his guns. In his above podcast, he claims that 70 year old mutual funds and the S&P500 have averaged 12% over the long run. Both the oldest mutual fund in America (the Wellington Fund) and the S&P500 (since inception) have averaged approximately 8% over their lifetimes to date. And with most professionals agreeing that even 8% is optimistic going forward, I’m not sure why he’s so insistent on that number. In the podcast, he becomes visibly (and audibly) very upset at “experts” and “financial nerds” who challenge him, his main complaint being that their negativity is discouraging people from investing, whereas his positivity (Pollyannaism?) inspires people to invest.
I do agree that his simple and consistent message encourages Joe and Jill Sixpack to just go out and invest, and in that sense, psychology plays a big role in things, and that some of us “nerds” can get too bogged down in the details for the average “Joe” to be able to relate. I can accept, for example, his “debt snowball” method of paying off the lowest balances first (rather than the more Boglehead-ish method of paying off those debts with the highest interest rates first). I would say the same about his insistence on getting out of debt (and especially establishing an emergency fund) before starting retirement investing. I wouldn’t advise someone in the same way, but hey… again, maybe he’s taking human psychology into account more than I am.
Where I vehemently disagree with Dave Ramsey -- and being that this is the Bogleheads forum, I’m sure I’m just convening with the choir here -- is in his insistence on using his network of commission-based financial planners… and the 12% thing. But his message reaches a huge audience, and I suppose if the alternative to using his network in many cases is people simply doing absolutely nothing, not investing, at all, or picking an advisor at random… then maybe his (and his commission-based advisors’) shaving a percentage point or two off the top is indeed “better.” And even the most recent data suggests this is still the case, i.e. people are doing nothing.
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Re: Dave Ramsey still defending 12% and still angry at "nerd
If all the discussion, here and elsewhere, about the emotional mistakes investors make is correct, that is a good theory of investing!baw703916 wrote:In other words, the "you can't handle the truth" theory of investing!nisiprius wrote: I think in every edition of Stocks for the Long Run but certainly the current one, opens the book with the claim that Raskob was right, even though the market returns only half of what Raskob said it did, because "investing over time in stocks has always been a winning strategy, whether one starts such an investment plan at a market top or not." He's excusing Raskob's making a specific performance claim, based on obtaining double the market average, as being in the interests of a greater good--convincing the public to invest in stocks even at market tops. If what it takes to do that is to dramatize by saying things that aren't so, then in Siegel's view, and in Ramsey's, it doesn't matter. The ends (convincing the investor to do what is in his best interests) justify the means (saying things that aren't so).
In theory, theory and practice are identical. In practice, they often differ.