Dave Ramsey - Help Me Understand His Investing Strategy

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Index Fan
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by Index Fan »

<groans> Not this topic again!
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JoMoney
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by JoMoney »

leonard wrote:
JoMoney wrote:
leonard wrote:...
You're inserting ambiguity where there is none. A company I own receives interest, I receive interest. Period.

It's not a "different type" of interest or anything else.
Sure. I'm not an expert on this. If you're interested in the concept, I suggest you read more on Islamic finance and banking and how it functions within the terms of acceptable sharing of risk within that belief system - and the arguments and differences of opinion with those who do follow it.
Have no idea why religion was brought in to this. The original concept was "buying stocks to avoid receiving interest". I was merely point out that buying stock, most likely doesn't avoid the problem of avoiding interest. Purely a logic exercise - nothing to do with religion.
I'll leave it to you to scroll up and re-read if you're trying to figure out how you got to here.
The point was that there are many people with beliefs against borrowing/lending money. Dave Ramsey has made his argument against bonds and believes it's consistent with his ideology.
If you want to argue against Dave Ramsey and his specific beliefs you'll have to call him or maybe engage him on Twitter, he seems to enjoy raging against the Internet when they disagree with him.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
leonard
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by leonard »

JoMoney wrote:figure out how you got to here.
How I got here? I didn't put forth premise - I just applied logic.

This post seems a brush off and avoiding clear logic with a "read above" response as if I am not comprehending. So, I'll be off.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
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JoMoney
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by JoMoney »

leonard wrote:
JoMoney wrote:figure out how you got to here.
How I got here? I didn't put forth premise - I just applied logic.

This post seems a brush off and avoiding clear logic with a "read above" response as if I am not comprehending. So, I'll be off.
It's not a premise, it's a fact that some people have beliefs against interest.
You stated, "If one own's stock in a company that earns interest, they earn interest.".
I agreed with you, but tried to explain that it's more nuanced then that - Dave Ramsey has claimed that not owning bonds is something he feels is consistent with his beliefs (but says nothing about avoiding bank stocks and the like). People following Islamic finance principles have disagreements over what is or is not allowable when it comes to interest (here's one guys opinion that I'm sure many would disagree with: http://www.islamicanswer.org/wordpress/?p=1496 ).

You insist that there's no ambiguity for you and it's all logic.
Which is fine, good for you. I'm not trying to shrug you off, but I don't think we're going anywhere as you don't have a question (it's black and white for you) and I don't think I'd have an answer if you did - as I tried to impart, I find a lot of ambiguity in the belief.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
basspond
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by basspond »

One of the comments he uses the most is "the borrower is a slave to the lender". So in his words you are either the slave or a slave owner on any instrument that has interest. Also interest in essence is the time value of money based on inflation. So logically there is no way to build wealth if you are investing in instruments that only keep up with inflation and also has management/expense fees.
leonard
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by leonard »

JoMoney wrote:
leonard wrote:
JoMoney wrote:figure out how you got to here.
How I got here? I didn't put forth premise - I just applied logic.

This post seems a brush off and avoiding clear logic with a "read above" response as if I am not comprehending. So, I'll be off.
It's not a premise, it's a fact that some people have beliefs against interest.
You stated, "If one own's stock in a company that earns interest, they earn interest.".
I agreed with you, but tried to explain that it's more nuanced then that - Dave Ramsey has claimed that not owning bonds is something he feels is consistent with his beliefs (but says nothing about avoiding bank stocks and the like). People following Islamic finance principles have disagreements over what is or is not allowable when it comes to interest (here's one guys opinion that I'm sure many would disagree with: http://www.islamicanswer.org/wordpress/?p=1496 ).

You insist that there's no ambiguity for you and it's all logic.
Which is fine, good for you. I'm not trying to shrug you off, but I don't think we're going anywhere as you don't have a question (it's black and white for you) and I don't think I'd have an answer if you did - as I tried to impart, I find a lot of ambiguity in the belief.
Why not just deal with the logic as presented? How is one not receiving interest, if they own shares in a company and that company receives interest? You introduce other issues (that weren't even in the original OP) - but you very simply don't refute the argument as laid out. You don't explain how any of these "nuances" undermine the basic premises and conclusion.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
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JoMoney
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by JoMoney »

leonard wrote:...
Why not just deal with the logic as presented? How is one not receiving interest, if they own shares in a company and that company receives interest? You introduce other issues (that weren't even in the original OP) - but you very simply don't refute the argument as laid out. You don't explain how any of these "nuances" undermine the basic premises and conclusion.
That is correct. I did not refute your statement, I agreed with you. But I pointed out that people who have these strong objections against debt and interest (like Dave Ramsey, Islamic Finance, and of other beliefs) don't always draw a hard line on what is or is not permissible. It's not always black and white, and there are sometimes allowances made. Sure... "debt" = "debt" and "earning interest" = "earning interest" , but sometimes people who believe it's generally wrong will consider it acceptable if it's structured a certain way under certain terms and circumstances.
Dave Ramsey believes everyone should be debt free, but makes allowances for home loans under some circumstances.
Dave Ramsey has used his beliefs on debt to justify his arguments against bonds as "debt instruments" (but says nothing about owning stocks that may be heavily indebted or have bonds on their books).
Under some beliefs in Islamic finance they allow for debts if it's for a productive venture (rather than consumption) and it's structured where the risk is shared.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
indexonlyplease
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by indexonlyplease »

WoW some of these commits are way off and have nothing to do with the topic or understand Dave Ramsey. Dave Ramsey is simple live your life debt free and and invest in mutual funds. It's that simple.

You were not born in debt so hard to understand why people get themselves in debt. And on investments, I don't think anyone would complain about someone who bought mutual stock funds and nothing else and just kept investing in them.. In the long run they would do great.

Ever heard of the man that only invested in the Vanguard SP 500 and now is retired and a millionaire.


Cliff
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by pocketplayer »

I cannot add to what has already been said, but might have a more personal insight.
This poster summed it up well imo;
There have been many threads on Dave Ramsey. Generally, many believe he is helpful to people when it comes to debt issues, but when it comes to investment he is not in the BH way of thinking.
I went to work for Dave in 2009. Moved to TN. A friend was a VP there and did my due diligence...read everything, listened to everything and there was an opening well suited to my background. I visited his office and sat in on a show (when he allowed this back in 2001) and have seen his growth from 18 employees to now over 300 and a new office in Cool Springs.

This has to be one of the best run companies ever. It is almost 'cult like' and I know some will run with that. The leadership dynamic is clear...you're on Dave's side or you are not. There is no distention allowed. The average employee is around 28. The philosophy for working has three tiers, the last being finding your 'place on the bus.' Once you find your role, you are there. It is very difficult to move around or change positions.

Dave has tapped into the radio 'anonymous' model. Although he does use this vocabulary, he is really dealing with addictive behavior. He uses his "7 steps" like AA does their 12 steps. There is a fellowship experienced to deal with what one cannot do alone. He is brilliant at motivating and focusing on getting out of debt. He is the strong "father-figure" and has done very well. His new home in Brentwood is a testimony of this. I will leave out details, but he was offered a huge amount of money years ago to sell his brand and declined.

What I had a real problem was his investing advice. Imo, he jumped the shark when he used a broad stroke approach to mutual funds and would base his advice on safe stats..."The stock market has gained X amount since its conception, therefore, you will also gain X." This took no personal look at any variable and was manipulative to an audience that is VERY loyal. Again, think of the father that helped the wayward son...people are devoted to this feeling of being safe and secure, always wanting an idol to follow. Just human nature.

I was really into Bob Brinker at the time and Dave was the exact opposite of Bob. Bob almost never discussed getting out of debt coaching, and Dave does not get into investing details (and when he does, he uses a simple formula). Dave is very much like going to AA...preach the same message and reinforce the same message...and this is a good thing.

Once someone gets their finances in order, they will then hunger for...NOW WHAT do I do? This is where Boglehead comes in to those who can break free and think on their own (yet they need a support group and fellowship of a new kind). This forum is a lot like a bus terminal...it attracts vulnerable people who don't even know what questions to ask, and instead of acting with arrogance, humbly (as modeled by Mr Bogle) is willing to share and help people build a new foundation.

So we need Dave (deal with the addiction) and Bogleheads (learn how to live after). Bogelehads who are seasoned can forget that finances and investing tap deep insecurities in people and paralyze their learning curve. This is why Primerica and the likes are SO popular...people want simple and a way to feel safe and secure. We all know most have no idea what money really is, so they just work hard and hope for the best. The info is overwhelming at first and most (going back to the AA thing here) start with good intentions, and go back to what they know. What makes this forum so significant is the more mature members who act like "elders" that can guide and offer to those who are willing to hear...and if they can teach well, all the better.

Just my take...
indexonlyplease
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by indexonlyplease »

Good point pocketplayer.

As a Dave Ramsey fan I believe in his debt free life style. I believe living debt free is way more important then investing at first. Hard to invest when you are paying someone else the interest on the credit cards. But once you are there, I believe in Bogleheads to invest.


Do you still work for Dave????
RetireWellRN
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by RetireWellRN »

Concerning DR's personal investment strategy,

He advises what he does himself including a healthy percentage of your assets in real estate. He not only owns his home as he recommends every listener to do but he is a real estate owner and realtor at heart. He owns real estate assets that earn income as well. This is another form of diversification since real estate does not perform following the indices that monitor the stock/bond markets. He owns them and does not recommend borrowing for investment real estate.

There are more hassles with real estate but it can also generate a return on investment with income annually and potentially more consistently then the stock market at the same time grow in value. Much of the REIT's in the US are not held as publicly traded stocks so it is a diversification that many don't take part.
pocketplayer
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by pocketplayer »

I left in 2010 and at that time Dave really pushed specific mutual funds from a local rep.
That was about as specific as he got. The company was not about investment knowledge.
It was never discussed. What Dave does personally few really know. He was very good with
strong boundaries. He has a very limited inner circle. His background was real estate so
it makes sense he would know this sector. He is very good at what he does and as long as he
stays in that circle, all good. When he gets outside of it (investing) imo, he is very simplistic.

He would LOVE the 3 portfolio model. As stated above, he provides a service for those who
cannot get out of debt on their own and need a 'father-figure' almost like a higher power to
make steps forward. This is really no different than Bogleheads into John Bogle...I mean,
the name of this forum is Bogleheads! lol People look for leadership. People that follow
Dave are so grateful to be out of debt they feel they reached the top of the mountain and
any basic investment is nirvana. Most people here start at a different place and emotionally
are not bound by the debt monster, so they can think further down the line.

People here at Bogleheads have to know they are the 5% of the population. The other 95%
really have no clue about investing and are very vulnerable. They go to work, try to do
a 401k or another retirement investment and live month to month. For those who have
a six month reserve, that is rare. That's about it. Bogleheads is like learning a new language.

They have no idea what their 401k is in, what expense ratios are...they just put money in and
focus on dinner for that evening. Suzie Orman becomes their guru or someone else. Look at
the Oprah effect...she mentioned a book on her show and BOOM, best-seller. Trump pimps
his Art of the Deal and it skyrockets on Amazon (a book written 25 years ago). That's just the
way it is. I call it knowledge Vs wisdom.

Our culture is all about facts, but wisdom...just the opposite. The real question is why does
Dave Ramsey have such a large audience? It reflects our culture of spenders without an anchor
--any plan or program for the future or understanding of money in general.

Help me understand DR's investment strategy? Better question might be, "How can I
understand the Boglehead investment strategy?" Next would be, "If I get a grasp on this
understanding will it then allow me to then understand (have an investment grid) to
evaluate what others say and do?" (be it DR or Suzie Orman or my neighbor who talks a lot)

That imo is what's going on here, paradigm shifts. I thought I knew X or Y, I am being
challenged that my whole way of thinking might have been off (huge pause emotionally)
then if I continue, I re-educate myself and take steps forward (but I am still unsure so
I come to the forum for support and conversation). The motivation is very different
than what Dave deals with. That is why is used the "AA" comparison. Addicts are in
survival mode and hit rock bottom usually...they are very teachable at this stage of their
vulnerability. They can't focus on investing details. When you're drowning, all you want to
do is get to shore, not discuss the best Italian restaurant in town and the better value for
a condo rental. DR accepts this audience level and the message is repeat and rinse.
His whole company's growth is based on taking his basic concepts and marketing it in 100
different ways. My Total Money Make Over is all about this...it is very simple. Dave's
books for kids and that division same thing, his appeal to high school and college students,
same thing. There are really only two programs used in churches today...and Dave's is
one of them. Get out of debt and get control of your life! I'd say about 10% of his audience
thinks past this and will come to say Bogleheads to go to the next "step."
gvsucavie03
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by gvsucavie03 »

One funny thing I heard him say in his broadcast is recommending "balanced" funds because they are less risky than the actual stock market and that he has purchased balanced funds for short-term investments. In the same spiel, he started out by saying that he'd never own a bond fund because it is just as risky as stocks and don't earn as much. I honestly don't think he understands that the balanced fund is more stable because of bonds. He just can't get over performance data... His incompetence about bonds and active stock funds such as American Funds and other expensive, loaded funds makes his advise really hard to swallow.

I've listened to the show since 2009 and discovered John Bogle just a few years ago. So glad I saw the light...
pocketplayer
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by pocketplayer »

I heard him say in his broadcast is recommending "balanced" funds because they are less risky than the actual stock market and that he has purchased balanced funds for short-term investments. In the same spiel, he started out by saying that he'd never own a bond fund because it is just as risky as stocks and don't earn as much. I honestly don't think he understands that the balanced fund is more stable because of bonds.
This is an excellent example. Imho, 98% of his listeners are grabbing for the life raft
and simply cannot critical think with such little foundational knowledge, so in this sense
he is always preaching to the choir. The calls are screened and if you try to ask a question
or challenge him, you will almost never get on the air. Little trade secret not so secret.
Only hope is to insert a response within your initial question and he is a master of shifting
gears before he gets cornered. They all are. His business is built upon confidence that
projects strength which gives one security. That simple.

The next step is to email questions. It is amazing how emailing about a product will get you
an overnight response, ask a "tough question" based on facts like stated above...crickets
chirping. I actually opened a dummy email account for this purpose, just to see how we
would respond to tough questions. This was a real turn off for me and I voiced this to a
friend who was a senior VP. His response, "I don't always do what Dave says."
Again...in his arena, he is top notch. Outside this, cookies on the bottom shelf, one size fits all.
Seattlenative
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by Seattlenative »

I finally watched the video link at http://www.daveramsey.com/show/videos/m ... ndex-funds

At one point, the caller asks Ramsey if "all mutual funds are actively managed funds", and DR awkwardly obfuscates his response so that he can avoid stating the obvious, which is that the universe of SEC-recognized mutual funds includes both index funds and actively-managed funds. Obviously, DR shot himself in the foot with his silly claim that small cap stocks are traded on the Chicago exchange - I take it he's never heard of NASDAQ or even of small-caps listed on the NYSE? Maybe DR really thinks small caps are all traded Over-the-Counter..... :confused

DR would have his audience believe that the actively-managed mutual funds which outperform target indexes during certain periods of time can and will continue to do so in the future. This is in clear contradiction of the statements on every investment prospectus and fact sheet,

The caller was obviously coached by the call screener to NOT identify by name the PBS documentary, "The Retirement Gamble". The caller wants DR to discuss the impact of fees on long-term rates of return. Later in the call, DR informs the caller that "the number one reason people retire with no money is not because of rate of return or because of fees... it's they don't freeking put any money into retirement..." That point in fact was a significant topic in the "The Retirement Gamble" documentary, compounded by the reality that for many Americans who face life setbacks such as job loss, divorce, death of a family member, medical crises or other serious life events they all too often are encouraged to yank money out of their retirement plans to pay for those bills (ohhhh, nothing makes my blood boil more than hearing a financial know-it-all or journalist use the expression "tap the equity in your house" or "tap into your retirement funds", it's a much more serious matterthan just pressing your fingers up-and-down on the kitchen table). DR then trashes the credibility of PBS' documentary because it comes from what he describes as a left-wing political worldview.

I watched the video again and am truly surprised at how DR responds to this question using what I'd call "lawyer-ese" pseudo-language. It sounds like it's honest and factual, but listen very carefully at what is not being said and at the subtle rhetorical shifting and his ability to create doubt in the mind of the audience about whether we should be worried about costs, whether we should be worried about this, that and the other. Geez, Jim Cramer of Mad Money fame actually is a lawyer and while he's more of an entertainer than anything else, Cramer doesn't become anywhere near as evasive with his audience as Dave Ramsey does when (DR is) discussing investing topics.

The one criticism I do have of PBS' Frontline documentary The Retirement Gamble is that when the host calculates that over 20 or so years the operating expenses of his employer's own plan would eat up the majority of the principal, something is omitted from his compounded calculations: any annualized growth in the value of the underlying investments. I watched that program five times and in viewing the segment where the host looks into those fees on his own plan, he never indicates any growth in the principal. I sure as heck would not remain invested in any product with a zero-percent annualized rate of return combined with a two-percent expense ratio...... can anyone confirm whether or not he actually inputted an estimated rate of future investment return (even a very, very modest four percent a year) as part of his calculations of how expenses would rob him of investment earnings?
gvsucavie03
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by gvsucavie03 »

I deleted my last response after watching the video more closely...

I Googled Chicago Mercantile Exchange... which is legit. http://www.investopedia.com/terms/c/cme.asp. Learned something new...

He actually did a decent analysis of when it would ever make sense to buy a loaded fund (if the ER's of non-loaded funds are higher than loaded)... however, I think he's assuming a one-time purchase. When we invest long-term, we invest at regular intervals and would have to deduct the load every month. He did avoid mentioning that index funds are both no-load AND low ER.

Based on what he described in this particular video, I think he has a little more knowledge of this than I originally thought. Still, the high-performance-is-the-victor attitude he carries as we know is faulty. He doesn't realize that when he ends up selling an under-performing fund (not if he ends up selling, but only a matter of when he would sell an under-performing fund), that he shoots himself in the foot and pretty much proves the point we make on this forum every day. He has mentioned numerous times on the air that if he's not happy with fund performance, that he'll sell it and move the money into the "next best thing."
Seattlenative
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by Seattlenative »

gvsucavie03 wrote:I deleted my last response after watching the video more closely...

I Googled Chicago Mercantile Exchange... which is legit. http://www.investopedia.com/terms/c/cme.asp. Learned something new...

He actually did a decent analysis of when it would ever make sense to buy a loaded fund (if the ER's of non-loaded funds are higher than loaded)... however, I think he's assuming a one-time purchase. When we invest long-term, we invest at regular intervals and would have to deduct the load every month. He did avoid mentioning that index funds are both no-load AND low ER.

Based on what he described in this particular video, I think he has a little more knowledge of this than I originally thought. Still, the high-performance-is-the-victor attitude he carries as we know is faulty. He doesn't realize that when he ends up selling an under-performing fund (not if he ends up selling, but only a matter of when he would sell an under-performing fund), that he shoots himself in the foot and pretty much proves the point we make on this forum every day. He has mentioned numerous times on the air that if he's not happy with fund performance, that he'll sell it and move the money into the "next best thing."
The CME has been around for a long time, but the vast majority of "small cap" and "mid cap" companies are listed on NASDAQ or the NYSE. I cannot confirm this right now, but at some point in the past David L. Ramsey III might have held a registered rep license but surrendered the license to avoid conflicts of interest as a public edu-tainer. I don't think Dave Ramsey is ignorant, I think he actually knows exactly what he is doing and saying about investing, but he is arrogant. You know the proverb, "Pride goeth before destruction, and an haughty spirit before a fall"....
gvsucavie03
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by gvsucavie03 »

Seattlenative wrote:
gvsucavie03 wrote:I deleted my last response after watching the video more closely...

I Googled Chicago Mercantile Exchange... which is legit. http://www.investopedia.com/terms/c/cme.asp. Learned something new...

He actually did a decent analysis of when it would ever make sense to buy a loaded fund (if the ER's of non-loaded funds are higher than loaded)... however, I think he's assuming a one-time purchase. When we invest long-term, we invest at regular intervals and would have to deduct the load every month. He did avoid mentioning that index funds are both no-load AND low ER.

Based on what he described in this particular video, I think he has a little more knowledge of this than I originally thought. Still, the high-performance-is-the-victor attitude he carries as we know is faulty. He doesn't realize that when he ends up selling an under-performing fund (not if he ends up selling, but only a matter of when he would sell an under-performing fund), that he shoots himself in the foot and pretty much proves the point we make on this forum every day. He has mentioned numerous times on the air that if he's not happy with fund performance, that he'll sell it and move the money into the "next best thing."
The CME has been around for a long time, but the vast majority of "small cap" and "mid cap" companies are listed on NASDAQ or the NYSE. I cannot confirm this right now, but at some point in the past David L. Ramsey III might have held a registered rep license but surrendered the license to avoid conflicts of interest as a public edu-tainer. I don't think Dave Ramsey is ignorant, I think he actually knows exactly what he is doing and saying about investing, but he is arrogant. You know the proverb, "Pride goeth before destruction, and an haughty spirit before a fall"....
He just refuses to take in new information about this when there is so much great information about investment best practices. I think this caller was trying to kindly help him see the light in a way...
mattymcmatt
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by mattymcmatt »

pocketplayer wrote: This is an excellent example. Imho, 98% of his listeners are grabbing for the life raft
and simply cannot critical think with such little foundational knowledge, so in this sense
he is always preaching to the choir. The calls are screened and if you try to ask a question
or challenge him, you will almost never get on the air
. Little trade secret not so secret.
Only hope is to insert a response within your initial question and he is a master of shifting
gears before he gets cornered. They all are. His business is built upon confidence that
projects strength which gives one security. That simple.
There was an MP3 making the rounds a year or two ago of a caller who did get through and really challenge Dave on his mutual fund performance. It was amazing how defensive and almost furious Dave got.

Anyway, I listened to Dave pretty much everyday for 2 years while getting out of debt. It was great motivation and kept me focused on the goal. As other's have said, he's great for that.

For the original question, my thoughts on where his investment strategy comes from are:

1. He probably does follow his own advice for the mutual funds, but....he probably doesn't care. As others have mentioned, Dave earns a way better return from his business and products. But how many times do you hear him advising people to start their own business or build up their own brand. Almost never.

2. The 12% or 15% return he quotes probably comes from some point in the past when he did actually check his mutual fund performance and it happened to be 15% at that time. So he just goes on quoting that forever. Again, he probably doesn't care what his mutual funds actually return. I would guess they are a small component of his overall investment portfolio.

As with any "guru", you have to ask, "Does their advice follow what they actually did to become wealthy?" The answer for Dave, for the investment part, is no.
gvsucavie03
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by gvsucavie03 »

mattymcmatt wrote: There was an MP3 making the rounds a year or two ago of a caller who did get through and really challenge Dave on his mutual fund performance. It was amazing how defensive and almost furious Dave got.
Probably the Motley Fool contributor... Dave bit his head off for no reason and really belittled him. I was mad after I listened to it. In Dave's defense, the contributor took a shot at Dave in an article, but Dave definitely overreacted.
pocketplayer
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by pocketplayer »

We've exhausted this topic, but it is very good to discuss because Dave and others have a huge
influence on the general population. People coming to Bogleheads brings their presuppositions
and the patience of this forum is what makes it so unique. It is part of the mission imo.

Maybe these can be a sticky...Dave Ramsey, Suzie Orman, Bob Brinker, etc...

This pretty much sums it up for me...
He just refuses to take in new information about this when there is so much great information about investment best practices...The 12% or 15% return he quotes probably comes from some point in the past when he did actually check his mutual fund performance and it happened to be 15% at that time. So he just goes on quoting that forever.
This is an ethical issue. It is manipulative. It preys on the weak and uninformed, those who are vulnerable. It takes a huge broad stroke and says, "You get into mutual funds, you will get this type of return." Nobody here in BH's that was mature would ever say, "If you get a mutual fund you will get a 10-12% return for your lifetime." What does that mean? He NEVER gets into any of the specifics discussed in these forums. Never talks about loaded funds, fees, types, portfolio balance (all the stuff the informed are working on for their SPECIFIC portfolios). It is reductionism. It is what the financial groups like Primerica do (when I was working with them the goal was to get people in one of three investments which gave your broker the largest commission. The guy who ran the office boasted about making $700k a year and everyone strove to be like him. It was cult-like!). There was no specifics to your personal situation because the guys were clueless, and this is the arrogance/pride associated with these types. Dave has similar energy because he knows people have very limited investment knowledge, finances are very emotional, and keeping it "cookies on the bottom shelf" allows people to feel in control...something is better than nothing.

Like my friend I met with the other night who makes well over $150k working with Fortune 500 clients all over the country, when asked what his 401k held, he paused and said, "I have no idea...I just do what HR tells me to do." When I tried to tell him he could look more closely at WHAT they set up for him, he changed the subject and that was it. This is a smart guy in his sphere of influence. Open the "money door" and he shuts down. Not interested. Knows he needs to look at things, but would rather focus on what he can control in his life. Guys like Dave are custom made for the masses...JUST TELL ME WHAT TO DO and I'll do it! With that influence comes responsibility, and he is irresponsible imo when he suggests a ROR if you do X giving people a false hope about something far more complex. If what he said was true, there would be no need for this forum. The subject would be closed...get you six month emergency fund, contribute to your retirement account, and if you have anything left over, get a mutual fund by calling my buddy down the street I use.

...and we are back to the need to follow a guru's lifestyle to make us feel secure! I believe Mr Trump is tapping into to this now at "full steam ahead."
Matt48Ritchie
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by Matt48Ritchie »

Pocketplayer, what options did you have available in the retirement plan available while working for him? I think the Roth 401k became available after 2010 so I imagine you didn't have that as an option. Do you think he allows current employees to choose between a Roth or Traditional? Would any employee be so bold as to pick the traditional option?

And on another note, my wife and I will probably be debt free sometime next year and I've been toying with the idea of calling him to do a troll-ish debt free scream. Somehow bringing up during the call that I paid off the highest interest loans first, opened 23+ credit cards during that time, took multiple vacations, and contributed to retirement accounts while paying off debt. I wonder how that would go, especially if I did it in person.
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JoMoney
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by JoMoney »

mattymcmatt wrote:...The 12% or 15% return he quotes probably comes from some point in the past when he did actually check his mutual fund performance and it happened to be 15% at that time. So he just goes on quoting that forever...
Right, like my friends that boast about big gains in individual stocks. You don't talk about the poor funds, and you don't calculate those into your total return, only the good ones that you hang on to 8-) :oops:
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
wolf359
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by wolf359 »

JH4P wrote:
(Now as for Dave recommending an 8% withdrawal rate in retirement, that one still has me totally baffled as it seems completely off the wall crazy to even suggest such a high number)
I just finished listening to the "Total Money Makeover" audiobook, which he narrated himself. Wow, he is a great motivational speaker.

When he got to the point of the 8% withdrawal rate, I was floored. I am simultaneously reading William Bernstein's "Investor's Manifesto," who strongly recommends a 2% withdrawal rate. The FIRE crowd (MMM, GoCurryCracker, and Mad Fientist) are strongly behind the 4% Trinity Study.

After listening to that section several times, I understand where Dave Ramsey is coming from. His definition of retirement is that you consider yourself financially independent enough to do what you want for a living. He derides those who stop working. Once your income is at 8% of your assets, you're free to take risks and work at what you want without having to worry about financial security. 8% is simply the minimum threshold where you declare yourself free and can start spending on luxuries again. But his version of retirement is a working retirement.

From his perspective -- if your goal is to save enough money to quit your job, you have the WRONG JOB. You should QUIT IT NOW and switch to the job God intended you to do. He then tells a story of a friend who is still working at 100 years old, who has the philosophy that to retire early is to die early.

8% is probably a reasonable level to consider yourself as having "FU money," especially if you keep working. He doesn't recommend you stop saving when you achieve 8%, but to keep making your nest egg as big as possible.

It's also predicated on the 12% rate of return. He states that 8% is reasonable because your money is growing at 12%, allowing for a 4% inflation rate. (If your rate of return is lower than 12%...)

I'm not his target audience, but I found the book to be very informative. On his scale, I'm starting at either Baby Step 6 or 7. His budgeting advice was pretty good, and I may use some of it for our household.

I'm not adopting any of his investing advice. I especially disliked his pushing 5-6% loads as reasonable. ("Stay away free fee-only financial advisors! 1% AUM is way too high -- they charge you EVERY YEAR.") Well, I stay away from ALL financial planners. He also forgets to tell you to make sure your financial advisor is a fiduciary.

I also better understand his reasoning on bonds. He doesn't dislike them because it's debt. He just thinks they're a lousy investment with lousy returns. There's quite a lot of people who agree with him, who are going 100% stocks. I can say that I'm perfectly happy with my bond position after the recent market turmoil.
Last edited by wolf359 on Fri Aug 28, 2015 10:11 am, edited 1 time in total.
BW1985
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by BW1985 »

Matt48Ritchie wrote: And on another note, my wife and I will probably be debt free sometime next year and I've been toying with the idea of calling him to do a troll-ish debt free scream. Somehow bringing up during the call that I paid off the highest interest loans first, opened 23+ credit cards during that time, took multiple vacations, and contributed to retirement accounts while paying off debt. I wonder how that would go, especially if I did it in person.
This would be hilarious. Please do this.
Chase the good life my whole life long, look back on my life and my life gone...where did I go wrong?
wolf359
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by wolf359 »

mattymcmatt wrote:
For the original question, my thoughts on where his investment strategy comes from are:

1. He probably does follow his own advice for the mutual funds, but....he probably doesn't care. As others have mentioned, Dave earns a way better return from his business and products. But how many times do you hear him advising people to start their own business or build up their own brand. Almost never.

2. The 12% or 15% return he quotes probably comes from some point in the past when he did actually check his mutual fund performance and it happened to be 15% at that time. So he just goes on quoting that forever. Again, he probably doesn't care what his mutual funds actually return. I would guess they are a small component of his overall investment portfolio.

As with any "guru", you have to ask, "Does their advice follow what they actually did to become wealthy?" The answer for Dave, for the investment part, is no.
You're only listening to the radio show, aimed at the Total Money Makeover audience.

Dave Ramsey also sells a course called "Entre-Leadership" that is aimed at the corporate crowd for starting your own business or building your brand.

He did go bankrupt and did dig himself out of debt. How to dig yourself out of debt and put your personal finances in order is the primary thing he teaches. That he does do effectively.

He does not claim to teach how to get rich quick. In fact, he states that the methods he teaches will take years to implement, and that they're hard enough to achieve that most people will fail.

His method is to stop the bleeding (stop incurring new debt), use a debt snowball to pay off existing short-term debt, and use the freed-up cash flow to put the rest of your life in order (retirement, college savings, paying off house.) His advice for wealth is to state that if you live below your means, avoid all debt, and save more than 15% of your income, you will get wealthy in 15-20 years. I don't disagree with that, even if you use loaded actively managed equity-only mutual funds. But you'll do better with passive, no-load, low-cost index funds.
Matt48Ritchie
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by Matt48Ritchie »

Couldn't resist posting this. Btw he has a typo and meant to say "can't."

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JoMoney
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by JoMoney »

Maybe disguised advice... most investment pro's don't beat the appropriate index, therefore they suck.
Conclusion = avoid investment pro's
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Seattlenative
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by Seattlenative »

Driving home tonight, I happened to tune in to Dave Ramsey's radio show right as he was responding to a caller question about index funds. Dave began his response with a very reasonable, fair discussion of index funds and why he uses index funds for what he calls "short term money" (he despises the notion of "parking" funds in a savings account or bond fund). After he provided a pretty solid description of the merits of index funds - including tax efficiency due to low portfolio turnover - Dave then launched into an angry tirade against those who are concerned about high investment fees.

Did anyone else happen to hear that dialogue? I seem to recall it occurred about 1 hour and 15 minutes into tonight's broadcast.
JH4P
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by JH4P »

I'm thinking of tweeting the following to Dave:


@DaveRamsey You say beating S&P is very easy. Why does your 401k plan offer:

AIVSX
AMRMX
ANEFX

All 3 underperformed S&P over last 20yrs.

#NotEasy
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JoMoney
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by JoMoney »

JH4P wrote:I'm thinking of tweeting the following to Dave:


@DaveRamsey You say beating S&P is very easy. Why does your 401k plan offer:

AIVSX
AMRMX
ANEFX

All 3 underperformed S&P over last 20yrs.

#NotEasy
Better check your facts first.
Image
MStar

The fact that his 401k is offering funds that outperformed in the past isn't saying anything though. My workplace 401k drops funds that don't perform well, so there's a bit of a survivorship bias.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
gvsucavie03
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by gvsucavie03 »

JoMoney wrote:
JH4P wrote:I'm thinking of tweeting the following to Dave:


@DaveRamsey You say beating S&P is very easy. Why does your 401k plan offer:

AIVSX
AMRMX
ANEFX

All 3 underperformed S&P over last 20yrs.

#NotEasy
Better check your facts first.
Image
MStar

The fact that his 401k is offering funds that outperformed in the past isn't saying anything though. My workplace 401k drops funds that don't perform well, so there's a bit of a survivorship bias.
Curious to see if performance holds after fees.
Pizzasteve510
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by Pizzasteve510 »

Pizzasteve510 wrote:DR is serving his own interests, so he makes it complicated. Generally, he wants to create a rationale for why:

1) you need to keep listening to him
2) give advertisers a reason to buy his endorcements, air time/seminar space for ads

If it is too simple (e.g. Scott Adams all you need to know editorial all of one list), then his business model collapses. Personally I don't need a cheerleader to live within my means and invest in the best products. It seems bloody obvious to me (no offense to those who don't get it or needed help).

It's the financial equivalent of someone who sells diet pills or diet programs. People know how to control their weight, but ...
Ok, I'm going to do two crazy things, then make an obscure comment, so please have patience.

Crazy thing #1 I just quoted myself to provide context for my comment. I am surprised that I don't think I have seen that done very often (wonder who was first?).
Crazy thing #2 I bumped a Dave Ramsey thread....shivers....

Ok, to the comment. Building on my original comment I will make an analogy. Living in the SF area I occasionally listen to AM 680, a sports talk station a few clicks away from Dave Ramsey's normal station. Now occasionally the guys on the sports talk station rave about a local Pizza place that makes pretty good NYC style pizza at several locations around the Bay Area.

Why do they do this?

First, the pizza is pretty darn good. If you order a pizza, they bring you one and charge a reasonable fee (according to them). The pizza is better than most other pizza and costs roughly $25. They also let you sit in their restaurant and eat it.

Since this pizza place pays for advertising, and their pies are better than say 80% of pizza restaurants in the area, it is not surprising that the radio guys have no problem occasionally raving about how good it is. That may even call it their favorite pizza and recommend it highly to their listeners. In fact this is culturally the norm for a radio host.

Now onto a Bogleheads perspective.

I happen to know for a fact that pizza is cheap to make. I also know that web sites like pizzanow.com can teach you how to make world class pizza at home for less than $5 a pie. This pizza will taste better and cost you less to eat, plus you will have the smug, self satisfied feeling of being a world class pizza chef (I know this as I am one myself).

Now I can look at these radio hosts and think, boy are they steering people wrong. They are suggesting a lazy way to eat dinner, when there is a so much better way out there. Don't they know that you can eat pizza for so much less? Surely their profit motive must be impacting their advice. Certainly their sponsor's advertising relationship must sway their views.

However, the hosts know that their lazy sports loving audience has no desire to learn to cook. In fact, that is the last thing on their minds. They are calling in, in a cult like way, to bask in the dialog of a loving community of like minded guys. They want to celebrate the manly art of stuffing ones face with pizza, with the least effort, while watching other men perform athletic feats.

From the hosts perspective they are offering wonderful advice, that is well targeted at their audience. And in fact the pizza performance of their sponsor will beat that of a poorly thought out home cooking adventure from an unskilled, uncoached hungry man-cave effort. The hosts firmly believe in their sponsor.

The facts remain that a better deal and finer pizza awaits those who explore the world of food, but sadly home chefs are a minority.

There is no Peace, but that which is from the Prince of Pizza. PizzaSteve.
IlliniDave
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by IlliniDave »

PizzaSteve,

That's a great analogy, and the comments from pocketplayer are very good as well. Ramsey is very successful and like all successful people he draws a lot of ire (so does Jack Bogle in certain places if one strays from here). It's just the nature of the beast. He helps people regarding their most immediate crisis/needs, and at least gets them pointed in the right direction. At a certain point, much like the pizza, the motivated individual must take initiative to optimize the situation for themselves. I am surrounded by extremely intelligent mathematically savvy people who know they should invest for retirement but just don't care to pay attention to the topic enough to make what we feel are the best choices for them, and we have to live with that. The same is true for most of Ramsey's audience. Compared to being broke and up to their ears in debt at age 65 (eating only cheap store-brand frozen pizza) they are still far better off with a pile of investments even if they lag the market a little (eating pizza at the high end pizza place). While it is a shame Ramsey's ego won't allow him to grow his summary investment advice, at least he gets even his most blind followers moving in a productive direction.
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JupiterJones
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by JupiterJones »

If we're going to extend the "financial advice as pizza" metaphor, then I guess the main criticisms with Dave are that:
  • He not only recommends the pizza place that advertises with him, he also actively discourages people from baking their own pizza. He claims that you're actually better off ordering pizza from Ernie & Luigi's Pizza ("ELP" for short) than trying to make your own. Furthermore, not only will Ernie and Luigi always make a better pie than anything you can come up with, they'll also be there to "talk you out" of putting the wrong toppings on there during times of culinary uncertainty.
  • He recommends only one type of pizza for everyone: 1/4 Pepperoni, 1/4 Sausage, 1/4 Bacon, and 1/4 Ham. Are you a vegetarian? Keeping Kosher? Allergic to pepperoni? Too bad! This is the one true pizza that everyone should eat, and if you disagree you are branded "an idiot". And although most pizza experts feel that vegetable toppings should have at least a small place on every pizza, Dave has no use for them. It's all meat for him!
Okay, now I'm craving pizza.
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JH4P
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by JH4P »

JoMoney wrote:
JH4P wrote:I'm thinking of tweeting the following to Dave:


@DaveRamsey You say beating S&P is very easy. Why does your 401k plan offer:

AIVSX
AMRMX
ANEFX

All 3 underperformed S&P over last 20yrs.

#NotEasy
Better check your facts first.
Image
MStar

The fact that his 401k is offering funds that outperformed in the past isn't saying anything though. My workplace 401k drops funds that don't perform well, so there's a bit of a survivorship bias.
I looked up Jan 1 of 1995 to Jan 1 of 2015. After accounting for the front-end load on AIVSX, I found the following:
- AIVSX - $65,379.20
- S&P500 - $65,475.20

Obviously these funds have been neck and neck for the last 20 years, but AIVSX sure hasn't "beaten the pants off the S&P500" like Dave says is so easy to do.

Maybe I should have stuck with 10 years. Dave's funds look even worse over the last 10. I went with 20 because I didn't want there to be any room for debate about the timeframe being to short.

Growth of 10k Over Last 10 Years (1/1/05 to 1/1/15)
S&P500 - $20,946.60
AGTHX - $20,440.20
AMRMX - $19,831.48
AIVSX - $19,191.16
AWSHX - $19,091.61

That's 4 funds in Ramsey's 401k that have underperformed the S&P500 over the last 10 years. I would simultaneously like the "Dave Ramsey is a crook" and the "Dave Ramsey can easily beat the S&P500" crowds to both realize their errors.
grettman
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by grettman »

I don't get all the criticism. He gives generally good advice to a broad audience of low income folks who are struggling. For the most part they are better off with him than without him and he makes money doing this service. That's the American way. He has a formula that allows him to easily explain complex concepts (given his audience) on the radio while providing some entertainment.
Pizzasteve510
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by Pizzasteve510 »

JupiterJones wrote:If we're going to extend the "financial advice as pizza" metaphor, then I guess the main criticisms with Dave are that:
  • He not only recommends the pizza place that advertises with him, he also actively discourages people from baking their own pizza. He claims that you're actually better off ordering pizza from Ernie & Luigi's Pizza ("ELP" for short) than trying to make your own. Furthermore, not only will Ernie and Luigi always make a better pie than anything you can come up with, they'll also be there to "talk you out" of putting the wrong toppings on there during times of culinary uncertainty.
  • He recommends only one type of pizza for everyone: 1/4 Pepperoni, 1/4 Sausage, 1/4 Bacon, and 1/4 Ham. Are you a vegetarian? Keeping Kosher? Allergic to pepperoni? Too bad! This is the one true pizza that everyone should eat, and if you disagree you are branded "an idiot". And although most pizza experts feel that vegetable toppings should have at least a small place on every pizza, Dave has no use for them. It's all meat for him!
Okay, now I'm craving pizza.
Hilarious (and a good extension of the comparison)
bs010101
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by bs010101 »

At some point I had compared American Funds' Growth Fund of America to the S&P 500 since the former's inception in 1974. $10K invested on day 1 would be worth about 3X as much as had you invested in the S&P 500. But doing a "telltale chart" shows that the outperformance ended after about ten years, after which it more closely tracked the index. This is pretty typical, where a new fund starts small and outperforms, thus attracting a lot of assets, which decreases their ability to outperform. But, if you look at the long-term track record and include those years, it would take a very long time before one could no longer accurately claim that the fund has a 40+ year track record of beating the S&P 500, due to the strong weighing of those early years of outperformance. The only problem is you cannot invest in that fund in 1974 anymore (unless you can find the 1.21 gigawatts of electricity you need to go back to 1974), so the 40-year track record is pretty much irrelevant to your expected returns.
Silas
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by Silas »

If Dave's listeners follow his advice on investing, they could easily lose their retirements.

Dave pushes firms that sell loaded funds with high expense ratios and sub-par performance. He encourages an extremely aggressive investment strategy, and assumes 12%+ market returns (which is absurd--the market has returned something like 6.5% long-term, and in the period from 1982 to 2012, bonds outperformed stocks).

Looking at the S&P 500, the average dividend yield is under 2%, which is very bad. That means investors are speculating, and not looking at total return. This happened in 1929, in the early 70s, and before the .com crash.

The average P/E ratio of the S&P 500 might be as high as 27 (or as low as 19 depending who you ask). If it is at 27, the market is in bubble territory, and stocks are massively overvalued. Even at 19, the number is too high. Price-to-book and other measures also indicate an overvalued market.

Interest rates are going up, maybe as soon as this month. That will impact stocks and bonds.

The only bright spot is a strong economy, low unemployment, and low inflation.

No one can forecast where the market is going, but the math says a major correction or even a crash is highly likely. Maybe to the tune of 50%+ losses for equities and a decade or more of bad returns. Therefore, being 100% invested in stocks, especially growth stocks, is financial suicide.

Dave doesn't like bond funds, but he doesn't talk about owning individual bonds to maturity, which removes interest rate risk. In other words, bond funds are a bad idea right now, but individual bonds are a good idea, especially if one waits 8-12 months or so before picking some up.

Preferred stocks are also good (less volatility, decent yields). Even convertibles are worth looking at (see VCVSX).

The first rule of investing is not losing money, and in this market one has to be very cautious. If you have a long time horizon (20+ years till retirement) you can stay the course, but still pay attention to what is going on.
JH4P
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by JH4P »

grettman wrote:I don't get all the criticism. He gives generally good advice to a broad audience of low income folks who are struggling. For the most part they are better off with him than without him and he makes money doing this service. That's the American way. He has a formula that allows him to easily explain complex concepts (given his audience) on the radio while providing some entertainment.
I completely agree with you that the "Dave Ramsey is a con-man doing significant financial harm to his listeners" people are wrong. He does indeed do a ton of good, and that is exactly why his glaring faults are so frustrating to some of us.

Dave insists on repeating extremely misleading, and sometimes factually wrong statements, and then, when he gets called out on it, he calls his critics idiots.

"If you are an investment pro and cant find funds that beat the S&P, you suck." - Dave Ramsey Tweet

I'd be much more accepting of his exaggerations if he wasn't constantly using name calling and demeaning comments to marginalize his critics, especially those who I believe are actually correct in their criticism. Dave is indeed mostly right about most things, but that is no excuse for his disgusting, dishonest responses to the critics of the occasional item where he has missed the mark.
Seattlenative
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by Seattlenative »

Here's the most recent Ramsey on-air discussion of index mutual funds, a fairly decent description of these but followed by his categorical dismissal of using index funds as a long-term investment vehicle - you'll need to look at the archive for 09/08/15, second hour, starting at about 10:30 into the segment.

http://www.daveramsey.com/show/archives ... w.archives

Dave states, "I use index funds a lot for two things. If I'm investing for a shorter term than ten years, then I'm just parking some money in an index mutual fund, like I'm parking some money in an index fund that actually, I just pulled it out.... I was saving for a piece of real estate... so I'm parking money in an (index) fund for a year, maybe three years versus it sitting in a stupid savings account. I like the low fees and predictability of an index fund."

He proceeds to describe basic characteristics of index funds and the various indexes. His explanation is very good, particularly the low turnover ratio and tax benefits of index funds.

"I don't worry about fees as much on retirement....some of my [401(k] funds have fees (loads)...the reason people don't have money at retirement is not fees. It's not even rate of return..... There's tons of studies out there....the number one primary driver of people who are successful in retirement.... 74% of it...by far, 74% of the reason.... your rate of savings. Translation if you want to retire you have to save money..... Yet all these nerds in the financial world keep carping on - and so-called consumer advocates - it's just a bunch of crap, they don't know what they're talking about... [sarcastic voice], 'Oh, it's the fees, those evil financial people - oh the rates of return are all over the case...."

Anyway, Dave's diatribe against those who raise serious concerns about the effect of fees runs for a few minutes.
JH4P
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by JH4P »

JH4P wrote:I'm thinking of tweeting the following to Dave:


@DaveRamsey You say beating S&P is very easy. Why does your 401k plan offer:

AIVSX
AMRMX
ANEFX

All 3 underperformed S&P over last 20yrs.

#NotEasy
So I went ahead and tweeted this to Dave. First thing I've ever tweeted mentioning him.

He blocked me. :mrgreen:
Seattlenative
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by Seattlenative »

darkhorse346 wrote:I'll get this out of the way: I am a fan of DR. Generally speaking, his baby steps work...period. Having said that, Dave and I part ways on his investing strategy. As has been repeated discussed on this forum, Dave recommends 25% in each of the "fund types": growth, growth & income, aggressive growth, and international. He does not recommend changing this strategy, unless someone is very risk averse. In that case, he recommends throwing a balanced fund into the mix.In investing, as in life, I think it is important to try to understand why and how people think, make decisions, and come to conclusions. Bogleheads: Any thoughts on why Dave recommends this very aggressive investment strategy? Thanks.
I have attended his Financial Peace University courses three times, the third time because he had revamped the 13-week course into a shorter 9-week course. (Once you've paid the $100 class fee, you can retake his classes for free.) From what he's shared of his own life story, he is much more of a risk-taker than most Americans. His dislike for debt and leveraged equity is quite personal. As he testifies about his own "riches-to-rags" experience as his first business plunged into bankruptcy, it seemed clear to me that his first business enterprise was very high-risk and his life story since then is that of a hard-core "go-getter" not unlike Mr. Trump.

In short, he's basically much more of a risk taker than most people. It does make it hard for his ELPs, once they've interviewed the prospective investor and evaluated their appetite for risk, to meet the rates of return which Ramsey believes are easy to obtain. Finally, I do find Dave Ramsey can be really, really overbearing and irritating when he speaks about investing.
gvsucavie03
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by gvsucavie03 »

Last week I heard another rant on index funds versus active/expensive fund. He again defended paying a 5.75% load. He quoted research that says that 74% of investment success is determined by savings rate and expenses are very low on the list. When considering all Americans and their encounter with investment success, I'd say this is accurate. When considering those that actual invest every month, I think all of the research quoted on this site confirm everything Bogle preaches about lowering costs. It's a bit condescending of him to quote research that says "you can only succeed at something you actually do."

One thing he brought up that probably holds some merit is those investors with professional guidance do better than those without. For those that aren't nerdy Bogleheads, this is probably true. :beer
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MNGopher
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by MNGopher »

I'm still waiting to see his books and how he makes 12% pretty much every year on his front load managed funds. I'm sure if he counts the money he makes off the products he pushes it is well above that, but not even close off his investments.
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darkhorse346
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Re: Dave Ramsey - Help Me Understand His Investing Strategy

Post by darkhorse346 »

I'm curious if the men and women that he interviews during the "Millionaire Theme Hour" of his show invest the way he recommends.
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