Dave Ramsey's investment advice

[johnny]

Y'all,

Is anyone out there listening to Dave Ramsey's radio show these days? I'm just curious to know if he's still giving the same investment advice, i.e., once you're debt-free and you've built up an emergency fund, just invest your money in "good growth stock mutual funds" and sit back and enjoy 12% returns. I haven't listened to his show for many months now... has he changed his tune at all?

Johnny
--------
All generalizations are false, including this one.

[medgar]

Caught part of his show tonight on the way home from tennis. No he is still preaching they same investments. He has lowered his noise level on the 12% returns.

He breaks his AA to 25% aggresive growth, 25% growth, 25% growth and income, 25% international. This AA seems to have a lot of overlap to me.

In my debt dumb years, I followed his advice to get out of debt. I stopped there, his AA just didn't sit right with me.

In these times I bet his business and products are growing like crazy.

Medgar

[tarnation]

Yes, still with the same advice. Although, he does say only if you will not need the money for the next five years. Seems he only likes three asset classes: equity funds, cash and paid for real estate.

[MWCA]

Guy gives good advice most of the time. Debt is terrible for the average person.

[johnny]

Yes, still with the same advice. Although, he does say only if you will not need the money for the next five years. Seems he only likes three asset classes: equity funds, cash and paid for real estate.

Yeah, from what I remember, he doesn't have much use for bonds... says they underperform. But I sure am glad I've got a big chunk of my $$$ in bonds -- they've really saved my hide in this market meltdown.

I think he does good work when he helps people get out of debt, but I feel sorry for anybody who follows his investment advice.

[paulsiu]

I recall he often favors aggressively paying off debts. This is a good idea. His investment ideas is good, too but I don't always agree. He seems to have a religious bend to his message. This is either a plus or minus depending on who you are.

Like any messenger, he will give good and bad ideas. It's up to you to listen and determine if it's valid.

[SP-diceman]

Its funny. I've only listened a few times to Dave Ramsey
and Suzi Orman.

Most of the shows I heard were about credit card debt.

I wonder if these times will endanger their careers?

Imagine if people decide to live with-in their means.


Thanks
SP-diceman

[IceNomad]

My biggest problem with Dave Ramsey is that he continues to push the "find a good mutual fund and get 12% returns per year" line. He engages in a fallacy by taking the long-term historical averages of the US equity market and spinning it to make it sound like the average person will get 12% every year, when that is clearly not the case. I'm not sure if his equity-heavy asset allocation or general glossing over the impact of fees is very helpful for investors, either. When it comes to investing, you get what you don't pay for. Dave Ramsey gives good advice about debt, but his investment advice and religiosity do not appeal to me.

[leo383]

I have not recently heard the "12% returns" bit.

He still advocates "a good growth mutual fund", which likely will send listeners to their latest Smart Money magazine and to pick the hottest funds.

[Adrian Nenu]

Ramsey is right about debt (duh!). Ignore everything else.

Adrian
anenu@tampabay.rr.com

[Bulldawg]

Ramsey has a very compelling testimony in my estimation : millionaire net worth in mid 20s, bankrupt by late 20s, has rebuilt his equity in his late 40s without using leverage. His advice is a lot of common sense and practical...and yes he sources a lot of his information from The Bible, which has much to say about stewardship, money, possessions, etc.

Ramsey seems extreme is his refusal to NEVER use credit cards and using a cash envelope system for budgeting...guess the bankruptcy changed him forever.

[ziggy29]

Ramsey has a very compelling testimony in my estimation : millionaire net worth in mid 20s, bankrupt by late 20s, has rebuilt his equity in his late 40s without using leverage. His advice is a lot of common sense and practical...and yes he sources a lot of his information from The Bible, which has much to say about stewardship, money, possessions, etc.

Ramsey seems extreme is his refusal to NEVER use credit cards and using a cash envelope system for budgeting...guess the bankruptcy changed him forever.

I agree with him about debt, and I think the current mess is bearing that out. Having said that there are a few things I don't totally agree with, such as:

* NEVER using a credit card. I have a 2% cash back card which I can use to pay many of my bills which I'd have anyway, whether I used plastic, wrote a check or drove to the corporate office and paid cash. It's not like I'm spending more on my phone bill because I'm charging the bill instead of writing a check. Why say no to free money?

* Investing advice. He suggests a good "growth stock mutual fund" for people who have a long time horizon. Which is fine and good if it's a very long time horizon AND someone can stand the thought of a market like this one whacking half of the value in a year (and most of that in the last six months). Also the 12% claim is absurd. He seems to have a preference for managed funds, too.

* Always "debt snowballing" with the lowest balance. I understand the psychological "quick win" by getting a quick zero balance, but if that debt was at 5% and you have 15% debt sitting out there... not so much. I think each situation is different in terms of how you snowball (and I do believe in the concept of working to eliminate one debt at a time with excess cash flow and paying the minimum on others). Sometimes Ramsey's order makes sense. Sometimes it makes sense to start with the highest interest rate. Sometimes it makes sense to look at cash flow and retire the debt with the highest minimum monthly payment.

I suggest that Ramsey tends to offer advice to the "lowest common denominator" and that he doesn't want to let each listener think they are "the exception" when they probably aren't.

[Beagler]

Does he hold any formal qualifications as an investment advisor? Any licenses? I read on his web site where he himself uses an advisor.

He used to talk about "good growth mutual funds."

Having observed and read a lot of advice over the years, I think Larry and Rick know a lot more about investing than D.R. knows.

[Chuck T]

I concur with Adrian's comments. Dave Ramsey has helped many people get out of debt. His message about debt is great. His investment advice is poor (IMHO).

[ziggy29]

Having observed and read a lot of advice over the years, I think Larry and Rick know a lot more about investing than D.R. knows.

No question, IMO. I suspect Ramsey's simplistic approach to investing is reminiscent of Charles J. Givens in some sense. But at least Givens made some attempt to recognize current interest rates in suggesting where to be invested. On the other hand, Givens always suggested being in 100% stocks, 100% bonds or 100% money market funds, AND he suggested buying on margin. (And with interest rates where they are, Givens would have suggested 100% stocks plus heavy margin over the last year. Hope you enjoy working until the day you die...)

[fishndoc]

When judging Dave Ramsey, one has to look at (or listen to) who his audience is. Judging by the callers and their problems, making relatively poor investment choices is at the very bottom of their list of problems.

Likewise, for most of his listeners, they have proved that they can not manage credit, and therefore for the majority of them using a credit card, even a little, is akin to an alcoholic having just one drink.

I truly believes Ramsey does more overall good than anyone else in financial journalism/media, despite his mutual fund advise.

In fact his "investment trilogy": cash, growth mutual funds, and paid off real estate (as well as no debt) might even help a few Bogleheads.

Wayne

[fishndoc]

One other thought on Dave Ramsey:
If the majority of Americans had followed his advise - pay off debt, live within your means including the size home you buy (and even the part about investing in growth mutual funds), we would not be in our current mess.

Wayne

[CyberBob]

He breaks his AA to 25% aggresive growth, 25% growth, 25% growth and income, 25% international. This AA seems to have a lot of overlap to me.

Categories like growth and income and aggressive growth are kind of vague, but he does, on occasion, clarify those allocations a bit to where they don't seem to overlap.

• 25% growth
• 25% value (a.k.a. growth and income)
• 25% small-cap (a.k.a. aggressive growth)
• 25% international

[haberd]

Ramsey's advice is OK if you are so stupid that you need to be told you shouldn't spend yourself into bankruptcy and can swallow all his religious proselitizing and political commentary. He is the economic equivalent of AA, as he tells people that they shouldn't even own a credit card, just like you would tell a drunk he shouldn't ever take a drink. For the rest of us, his investment advice is always trite and often just plain awful.
Unlike AA, however, he is basically a con artist and shill for all the numerous products he sells for $2K-$4K a pop. He uses his radio and TV shows as an infomercial for his Financial Peace University to "Biblical churches" (his term), businesses, schools and non-profits. He also offers online lessons. How can you afford them if you're broke? He also gets kickbacks from his "endorsed providers"? How do you think he got rich?

[Bulldawg]

Ramsey has a very compelling testimony in my estimation : millionaire net worth in mid 20s, bankrupt by late 20s, has rebuilt his equity in his late 40s without using leverage. His advice is a lot of common sense and practical...and yes he sources a lot of his information from The Bible, which has much to say about stewardship, money, possessions, etc.

Ramsey seems extreme is his refusal to NEVER use credit cards and using a cash envelope system for budgeting...guess the bankruptcy changed him forever.

I agree with him about debt, and I think the current mess is bearing that out. Having said that there are a few things I don't totally agree with, such as:



I suggest that Ramsey tends to offer advice to the "lowest common denominator" and that he doesn't want to let each listener think they are "the exception" when they probably aren't.

Yes, Ramsey is appealing to as wide an audience as possible...his weekly radio audience is 4.5 million now ( not bad for non-political talk competing against guys such as Rush and Hannity).

What I would like to hear from Ramsey would be some Boglehead wisdom : a certain percentage of fixed investments in his AA recommendations and "low expense index funds" replacing his "good growth stock mutual fund" mantra. This would still be wise, practical, and simple advice for the 4.5 million listeners !

[tarnation]

* Always "debt snowballing" with the lowest balance. I understand the psychological "quick win" by getting a quick zero balance, but if that debt was at 5% and you have 15% debt sitting out there... not so much. I think each situation is different in terms of how you snowball (and I do believe in the concept of working to eliminate one debt at a time with excess cash flow and paying the minimum on others). Sometimes Ramsey's order makes sense. Sometimes it makes sense to start with the highest interest rate. Sometimes it makes sense to look at cash flow and retire the debt with the highest minimum monthly payment.

This one used to bug me too. However, I think there is some real (hard to quantify) benefits to completing eliminating a debt; you can't get late fees, etc on that account. There is a real benefit to simplification also, especially for those with marginal money management skills.

[haberd]

He appeals to much same audience as those political commentators and has much the same opinions.
Again, he may offer useful advice for the simpleminded, but it's advice on which he is making huge profits while wrapping himself in a robe of humanitarianism and religion. Give him credit, he found a huge niche for selling common sense to morons and is taking every advantage of it. His advice can be encapsulated: Spend only what you earn, build an emergency fund, pay off your debts and avoid new ones, have a budget, and don't own a credit card. To this extent, he does offer a public service, but he does not have the knowledge or training to offer good investment advice.

[Bulldawg]

One other thought on Dave Ramsey:
If the majority of Americans had followed his advise - pay off debt, live within your means including the size home you buy (and even the part about investing in growth mutual funds), we would not be in our current mess.

Wayne

Yes, and the majority of the "Big Boy Bailout" club !

[Derek Tinnin]

Dave Ramsey is just trying to close the behavior gap, which is much more costly than the cost difference between active and passive funds, etc. If you have zero debt and live within your means, your investment success (driven by good behavior) should improve, even if you use a "good growth mutual fund."

I have sent e-mails to Mr. Ramsey nudging him to promote index funds just like he does with term insurance vs. whole life. I just don't think he has ever taken the time to really study the investment side to the extent the typical Boglehead does.

If a couple hundred Bogleheads inundate Dave Ramsey's inbox with the "truth," maybe he will eventually catch on.

[Bulldawg]

I have sent e-mails to Mr. Ramsey nudging him to promote index funds just like he does with term insurance vs. whole life. I just don't think he has ever taken the time to really study the investment side to the extent the typical Boglehead does.

If a couple hundred Bogleheads inundate Dave Ramsey's inbox with the "truth," maybe he will eventually catch on.

Excellent idea as I too have emailed Dave about his lacking index and bond advice per his AA suggestions...

[haberd]

I'm sure he will begin giving that advice if there's any money in it for him.
Maybe he could sell an audio tape on Buying Index Funds to go along with his $280 Home University Study Kit or his $129 Lifetime Membership or his $20 Deluxe Envelope System tape (not including the $4.95 envelops) or his $15 Dumping Debt Audio - it better be REAL simple for his typical audience.
But then scratch that idea - some of his "Endorsed Local Providers" would object and he might lose the fees they pay him.

How can you knock somebody's financial skills who has figured out how to charge $20 for this?
https://beta.daveramsey.com/shop/prod210.html

[3CT_Paddler]

Unlike AA, however, he is basically a con artist and shill for all the numerous products he sells for $2K-$4K a pop. He uses his radio and TV shows as an infomercial for his Financial Peace University to "Biblical churches" (his term), businesses, schools and non-profits. He also offers online lessons. How can you afford them if you're broke? He also gets kickbacks from his "endorsed providers"? How do you think he got rich?

I think this post is a bit uninformed and harsh at best. I agree with most people on here that his investment advice is not the best, but I don't think he is out to con people. Is he selling a product? You bet... but that does not mean he is a con artist. I don't know of any products he sells for "$2k-4k a pop". His book is what $10-$20 and I think his class is around $100. I don't think Dave Ramsey is the authority on all things financial, but I do think he has changed more lives for the average financially illiterate American than any other financial personality selling a product. There are thousands in the last couple years who have gotten out of debt because of his program, and if it were not for his program they would have no way of making it out of our current economic mess now that hard times have hit. I respect your opinion but I think you are off base on this one.

[sommerfeld]

However, I think there is some real (hard to quantify) benefits to completing eliminating a debt; you can't get late fees, etc on that account. There is a real benefit to simplification also, especially for those with marginal money management skills.

There's also the general risk reduction aspect - each monthly minimum payment you eliminate reduces your monthly fixed expenses and increases your ability to cope with unexepected reductions in income.

monte carlo simulations could possibly find a more optimal ordering for arbitrary combinations of balances, interest rates, minimum payments, and risk of job loss, but running them is beyond the ability of the vast majority of the population.

"allocate spare cash flow to debt with smallest balance" is a simple rule, hard to screw up and which is pretty good at getting someone deep in a hole into a safer place.

[haberd]

https://beta.daveramsey.com/shop/search.ep?categoryId=&keyWords=home+university&x=22&y=10

No, not $290 - only $289 for his Financial Peace University Home Kit.
Does he provide a useful service to some people? Yes, and I suppose I could leave it at that.
What I object to is somebody pretending to be an unbiased humanitarian wrapping himself in Jesus robes, then over-charging individuals, schools and churches for literally hundreds of products. If you don't believe me, go to his website - the products are endless and repetitive, all conveying one simple message that could be taught to anyone in 15 minutes and expressed in 5.
Worse to me is his engaging in kick-back schemes to endorse local services.
The only way to get free advice from him is to go on one of his infomercials - otherwise, Mr. Christianity will charge you for a lot of mostly junk based on a simple (if sometimes valid) idea.
Fair enough - the schools don't teach this, so some people need it, even if they are grossly overcharged for it.

[NYCPete]

If you don't believe me, go to his website - the products are endless and repetitive, all conveying one simple message that could be taught to anyone in 15 minutes and expressed in 5.

Of course, this is kind of the crux of the issue of teaching personal finance, isn't it? If it were so simple that people could learn it in 15 minutes or say it to them in 5 minutes, why is it that personal finance is such a hard thing for people to learn and to grasp?

My take on it: Just like people have different learning styles, people need to hear something from a variety of different sources in a variety of different ways until something finally clicks for them. This is why there are so many different gurus out there selling this stuff (Suze Orman, David Bach, Jean Chatsky, Dave Ramsey, Rick Edelman, etc.) Now, not all of them focus on the same advice, and not all of them are gearing themselves toward the same audience. So honestly, with all the different gurus saying different things to different groups of people all the time, I find myself forgiving the average citizen for being confused.

IMHO, overall Ramsey does more good than harm.

Best,
Peter

[mlebuf]

Dave Ramsey is not a con artist. He has a product/service to sell that many people need and can derive benefit from. His advice leans toward the extreme and dogmatic: no debt, no credit cards, etc. On many occasions I've heard him mention the 12% average annual return from good growth mutual funds. And he closes each hour telling people that the only way to financial peace is through Christianity. Perhaps it's just me, but I know a lot of non-Christians who appear to be very much at peace with their money.

Nevertheless, I think much of his advice is good for his audience. Many of the people who call in are financial basket cases. They have limited educations and lots of credit card debt, along with upside down mortgages and car payments. In short, they have no clue about how to manage money and have dug themselves into a deep financial hole. These are people who need to hear his "get out of debt and stay out of debt" sermon. Think of them as inverse Bogleheads.

About two weeks ago, I was in my car listening to his show. Much to my surprise, he quoted author "Michael Lee-Boff." Nice work, Dave.

[DocHolliday]

Dave Ramsey has found himself a nice way to make a living. I actually enjoy his show at times simply for the entertainment. It seems as though he is still slightly appalled at times coming to grips with some of the callers.

He may be a little of a con artist but his debt message makes sense. Many of the folks in this country have big debt issues and Ramsey may be the only one that gets through. Some folks believe a guy on tv more than any book. Of course, more folks are going to watch tv than read a book.

[3CT_Paddler]

No, not $290 - only $289 for his Financial Peace University Home Kit.
Does he provide a useful service to some people? Yes, and I suppose I could leave it at that.
What I object to is somebody pretending to be an unbiased humanitarian wrapping himself in Jesus robes, then over-charging individuals, schools and churches for literally hundreds of products. If you don't believe me, go to his website - the products are endless and repetitive, all conveying one simple message that could be taught to anyone in 15 minutes and expressed in 5.
Worse to me is his engaging in kick-back schemes to endorse local services.
The only way to get free advice from him is to go on one of his infomercials - otherwise, Mr. Christianity will charge you for a lot of mostly junk based on a simple (if sometimes valid) idea.
Fair enough - the schools don't teach this, so some people need it, even if they are grossly overcharged for it.

Obviously you have some issues with his religion. It's possible he could be using that cloak of Christianity to con people and its also possible that he truly believes what he says about his religion and sees his program as an avenue for that. I think he has a right to that just like anybody else on the radio can spout their opinions on religion and you can always turn the channel.

I can personally vouch that I know people who are taking the class for $100. Maybe they get a subsidy from their religious group... I don't know. I don't really know much about kickbacks schemes to ELP's but I highly doubt what he is doing is unethical or fraudulent.

You can get free advice everyday on his radio station by listening. The only thing I have ever bought was one of his first books and other than that occasionally listen to his radio program. Personally I love hearing the stories about how people were able to get rid of collosal burdens of debt that were wrecking their family. I don't really get much from his advice, because like you said it is common sense. It is surprising though how many people don't have the discipline to exercise common sense.

[MWCA]

One other thought on Dave Ramsey:
If the majority of Americans had followed his advise - pay off debt, live within your means including the size home you buy (and even the part about investing in growth mutual funds), we would not be in our current mess.

Wayne

Well I think we need a few spenders in this country so the savers can be alright in the end

[Derek Tinnin]

Perhaps we should sign up Bogleheads as an ELP.

Unless the kickback gets in the way. Does Mr. Ramsey really get a kickback from ELP's?

[haberd]

My primary problem with him is his sanctimoniousness and money-grubbing with all the products he's selling. Why not stick to a couple sound ideas?
Also, when he starts to give investment advice, he gets in over his head. He should stick to what he is good at - telling people how to manage their money and what to do when they get in trouble with creditors.
But, as I said, he is providing a worthwhile service, and I do think he believes in his own message.
PS: Re ELPs, he charges them a fee, which he explains as necessary to defray expenses, as he says "to fund the large staff and technology required to operate the ELP program." He claims to have a staff of 19 doing it.
http://www.daveramsey.com/etc/cms/index.cfm?intContentID=6795
From what I have heard, at least some of the ELP financial advisors steer people to American Mutual Funds, which do have a good record but are load funds.

[trvlnut]

The ELPs pay him. No doubt about it.

I have heard from health insurance agent forums that he requires the agent to sell HSA plans only. Being an agent, I know that every situation is different and there are many HSA plans that cost more than a regular co-pay plan.

I just find him extremely black and white about certain things; health insurance, life insurance, no credit card, etc.

He seems to be a great salesman that really has no financial training. I think he will never support indexing since he wants to support other salesmen who sell funds with loads.

[haberd]

Like I said, a con artist who may believe much of his own con and does help some ignorant people, as long as they just take his most basic advice and don't spend much money on his products.

[scpo]

Why does anyone have to be told to pay down debt. To me it would be human nature to stay out of. I know not done as easily said.
We never made a lot of money the last 3 years of working prior to retiring in 99 our pay was $55/60k. WE built a 7 figure portfolio of funds with out any advice from anyone.
We were debt free and enjoying retirement until that ugly word CANCER took my wife at 67 in 10/08.

[manuvns]

Dave is for people who max out credit cards , don't have enough money to pay back debt , don't have basic financial common sense . I guess most folks on this bb have much higher financial IQ .

[Adrian Nenu]

Ramsey is fine on budgeting and debt but has the potential to greatly improve his investing advice if he read some of the Bogleheads' recommended books. As he stands, he is much better than Orman and Kyosaki.

Adrian
anenu@tampabay.rr.com

[zhiwiller]

Sophistication in investing is fine if you are equipped to be taking that advice, but 95% of the callers to his show are in no position to be investing at all.

When my grandmother asked me what computer to buy, I didn't bother trying to educate her on RAM or which browser is best, I just got her a cheap one that still had more than she could ever use and let her play. If she gets more sophisticated, she can learn about the other stuff.

DRs callers are the same. I listen to him all the time and he doesn't talk much about what kinds of mutual funds to buy, maybe he used to, I just started a few months ago.

[cosmos]

https://beta.daveramsey.com/shop/search.ep?categoryId=&keyWords=home+university&x=22&y=10

No, not $290 - only $289 for his Financial Peace University Home Kit.
Does he provide a useful service to some people? Yes, and I suppose I could leave it at that.
What I object to is somebody pretending to be an unbiased humanitarian wrapping himself in Jesus robes, then over-charging individuals, schools and churches for literally hundreds of products. If you don't believe me, go to his website - the products are endless and repetitive, all conveying one simple message that could be taught to anyone in 15 minutes and expressed in 5.
Worse to me is his engaging in kick-back schemes to endorse local services.
The only way to get free advice from him is to go on one of his infomercials - otherwise, Mr. Christianity will charge you for a lot of mostly junk based on a simple (if sometimes valid) idea.
Fair enough - the schools don't teach this, so some people need it, even if they are grossly overcharged for it.

You would think that investing with Jesus would offer a greater return!

[3CT_Paddler]

Sophistication in investing is fine if you are equipped to be taking that advice, but 95% of the callers to his show are in no position to be investing at all.

When my grandmother asked me what computer to buy, I didn't bother trying to educate her on RAM or which browser is best, I just got her a cheap one that still had more than she could ever use and let her play. If she gets more sophisticated, she can learn about the other stuff.

DRs callers are the same. I listen to him all the time and he doesn't talk much about what kinds of mutual funds to buy, maybe he used to, I just started a few months ago.

I think one thing that people have overlooked on this board is that Ramsey encourages people to understand their investments and not just take the word of a financial advisor at face value. The only advice I hear from him is typically to buy good growth stock mutual funds. As far as investing goes it is not a Boglehead way of doing it, but you could do a lot worse.

I think there are a lot of callers who are not ready to invest (up to their eyeballs in debt), but there are also a lot of callers who I would say are just the opposite. If you can pay off $20k of debt in a year and be debt free... I think you qualify as ready to invest. It does not take a degree in economics to invest wisely. Read one Boglehead book and you pretty much know enough of the basics to be successful. Just my 2 cents.

[modal]

Someone needs to mail Dave Ramesy the Bogleheads book.

[3CT_Paddler]

Someone needs to mail Dave Ramesy the Bogleheads book.

Hopefully one day he sees the light when it comes to investing! I think he puts too much faith in fund managers ability to successfully pick stocks. I heard one of his earlier tapes that my parents had and he stressed finding good mutual fund managers with good track records. He talked about how they had teams of people assessing different companies/sectors and the benefits of that. Basically he has bought into what fund managers have been preaching forever about their superior returns over the other guy. Obviously Bogleheads know better than that, but it is not like he is in the minority on his opinion on the superiority of managed funds. I hope he changes his mind, and I hope that 10-20 years from now the majority of people see the benefits of low cost investing.

[johnny]

I actually once heard Ramsey recommend investing in an S&P 500 index fund. It was about a year ago, as I recall. The caller was debt-free and had an emergency fund, and she had maxed out her 401k and IRA contributions. She wanted to open a taxable account, and DR suggested an S&P 500 fund because of its low turnover. I almost fell out of my chair when I heard that.

[fishndoc]

I'm gonna try to keep this politically neutral, but:

Ramsey's advice is OK if you are so stupid that you need to be told you shouldn't spend yourself into bankruptcy...

Any chance we could get him an audience with Congress?

Wayne

[Pinnacle Point]

Listen to DR a fair amount and agree with most of the points made above especially his non boglehead approach of actively managed funds. My general feeling is that he gives good anti consumer debt advice and weak investment advice.

The thing that I can't figure out is when he tells people to payoff the mortgage early. Seems to me that is not wise if you have a 4.75% fixed rate which is really a net 2.75% to 3.00% after tax deduction at my marginal rate. If you couple that with the 12% return of "good growth stock mutual funds" that he touts which after taxes should leave of return of at least 8 to 9%. This is a 5 to 6 percent spread. I reallize that this doesn't take inflation and risk into account but as Bogle himself describes even 1 to 2 % spread/return can make a big difference to long term investors. Any thoughts??

Thanks,
J.

[3CT_Paddler]

Listen to DR a fair amount and agree with most of the points made above especially his non boglehead approach of actively managed funds. My general feeling is that he gives good anti consumer debt advice and weak investment advice.

The thing that I can't figure out is when he tells people to payoff the mortgage early. Seems to me that is not wise if you have a 4.75% fixed rate which is really a net 2.75% to 3.00% after tax deduction at my marginal rate. If you couple that with the 12% return of "good growth stock mutual funds" that he touts which after taxes should leave of return of at least 8 to 9%. This is a 5 to 6 percent spread. I reallize that this doesn't take inflation and risk into account but as Bogle himself describes even 1 to 2 % spread/return can make a big difference to long term investors. Any thoughts??

Thanks,
J.

I believe his first step is to pay off all debts but the house and set up an emergency fund. Then invest max possible in Roth IRA/401K and pay off the house at the same time with more of an emphasis on paying off the house. I think if more people took his advice over the last ten years and put more into paying off their mortgage and would have recieved the guaranteed 6,7,8% return while investing less in the market they would be better off today. Plus with the market at its lows now they would have more cash flow to invest in the market. Of course hindsight is 20/20 and that may not be the case in the next 10 years. I don't think you will even find many Bogleheads on this site who advocate taking out a mortgage or line of credit to invest in the market which is basically what you would be doing.