Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

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JH4P
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Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by JH4P »

Regarding Dave Ramsey’s investing advice, I’ve seen posters on this board call him “a huckster”, “full of manure”, “a horrid adviser”, “an unethical opportunist”, “a sleazy crook”, “a shameless con-man”, and “has probably stolen more money from his idiot audience than he has saved them”

To be fair, the majority of posters aren’t quite as negative as the quotes above, but I think it is true to say that Dave takes quite a bit of grief from this board for his investing advice.

What I decided to do was to look at some historical numbers to see what the actual differences in results have been over the last couple decades between the Ramsey and Boglehead strategies for investing.

The specific funds Dave offers to his employees via their 401Ks are public information. https://www.efast.dol.gov/portal/app/di ... tion=e1s16# (search for “The Lampo Group”) If you look at just the front loaded funds (something Bogleheads love to demonize), and furthermore, just those which are majority U.S. stocks, you find 6 funds available to Dave’s employees. A couple of these Dave has even mentioned by name in past radio segments when referring to examples of stocks with good long track records.
- AIVSX – American Funds, The Investment Company of America
- AGTHX – American Funds, The Growth Fund of America
- AWSHX – American Funds, Washington Mutual Investors Fund
- AMRMX – American Funds, American Mutual Fund
- ANCFX – American Funds, Fundamental Investors
- ANEFX – American Funds, New Economy Fund

Note that all 6 of the American Funds have a front-end load of 5.75% with expense ratios hovering around 0.6%. As a point of comparison, I also researched the returns from the Vanguard Total Stock Market Index (VTSAX). It is a Boglehead favorite for low cost index investing in U.S. stocks. 0.05% expense ratio, no loads.

Note: All returns calculated below are AFTER factoring in front-end load costs, where applicable.


Comparison #1 - Average Return of the last 18 Rolling Five Year Periods
AIVSX – 7.7%
AGTHX – 9.2%
AWSHX – 7.8%
AMRMX – 7.3%
ANCFX – 8.7%
ANEFX – 7.6%
VTSAX – 8.6%

Comments
The 18 periods that were averaged were 1993-1998 up through 2010-2015. All periods utilized Jan 1 of the given year. These 18 periods (22 years) cover the full life cycle of VTSAX. It also just so happens that Ramsey has been on the air since 1992, another good reason to utilize this time frame.

Of course, even over 5 year periods, there was quite a bit of volatility. The 5 year period from ’04 to ’09 saw negative returns across all 7 funds. Returns from the ’95 to ’00 period were as high as 28%. By averaging all 18 of the 5 year rolling returns, we see that the average rate of return a random 5 year investor saw, after fees and loads, fell in a fairly tight range of 7.3% to 9.2%. VTSAX performed slightly above average in the group, coming in 3rd out of 7.

Example calculation for those who want to fact check my math:
1/1/10 to 1/1/15 – Morningstar says AIVSX turned $10,000 into $18,688.42
1.868842 x 0.9425 = 1.76138 (this accounts for the 5.75% front-end load)
Therefore $10,000 actually netted the investor $17,613.80 after accounting for the front-end load
5th root of 1.76138 = 1.11988
That means the actual return on investment with this fund during this time period, fees and loads included, was 11.99%.


Comparison #2 – 10 Year Annualized Returns from 1/1/05 to 1/1/15
AIVSX – 6.7%
AGTHX – 7.4%
AWSHX – 6.7%
AMRMX – 7.1%
ANCFX – 8.0%
ANEFX – 8.5%
VTSAX – 8.1%


Comparison #3 – 22 Year Annualized Returns from 1/1/93 to 1/1/15
AIVSX – 9.5%
AGTHX – 10.7%
AWSHX – 9.7%
AMRMX – 8.8%
ANCFX – 10.5%
ANEFX – 9.5%
VTSAX – 9.5%


Comparison #4 – 30 Year Annualized Returns from 1/1/85 to 1/1/15
AIVSX – 11.3%
AGTHX – 12.2%
AWSHX – 11.3%
AMRMX – 10.6%
ANCFX – 11.9%
ANEFX – 11.4%
S&P500 – 11.3%

Comments
In order to look all the way back to 1985, I had to switch to the S&P 500 TR USD according to Morningstar. VTSAX only goes back to 1992. Looking back at the last 20-30 years, VTSAX and the S&P500 were nothing special when compared to the 6 “Ramsey funds”.


Final Conclusions:
Investing in a front-loaded fund for 1-2 years would be stupid, and Dave Ramsey does not recommend that. Starting at 5 years, we can see that the funds Dave has recommended have performed very similarly to VTSAX and the S&P500, and 5 years is still a very short holding time for mutual funds of any type. By the time you start looking at 10, 20, or 30 years, the funds Dave recommends have all tracked fairly closely with VTSAX.

I still agree that Dave is pushing the envelope when he constantly uses 12% for his calculations of future growth. Clearly based on these numbers, both index fund investors and investors in “his” front-loaded funds saw average returns much closer to 8-10% over the last 2 decades, even less over the last 10 years or so. If you look at the last 30 years, as a group, it was a very good stretch that performed well above average. The annualized return of the S&P500 over the last 80 years is somewhere between 9-10%. 12% isn’t impossible, but is definitely is on the upper boundary of what is realistic. I’ll continue to argue Dave would do better referencing 10%, but it’s not something worth vilifying him over.

My biggest gripe with Dave is his suggestion that 8% withdrawal rates are reasonable. You could argue that it is due to his use of 12%, but I think the bigger problem is that Dave’s formula (return – inflation = withdrawl rate) ignores sequence of returns. Even if we knew we could average 12% throughout retirement, it would be wise to subtract more than just inflation when calculating withdrawal rates. There are plenty of posts on this forum that do a good job going into detail to help explain why this is true. I’m more than happy to continue to watch people bash Dave over this specific topic until he comes to his senses.

However, my main point of this post is that some of you need to ease up on your overall criticism of Dave's investing advice. Withdrawal rates aside, which he discusses very rarely, he is not a “sleazy crook” or a “con-man”. Anyone following his recommendations to go to an ELP and invest in front-loaded funds has, on average, seen returns in the same ballpark as the “keep expenses low” crowd. I agree with the theory behind the Boglehead approach, and do believe long term it will produce a slightly higher rate of return, but at the end of the day, Dave does wonderful things helping people get out of messy financial situations. His financial advice may or may not be optimal, but it is very, very far from harmful. I believe the differences between Dave’s results and a typical Boglehead’s results are small enough that both can be considered “good” advice.

It’s time to drop the “he’s a horrible con-man” exaggerations. The numbers just don’t back up those statements.
mhalley
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by mhalley »

The majority of 401k Plans waive the front end loads on load funds. I don't know if this is true for Dave's co, but I would imagine it is. You might redo the calculations foregoing the front end loads to see how the funds fare in that case. Certainly I do not agree that Dave is a con man. There are many people out there that still say managed funds are the way to go (else why would there be so many?) I think most folks here disagree with the 100% stock allocation the most,managed funds with load/high er second. Multiple other problems with high withdrawal rate etc.
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SpringMan
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by SpringMan »

We are all free to invest however we like. You are free to invest your money with one of Dave's ELPs, if you so desire.
Here is a link you may find helpful https://www.daveramsey.com/elp/investing
Personally, I would not recommend this to anyone for reasons discussed in the many other Dave Ramsey threads.
Best Wishes, SpringMan
MIretired
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by MIretired »

JH4P said:
Comparison #3 – 22 Year Annualized Returns from 1/1/93 to 1/1/15
AIVSX – 9.5%
AGTHX – 10.7%
AWSHX – 9.7%
AMRMX – 8.8%
ANCFX – 10.5%
ANEFX – 9.5%
VTSAX – 9.5%
Not to be a downer, but are these funds apples-to-apples with VTSAX?
But, I reconsider that a judgement of DR does not have to hold-up that his are the best of category; only that they are good all-around funds.
But, since you compared returns, here is how they are currently invested per M*.
Also, note all of these funds are all large cap.

AIVSX - LB - Eq. - 9.25% non-US - med. mrkt. cap. - $73b.
AGTHX - LG - Eq. - 13.5% non-US - med. mrkt. cap. - $49b.
AWSHX - LB - Eq. - 6% non-US - med. mrkt. cap. - $85b.
AMRMX - LV - Eq. - 8% non-US - med. mrkt. cap. - $66b.
ANCFX - LB - Eq. - 14% non-US - med. mrkt. cap. - $73b.
ANEFX - LG - Eq. - 28% non-US - med. mrkt. cap. - $20b.

VTSAX - LV - Eq. - 1% non-US - med. mrkt. cap. - $41b.

401ks being what they are, I wouldn't complain about these front load and all.
I've always thought (20 yrs. ago) that AF was a very good fund family.
That link to a search for public filing. Funds in plan are on very last page. AF comprise 2/3rds of offerings. Has Janus Overseas and Opppenheimer Developing to add a couple, also 1 bond fund, 1 balanced fund.
Also, Raymond James received .50 bps for sales for AF assets purchased. This all for yr. 2013. Just for interest.

I
SoonerD
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by SoonerD »

JH4P did Ramsey really have a corporate 401k plan back in 1992 and did that plan have the same investment line-up for 23 years?

My experience in the 401k industry is investment committees often add top performing funds AFTER the record of top performance has been established - they are no better than the rest of us at selecting such funds before the period of great performance
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by arcticpineapplecorp. »

[quote="JH4P"]Regarding Dave Ramsey’s investing advice, I’ve seen posters on this board call him “a huckster”, “full of manure”, “a horrid adviser”, “an unethical opportunist”, “a sleazy crook”, “a shameless con-man”, and “has probably stolen more money from his idiot audience than he has saved them”

That's putting it nicely. :D

I still stand by Jack Bogle "You get to keep what you don't pay for". The more you pay, the less you keep.

I agree with MIpreRetirey that those might not be apples to apples to comparisons.

And finally, the past is not prologue, i.e. past performance is no predictor of future results.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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JH4P
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by JH4P »

SoonerD wrote:JH4P did Ramsey really have a corporate 401k plan back in 1992 and did that plan have the same investment line-up for 23 years?

My experience in the 401k industry is investment committees often add top performing funds AFTER the record of top performance has been established - they are no better than the rest of us at selecting such funds before the period of great performance
I can't look up his 401k back to 1992, but I know that he has thrown out references to American Funds for many years. Considering they fit his decades old, consistent advice of using front loaded funds, I wouldn't be surprised if he has owned them personally for a long time and if his ELPs have recommended them for a long time as well.

Maybe it isn't fair to go all the way back to 1992, but it also isn't fair to start in 2015. I don't know the exact point Dave first recommended American Funds, but it was somewhere in between the start of his radio career and now, and the funds have been competitive with the S&P500 ever since. That's all I'm really trying to prove. Real world people have followed Dave's advice (whether they started 5, 10, 15 years ago) and haven't suffered the horrible fate that some on this board would try to suggest was inevitable.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by ERISA Stone »

JH4P wrote:
SoonerD wrote:JH4P did Ramsey really have a corporate 401k plan back in 1992 and did that plan have the same investment line-up for 23 years?

My experience in the 401k industry is investment committees often add top performing funds AFTER the record of top performance has been established - they are no better than the rest of us at selecting such funds before the period of great performance
I can't look up his 401k back to 1992, but I know that he has thrown out references to American Funds for many years. Considering they fit his decades old, consistent advice of using front loaded funds, I wouldn't be surprised if he has owned them personally for a long time and if his ELPs have recommended them for a long time as well.

Maybe it isn't fair to go all the way back to 1992, but it also isn't fair to start in 2015. I don't know the exact point Dave first recommended American Funds, but it was somewhere in between the start of his radio career and now, and the funds have been competitive with the S&P500 ever since. That's all I'm really trying to prove. Real world people have followed Dave's advice (whether they started 5, 10, 15 years ago) and haven't suffered the horrible fate that some on this board would try to suggest was inevitable.
If you can find a Form 5500, it will tell you when the current plan was established. That doesn't mean his company didn't create multiple plans though.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by YttriumNitrate »

I generally see Dave Ramsey's advice as emotionally correct while mathematically wrong, and Boglehead advice is usually mathematically correct but can be emotionally flawed.

For example, Ramsey's debt snow ignores the interest rates a person is paying on the debts, so people end up taking longer to get out of debt. However, it appears that people are more likely to succeed even though they pay more interest than they have to. Another example would be paying an adviser 1 to 2% each year. Mathematically, that makes no sense, but when you factor in human emotions it would not surprise me in the least to find that people who pay an adviser are much more likely to reach their financial goals than those that do not.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by nisiprius »

I think "funds offered in his 401(k)" is a very relevant and fair datum to use. Good idea. It is also a very good indicator of the funds he is always bringing up, without naming them, as examples.

As to how to evaluate them fairly, that's obviously a separate question, and not easy to answer.

There are a huge number of firms, probably the vast majority of them, that fall in the broad category of "firms that really do meet the 'suitability' standard and really don't meet the 'fiduciary' standard." That is to say, a huge number of people are being put into portfolios that are hardly disasters, but but with portfolio choice influenced by someone's need to make a buck.

In Dave Ramsey's case his own net worth, and I'm just using celebritynetworth.com as my source--no idea how reliable it is--is estimated at $55 million, which is very much in the same ballpark as John C. Bogle ($80 million). For comparison, that same source shows Suze Orman at $35 million, Jim Cramer at $100 million--and advisor Ken Fisher at $2.8 billion-with-a-b.

How much money at all changes hands between Dave Ramsey and his "ELP's?" It's not crystal clear... various Google hits of unknown reliability suggest that they pay a fee to become designated as an ELP and that they pay a $30 fee for every client referred to them by Ramsey's organization.

To me, he seems more like someone who makes money from his media empire (and sales of course materials etc.) than someone who makes money directly from clients' investments.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Mike Scott
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by Mike Scott »

And the great thing about all of this is that we each get to make our own individual choices.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by JH4P »

Mike Scott wrote:And the great thing about all of this is that we each get to make our own individual choices.
Totally agree. I just wish people who made different choices didn't have to be vilified so often.

The world needs less name calling of decent people as stupid/evil. There are plenty of actually stupid/evil people to go around.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by LateStarter1975 »

I agree that Dave Ramsey's investment advice may not be the best, but this post summarizes what I've always felt: That even if you follow Dave Ramsey's investment advice, you will still turn out successful. For all those who are not in the least interested in finances and investments, it may well be worth it to just go with Dave's investment ELP and you will still do good. However, there is a better, simpler and less costly way of financial success by using the bogleheads way. At the end of the day, it's all about choices. That's why I don't criticize Dave too much on this, because if you seek knowledge, you will find it...that's certainly what happened to me and led me to discover Bogleheads after becoming debt free through Dave Ramsey principles.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by RandomPointer »

Interesting numbers. I am wondering what if the funds are compared with index funds with similar style.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by nisiprius »

RandomPointer wrote:Interesting numbers. I am wondering what if the funds are compared with index funds with similar style.
Probably very good. My employer's 401(k) fund was always predominantly populated with funds rated 4 and 5 stars by Morningstar. They didn't put funds into the plan if they hadn't had good past performance, and they dumped the ones that lagged. It's no trick to find funds that have outperformed for as long as ten years. The real test would be to see what funds were in the Lampo 401(k) ten years ago. (It's always very hard to find that sort of thing out).
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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JH4P
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by JH4P »

I was able to find results as far back as 2009. Ramsey's 401k plan in 2009 included 3 of the 6 that I found in his 2013 plan.

AIVSX, AGTHX, AWSHX

His 401K offered fewer options at the time, so it isn't necessarily true that he dropped poor performing funds to add the other 3. He may have just decided in recent years to expand his employee's options by increasing the total number of funds available.

From 1/1/09 to 9/1/15, $10k grew to (annual rate of return)
AIVSX - $20,990 (11.8%)
AGTHX - $23,558 (13.7%)
AWSHX - $20,709 (11.5%)
VTSAX - $25,245 (14.9%)
S&P500 TR - $24,451 (14.4%)

Note: For the 3 American Funds, the numbers above are adjusted for front-end loads. The dollar amounts above are 0.9425 x the value that Morningstar listed for growth of $10k. This took off about a full 1% off the rates of return. Obviously, at longer holding periods, the front-end load affect would be less.

Very clearly, Ramsey's employees would have done better as index investors than American Funds investors over the last 6-7 years. His claim that it is "easy to beat the pants off the S&P500" is clearly wrong, as his funds have failed to even match it, but simultaneously, people are also wrong to claim that he is "a sleazy crook".

I'll enjoy tracking these funds through future years to see how they perform relative to the S&P. If anyone can point me to a Dave Ramsey quote mentioning a specific American Fund prior to 2009, please let me know. For now, 2009 is going to have to be my starting point.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by David Jay »

YttriumNitrate wrote:I generally see Dave Ramsey's advice as emotionally correct while mathematically wrong, and Boglehead advice is usually mathematically correct but can be emotionally flawed.

For example, Ramsey's debt snow ignores the interest rates a person is paying on the debts, so people end up taking longer to get out of debt. However, it appears that people are more likely to succeed even though they pay more interest than they have to. Another example would be paying an adviser 1 to 2% each year. Mathematically, that makes no sense, but when you factor in human emotions it would not surprise me in the least to find that people who pay an adviser are much more likely to reach their financial goals than those that do not.
+1

Humans are emotional beings (look at all the threads in the last 10 days about people wanting to reduce their stock allocations). Dave has helped many, many people get their spending under control and pay off debt.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by sixty40 »

I manage our small company's 401K and we have American Funds through an agent and the expenses are not what people think, they are higher. We are not offered the same classes of shares as other AF investors, for example:
AF Investment Company of America AIVSX becomes RICCX (exp ratio of 0.96% no-load)
AF The Growth Fund of America AGTHX becomes RGACX (exp ratio of 0.98% no load)

We are using the American Funds R3 class of shares and all the funds in this class are in the 0.95% to 1.2% range. AF waves the front end load but you do not get something for nothing. I recall going thru the process yrs back and there are a few classes of shares we can choose from. The lower expense ratios have higher yearly fees the company has to pay for each employee in addition to the expense ratios, the higher expense ratios can have no additional fees. As I recall, the expense ratios can go as high as 1.5% with no additional fees. For 10-yr annualized returns:

RICCX = 6.89% as of 7/31/15 (compare to VTSAX)
RGACX = 7.79% as of 7/31/15 (compare to VIGRX)
VTSAX = 7.50% as of 8/31/15 (total stock mkt)
VFIAX = 7.14% as of 8/31/15 (SP500)
VIGRX = 8.29% as of 8/31/15 (growth index)

The returns are close, so I am OK with using AF. I looked into using Vanguard, VG charges a flat yrly fee of $2500(?) and a fee per participant. The good thing is VG uses the same fund class as with other investor, VG does not have different share classes with increased expense ratios for 401K plans. I would like to transfer over to VG, but our company dynamics is keeping us at AF.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by Kevin M »

In selecting the best of the worst funds in my daughter's lousy 401k (no low-cost index funds), we selected American Funds EuroPacific Growth Fund (RERBX) for international. Why? Because when we looked, it had tracked Vanguard Total International Stock Index fund (VGTSX) quite closely over the previous five years, so I figured it was basically a high-expense, closet index fund. Interestingly, it has done quite a bit better than VGTSX over the most recent five years, but I just consider this good luck. It could very well have gone the other way, and it has gone the other way over previous 5-year periods.

The closest to a decent total US stock fund available is American Funds The Growth Fund of America (RGABX), and Vanguard Total Stock Market Index (VTSMX) has beaten it handsomely over the last five years. Vanguard generally comes out on top if you look at recent rolling five-year periods, but if you go back to periods ending in the mid-to-late 1990s, RGABX was the clear winner. This is the nature of actively-managed funds.

The research seems pretty conclusive that as the measurement period increases, fewer and fewer actively-managed funds beat a fair benchmark, and for the ones that do, it's hard if not impossible to tell whether or not it was due to skill or luck. So my preference is to stick with index funds, only use actively-managed funds if there's no other choice, and then to select whichever one has hugged a comparable index fund most closely in recent years, not the one that has outperformed.

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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by MrVargas »

His advice for the accumulation phase of retirement is "ok." It's his advice in retirement and near-retirement that is downright dangerous. He wants you to be in 100% equities and has suggested an 8% withdrawal rate as reasonable. That is way too volatile and risky for most people.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by JH4P »

JH4P wrote: Mon Aug 31, 2015 4:11 pm The specific funds Dave offers to his employees via their 401Ks are public information. https://www.efast.dol.gov/portal/app/di ... tion=e1s16# (search for “The Lampo Group”)
Question. I'm following up on some research I did a few years ago, and I came across something strange. Via the above link, I can still search for Dave's 401k, but recent years don't make sense. For example, in 2017, the report shows total holdings at $25 million. If this was just for Dave, it might be correct. But he has 700-800 employees. I would expect something more like $200 million company wide.

Any ideas where the rest of the money is? This is supposed to be public information, right?
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by autolycus »

JH4P wrote: Mon Aug 31, 2015 4:11 pm The specific funds Dave offers to his employees via their 401Ks are public information. https://www.efast.dol.gov/portal/app/di ... tion=e1s16# (search for “The Lampo Group”) If you look at just the front loaded funds (something Bogleheads love to demonize), and furthermore, just those which are majority U.S. stocks, you find 6 funds available to Dave’s employees. A couple of these Dave has even mentioned by name in past radio segments when referring to examples of stocks with good long track records.
- AIVSX – American Funds, The Investment Company of America
- AGTHX – American Funds, The Growth Fund of America
- AWSHX – American Funds, Washington Mutual Investors Fund
- AMRMX – American Funds, American Mutual Fund
- ANCFX – American Funds, Fundamental Investors
- ANEFX – American Funds, New Economy Fund

Note that all 6 of the American Funds have a front-end load of 5.75% with expense ratios hovering around 0.6%. As a point of comparison, I also researched the returns from the Vanguard Total Stock Market Index (VTSAX). It is a Boglehead favorite for low cost index investing in U.S. stocks. 0.05% expense ratio, no loads.
All of those funds have multiple share classes with a variety of commission and expense structures. Were you able to look at the specific share classes used in the plan?
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by Jack FFR1846 »

I would take issue with a few assumptions here.

First, DR's 401k offerings likely have absolutely no relationship with what any particular ELP would offer. None.

Further: To become an ELP, you agree to pay monthly and per lead.

The numbers: So most ELPs charge AUM percentages. So all of those returns shown need to be reduced by 1-2% which the ELP charges.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by leeks »

That set of American Funds looks almost identical to those my husband was put into when he first opened a Roth IRA in his early 20s at a local credit union. Not ideal, but it was fine until we learned more about investing and had more significant savings. Had that imperfect/high-fee advice not been available from what he considered a trustworthy organization, he would have left it in a nearly zero-interest savings account and missed out on several years of the tax-advantaged space.

I think it is worth considering what a typical Dave Ramsey listener is likely to do (or not do) without the availability of such advisors. I think that spending time reading bogleheads and doing a lot of their own research is atypical. I don't think Vanguard offers low-cost advising for first-time small investors who need hand holding. I'm not sure this is widely available. USAA is one example of an organization that will offer fund recommendations for members and help them get started with investment accounts, but bogleheads are always down on USAA funds as well.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by DanMahowny »

JH4P wrote: Mon Aug 31, 2015 4:11 pm My biggest gripe with Dave is his suggestion that 8% withdrawal rates are reasonable.
Yes. This.

Perhaps someone "with the heart of a teacher" will tell him this is ridiculous advice.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by YttriumNitrate »

JH4P wrote: Tue Mar 26, 2019 12:03 pm Question. I'm following up on some research I did a few years ago, and I came across something strange. Via the above link, I can still search for Dave's 401k, but recent years don't make sense. For example, in 2017, the report shows total holdings at $25 million. If this was just for Dave, it might be correct. But he has 700-800 employees. I would expect something more like $200 million company wide.Any ideas where the rest of the money is? This is supposed to be public information, right?
On page 1 of the Form 5500 it states that the plan was started January of 2006, and there are currently about 500 participating in the plan. On page 12, it shows that Lampo contributed $1.4 million to the plan (~$2750 per employee) while the the employees contributed about $4700 each ($2.4 million).* Considering the plan is only a tad over 10 years old, and the company has grow significantly in that time, $25 million seems right.

Considering the age of the plan, the contribution limits, and the means testing requirements, I doubt Dave Ramsey's individual portion of the Lampo 401k is over $400k.

**Ramsey's retirement advice is "split your 15% retirement investing budget between tax-deferred retirement plans like your 401(k) and/or after-tax plans like a Roth IRA. ... If your employer offers a 401(k) match, invest enough in your plan to receive the full match."[1] so I wouldn't expect most of his employees to fully fund their 401ks.
Last edited by YttriumNitrate on Tue Mar 26, 2019 1:57 pm, edited 1 time in total.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by JamesSFO »

JH4P wrote: Mon Aug 31, 2015 4:11 pm Anyone following his recommendations to go to an ELP and invest in front-loaded funds has, on average, seen returns in the same ballpark as the “keep expenses low” crowd.
Wait a second? After losing 5.75% of my investment to a front-end load, I only get parity? That's some odd math to me to say we end up in the same ballpark. If we both have $10K to invest each year and we are both going to get approximately the VTSAX return, what would ever justify parting with 5.75% up front each year as a load? And why would we compare that and say the returns are the same? Not at all!

I don't think Dave is scum, but I think trying to handwave off the front-end loads is odd.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by Jags4186 »

Here are my thoughts in no particular order

1) There’s nothing wrong with investing in active funds as long as you understand the risk/reward structure.
2) Past performance does not = future returns
3) American Funds is one of the best managed active fund companies
4) Dave Ramsey recommend 100% stocks all the time as he of course doesn’t believe in debt or investing in it (although, curiously he will recommend “balanced” funds from time to time. Not sure if what he calls balanced is what we think is balanced).
5) DR’s investing advice fails not from his 4 fund strategy, but rather from his insistence that 12% returns are normal and 8% withdrawal rates are normal. An investor running the numbers based on these assumptions would undersave and overspend in retirement

Dave’s advice is mildly contradictory and certainly misunderstood by many here. He rejects “math nerds” who critique the above messaging on 12% and 8% and his true message is when you listen to the show:

A) Get out of debt stay out of debt
B) Buy a very conservative house (25% take home pay PITI on a 15 year fixed)
C) Don’t buy a new car until your net worth is $1 million+
D) Save 15% of your income and aggressively pay off your house
E) Once house is paid off save as much as possible until you retire (15% + your old mortgage payment + your mortgage overpayment)
F) Work until normal retirement age. (He rejects the notion of people retiring in the 40s and 50s under the guise of “you’ll be bored go make some money”)

So, regardless of whether or not his math works out, if you do follow the above advice you are likely to have plenty of money and a great retirement. You won’t get this message if you don’t listen to his show and only read threads on Bogleheads.
Last edited by Jags4186 on Tue Mar 26, 2019 2:02 pm, edited 2 times in total.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by UpperNwGuy »

Not much has been said about the fact that Dave Ramsey's advice is a confusing mix of religion and personal finance. I prefer to get my financial advice from secular sources and my religious inspiration from folk who don't talk about money. One of the reasons why my ex-wife asked for a divorce was because I refused to attend Larry Burkett seminars and follow Larry's envelope system. (Larry was Dave's mentor.)

Whether Dave's investment advice is good or bad does not concern me. What I do know is that low-cost total-market index funds are better investments than the actively managed funds that he is pushing.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by JH4P »

YttriumNitrate wrote: Tue Mar 26, 2019 1:51 pm
JH4P wrote: Tue Mar 26, 2019 12:03 pm Question. I'm following up on some research I did a few years ago, and I came across something strange. Via the above link, I can still search for Dave's 401k, but recent years don't make sense. For example, in 2017, the report shows total holdings at $25 million. If this was just for Dave, it might be correct. But he has 700-800 employees. I would expect something more like $200 million company wide.Any ideas where the rest of the money is? This is supposed to be public information, right?
On page 1 of the Form 5500 it states that the plan was started January of 2006, and there are currently about 500 participating in the plan. On page 12, it shows that Lampo contributed $1.4 million to the plan (~$2750 per employee) while the the employees contributed about $4700 each ($2.4 million).* Considering the plan is only a tad over 10 years old, and the company has grow significantly in that time, $25 million seems right.

Considering the age of the plan, the contribution limits, and the means testing requirements, I doubt Dave Ramsey's individual portion of the Lampo 401k is over $400k.

**Ramsey's retirement advice is "split your 15% retirement investing budget between tax-deferred retirement plans like your 401(k) and/or after-tax plans like a Roth IRA. ... If your employer offers a 401(k) match, invest enough in your plan to receive the full match."[1] so I wouldn't expect most of his employees to fully fund their 401ks.
Thank you. That makes sense. I had looked at my own company's forms recently and saw that despite having only 1/4 the employees, we have more total funds than Dave's. Hadn't noticed that Dave's didn't start until 2006. My company's started in 1997. Knowing that, the totals make much more sense.

Appreciate the help! I'm going to work on a new post on the topic of Dave's "you can beat the S&P" advice, and these 401k numbers are relevant. The bottom line totals just threw me off at first and I was scared I was missing something.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by UpperNwGuy »

JH4P wrote: Tue Mar 26, 2019 2:23 pm Appreciate the help! I'm going to work on a new post on the topic of Dave's "you can beat the S&P" advice, and these 401k numbers are relevant. The bottom line totals just threw me off at first and I was scared I was missing something.
Why are you going to write another Dave Ramsey post? This is board centers around Jack Bogle's style of investing, and Dave Ramsey is clearly outside that tradition.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by smitcat »

JH4P wrote: Tue Mar 26, 2019 2:23 pm
YttriumNitrate wrote: Tue Mar 26, 2019 1:51 pm
JH4P wrote: Tue Mar 26, 2019 12:03 pm Question. I'm following up on some research I did a few years ago, and I came across something strange. Via the above link, I can still search for Dave's 401k, but recent years don't make sense. For example, in 2017, the report shows total holdings at $25 million. If this was just for Dave, it might be correct. But he has 700-800 employees. I would expect something more like $200 million company wide.Any ideas where the rest of the money is? This is supposed to be public information, right?
On page 1 of the Form 5500 it states that the plan was started January of 2006, and there are currently about 500 participating in the plan. On page 12, it shows that Lampo contributed $1.4 million to the plan (~$2750 per employee) while the the employees contributed about $4700 each ($2.4 million).* Considering the plan is only a tad over 10 years old, and the company has grow significantly in that time, $25 million seems right.

Considering the age of the plan, the contribution limits, and the means testing requirements, I doubt Dave Ramsey's individual portion of the Lampo 401k is over $400k.

**Ramsey's retirement advice is "split your 15% retirement investing budget between tax-deferred retirement plans like your 401(k) and/or after-tax plans like a Roth IRA. ... If your employer offers a 401(k) match, invest enough in your plan to receive the full match."[1] so I wouldn't expect most of his employees to fully fund their 401ks.
Thank you. That makes sense. I had looked at my own company's forms recently and saw that despite having only 1/4 the employees, we have more total funds than Dave's. Hadn't noticed that Dave's didn't start until 2006. My company's started in 1997. Knowing that, the totals make much more sense.

Appreciate the help! I'm going to work on a new post on the topic of Dave's "you can beat the S&P" advice, and these 401k numbers are relevant. The bottom line totals just threw me off at first and I was scared I was missing something.
18 post out of 27 are about Dave Ramsey - this is not likely the best place for your efforts if your real thoughts are all focused on Dave Ramsey.
Why not just post on that site?
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by deltaneutral83 »

feh wrote: Wed Sep 02, 2015 12:00 pm
JH4P wrote:His claim that it is "easy to beat the pants off the S&P500" is clearly wrong, as his funds have failed to even match it, but simultaneously, people are also wrong to claim that he is "a sleazy crook".
If he is personally profiting from his recommendations to invest in those funds, and he's not accurate about the results, then I think "sleazy crook" is a fair label.
I would propose that you take twenty ordinary folks and give them your own advice on how best to manage their investments (which means 401k and/or IRA as 95% of the country has no capacity for a taxable) and we can compare it to Dave's as far as the accumulation phase is concerned. The key here is that both competitors (you and Dave) are subject to behavioral risk(s) of your clients and whoever has the best risk adjusted return wins (fees included of course). For this exercise, we'd need to just stick to equities as this is the accumulation phase. I agree that the no bonds and 8% withdrawal rate is high for a retiree but Dave couldn't care less about that when he's staring down the barrel of a 45 year old with a zero net worth. As if having $1.2 million at age 58 all in equities is a huge hypothetical concern so much as the current conundrum of zilch.

To sum up, Dave is basically a parent not giving a child the choice to make a bad decision. The "12% year over year" and "My funds beat the S&P" is simply a tool that he uses to get people to invest. It isn't accurate, and it isn't projected at Bogleheads, in fact, the AIVSX he touts "best-est fund in the world since 1932" has been steamrolled the last 10 years by SPY. Much like a parent telling a child they will have mold growing in their teeth if they don't brush (or whatever horror story your parents told you to get to brush your teeth), Dave wants intentional action out of folks. You're not necessarily concerned about the execution of the best oral hygiene but you are interested in using whatever tactics you've acquired thorough decades of behavioral studies to get the child to brush in the first place. BH have a much greater grasp of behaviors than the common man, and that's the entire premise of Dave's financial tactics. Some of the BH's actually post as if Dave is talking directly at them and get mad, I don't wake up in the morning that irritated so I can't speak to it through that lens as I know who he's speaking to.
Last edited by deltaneutral83 on Tue Mar 26, 2019 3:06 pm, edited 1 time in total.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by JH4P »

smitcat wrote: Tue Mar 26, 2019 2:41 pm18 post out of 27 are about Dave Ramsey - this is not likely the best place for your efforts if your real thoughts are all focused on Dave Ramsey.
Why not just post on that site?
Dave Ramsey is in my church. I desire to be informed and capable of responding well when discussing him. I want to be able to point out his faults clearly, but without hyperbole. I don’t think I’d get the same valuable responses in his forum that I receive here.

Is that OK?
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by senex »

JH4P wrote: Tue Mar 26, 2019 3:06 pm Is that OK?
Ok? That is great. Thanks for bumping this old thread (I wasn't active when you first posted it).

It's hard to believe no one has said yet: this is brilliantly conceived and expertly executed. Thank you for such great work.

It gives a quantitative comparison of stuff that not just Ramsey, but many advisors are doing. Many bogleheads have relatives that invest via advisors, and we worry about their returns. An analysis like this shows that for regular people (i.e. not boglehead hyper-optimizers) such funds/advisors can be respectable enough. They are *especially* respectable given that for some percent of customers, their main alternatives (if not hand-held in these funds) would be to blow all their income on frivolities or to "invest" in CDs or a savings account. Psychology is prince & not everyone has boglehead constitution.

Keep up the good work.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by UpperNwGuy »

Wow! I didn’t notice that this was the March 2019 reactivation of a 2015 thread. Thanks for calling that out.

OP, you’ve had four long years to research this. Why are you still churning this same topic?
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by JH4P »

UpperNwGuy wrote: Tue Mar 26, 2019 3:43 pm Wow! I didn’t notice that this was the March 2019 reactivation of a 2015 thread. Thanks for calling that out.

OP, you’ve had four long years to research this. Why are you still churning this same topic?
Dave says it is easy to pick funds that beat the S&P. Bogleheads (amongst many others) say picking past winners doesn’t mean they will continue to win in the future, and in fact they likely won’t. (I agree). I wanted to run a test. The oldest listing of Dave’s 401k menu options that I could find was from 2008. I’m revisiting the subject because we now have a decade of data to review and see just how well Dave’s “S&P beaters” actually did.

I’ve found some interesting results so far and am curious to see if anyone can poke any holes in my analysis. I plan to share some of this with a few of my friends who are more pro-Dave than I am. I’m happy to share stuff here in case it helps anyone else. This forum is great in that regard.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by Mr.BB »

One my problems with Dave's investment advice is that you lose years of compounding interest by putting off savings. I do agree with him about setting up an emergency account and getting out of high interest credit card rates. I heard him tell a woman in her early 20's to use an extra $10,000 (she had received) toward her house down payment. Even if she had used half and put $5,000 of that money in an index total market fund and just leave it alone, she would have a lot more money in 40-45 years then if she just put it all into her future house payment.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by smitcat »

JH4P wrote: Tue Mar 26, 2019 3:06 pm
smitcat wrote: Tue Mar 26, 2019 2:41 pm18 post out of 27 are about Dave Ramsey - this is not likely the best place for your efforts if your real thoughts are all focused on Dave Ramsey.
Why not just post on that site?
Dave Ramsey is in my church. I desire to be informed and capable of responding well when discussing him. I want to be able to point out his faults clearly, but without hyperbole. I don’t think I’d get the same valuable responses in his forum that I receive here.

Is that OK?

"Dave Ramsey is in my church. I desire to be informed and capable of responding well when discussing him. I want to be able to point out his faults clearly, but without hyperbole. I don’t think I’d get the same valuable responses in his forum that I receive here."

Everyone can do whatever they like but I for one just want to find best solutions to problems and that would not typically include quoting the same person/source no matter who they are.
Not for me to say what is OK and what is not OK....
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by Nate79 »

JH4P wrote: Tue Mar 26, 2019 4:08 pm
UpperNwGuy wrote: Tue Mar 26, 2019 3:43 pm Wow! I didn’t notice that this was the March 2019 reactivation of a 2015 thread. Thanks for calling that out.

OP, you’ve had four long years to research this. Why are you still churning this same topic?
Dave says it is easy to pick funds that beat the S&P. Bogleheads (amongst many others) say picking past winners doesn’t mean they will continue to win in the future, and in fact they likely won’t. (I agree). I wanted to run a test. The oldest listing of Dave’s 401k menu options that I could find was from 2008. I’m revisiting the subject because we now have a decade of data to review and see just how well Dave’s “S&P beaters” actually did.

I’ve found some interesting results so far and am curious to see if anyone can poke any holes in my analysis. I plan to share some of this with a few of my friends who are more pro-Dave than I am. I’m happy to share stuff here in case it helps anyone else. This forum is great in that regard.
Did you run the numbers without the loads? It is highly unlikely that they pay loads like near 100% of 401ks don't. I have one American funds in my 401k and we certainly don't pay loads.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by darkhorse346 »

nisiprius wrote: Tue Sep 01, 2015 9:10 am
In Dave Ramsey's case his own net worth, and I'm just using celebritynetworth.com as my source--no idea how reliable it is--is estimated at $55 million, which is very much in the same ballpark as John C. Bogle ($80 million). For comparison, that same source shows Suze Orman at $35 million, Jim Cramer at $100 million--and advisor Ken Fisher at $2.8 billion-with-a-b.

To me, he seems more like someone who makes money from his media empire (and sales of course materials etc.) than someone who makes money directly from clients' investments.
I have heard Dave mention that most of his net worth is in other assets such as real estate and his business. Mutual funds represent a relatively small part of the net worth pie, so I could see 100% equities making sense for him.

BTW, Capital Group, who runs the American Funds, are good. If I had to use one active manager, and I do due to 401k limitations, I'd want it to be American Funds.

Sadly, many people (non-Bogleheads) are buried in debt and quietly struggling...they look great, but they're broke. I think Dave does a lot of good for many people. I think we just need to give him a break. Let's agree to strongly disagree with his investment advice and move on.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by Grt2bOutdoors »

Mr.BB wrote: Tue Mar 26, 2019 4:18 pm One my problems with Dave's investment advice is that you lose years of compounding interest by putting off savings. I do agree with him about setting up an emergency account and getting out of high interest credit card rates. I heard him tell a woman in her early 20's to use an extra $10,000 (she had received) toward her house down payment. Even if she had used half and put $5,000 of that money in an index total market fund and just leave it alone, she would have a lot more money in 40-45 yearsa then if she just put it all into her future house payment.
Ah, and there in lies the crux of the problem. Most people are can not invest and “leave it alone”, they are prone to behavioral errors where they buy high and sell low when there is market disruption.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by Slacker »

JH4P wrote: Tue Mar 26, 2019 4:08 pm
UpperNwGuy wrote: Tue Mar 26, 2019 3:43 pm Wow! I didn’t notice that this was the March 2019 reactivation of a 2015 thread. Thanks for calling that out.

OP, you’ve had four long years to research this. Why are you still churning this same topic?
Dave says it is easy to pick funds that beat the S&P. Bogleheads (amongst many others) say picking past winners doesn’t mean they will continue to win in the future, and in fact they likely won’t. (I agree). I wanted to run a test. The oldest listing of Dave’s 401k menu options that I could find was from 2008. I’m revisiting the subject because we now have a decade of data to review and see just how well Dave’s “S&P beaters” actually did.

I’ve found some interesting results so far and am curious to see if anyone can poke any holes in my analysis. I plan to share some of this with a few of my friends who are more pro-Dave than I am. I’m happy to share stuff here in case it helps anyone else. This forum is great in that regard.
Have you tried running the results with annual $10,000 deposits from 2008 until today to see these funds compare?

I suppose you'd need to resolve 1) what that looks like in returns for those going to an ELP and paying a front end load 2) what that looks like for his employees who may not pay the loads but could potentially be paying a higher ER (from what others have said)...but I think #1 is more important for Ramsey listeners and #2 only relevant to Ramsey employees.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by whodidntante »

I would like to thank Dave Ramsey for disproving Bogleheadism. But I'm a little concerned that maybe it was just a good market for growth stocks and not actually a great stock picker thing. So I'll need to consult with a smartvestor pro with the heart of a teacher to know which funds will outperform in the future, because it's all so complicated.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by JBTX »

Kevin M wrote: Wed Sep 02, 2015 1:46 pm In selecting the best of the worst funds in my daughter's lousy 401k (no low-cost index funds), we selected American Funds EuroPacific Growth Fund (RERBX) for international. Why? Because when we looked, it had tracked Vanguard Total International Stock Index fund (VGTSX) quite closely over the previous five years, so I figured it was basically a high-expense, closet index fund. Interestingly, it has done quite a bit better than VGTSX over the most recent five years, but I just consider this good luck. It could very well have gone the other way, and it has gone the other way over previous 5-year periods.

The closest to a decent total US stock fund available is American Funds The Growth Fund of America (RGABX), and Vanguard Total Stock Market Index (VTSMX) has beaten it handsomely over the last five years. Vanguard generally comes out on top if you look at recent rolling five-year periods, but if you go back to periods ending in the mid-to-late 1990s, RGABX was the clear winner. This is the nature of actively-managed funds.

The research seems pretty conclusive that as the measurement period increases, fewer and fewer actively-managed funds beat a fair benchmark, and for the ones that do, it's hard if not impossible to tell whether or not it was due to skill or luck. So my preference is to stick with index funds, only use actively-managed funds if there's no other choice, and then to select whichever one has hugged a comparable index fund most closely in recent years, not the one that has outperformed.

Kevin
I recall when evaluating 401ks I did some benchmarking of American funds, using 10 and 15 year periods. They actually tracked very closely to comparable index funds. I don't think front end loads were factored in.

The vaunted out performance of American funds must have come from periods more than 15 years ago.

You can American funds at much lower expenses ratios in some 401k plans.

Bottom line I'd say their funds are better than most active funds,and I wouldnt be unhappy with their lower fee versions in a 401k plan, but for the most part they track index funds and certainly don't warrant a 5.75% load.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by Random Musings »

"Pushing the envelope" IMHO is just being plain wrong but still saying it over and over and over as a marketing ploy to get people to use financial services where Dave may get a piece of the action.

I could never recommend a financial "expert" that does this.

RM
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by stemikger »

I like listening to the Dave Ramsey show for all the success stories. I do also like Dave at times and if he likes managed funds, so be it. Where I take issue with Dave is when he becomes bully Dave. It is not all the time, but often enough to make me scratch my head. There are times Dave has really great wisdom and is pretty deep and thoughtful but when bully Dave arrives, he can be a real jerk.
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by eigenperson »

Since this thread was bumped, we might as well take the opportunity to look at the performance of the funds listed in the first post, since it was made on August 31, 2015. After all, those funds were really in Dave's 401(k) on that date. There is no hindsight bias in selecting them.

We'll compare against VTSAX, as was done in the original post.

Here's the growth of $10,000 according to Morningstar. I'm going to disregard any front-end loads here.

AIVSX: $14,306.93
AGTHX: $15,375.52
AWSHX: $15,064.49
AMRMX: $14,446.77
ANCFX: $14,993.08
ANEFX: $14,879.48

Average: $14,844.38

Benchmark for comparison:

VTSAX: $14,899.03

The verdict? It's pretty close, but to hopefully no one's surprise, the index fund won. VTSAX beat the Dave Ramsey equal-weighted portfolio by a narrow 0.55% overall, which comes out to 0.15% per year. Since the expense ratios of these funds are in the 0.60% range, that means their managers succeeded in beating the market in aggregate, but unfortunately they charged more in fees than they outperformed by, leaving investors slightly worse off.

The difference is not statistically significant, so we can't conclude that active funds are inferior to index funds -- at least until you consider the sales load. It's pretty clear from yet another period of underperformance that you're not getting your money's worth when you pay that load, but rather the exact opposite.
Raabe34
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by Raabe34 »

In the case of Dave's 401k, they would not be paying any loads in the 401k plan due to being past the breakpoints. I think he takes that assumption(liberally) that we'll all be millionaires and won't be paying loads. He's fast forwarding a bit but he keeps the end in mind. The positive that he has brought to so many should be respected.
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whodidntante
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Re: Dave Ramsey's Advice - Evaluated with Actual Returns from His Company's 401K

Post by whodidntante »

Raabe34 wrote: Tue Mar 26, 2019 11:26 pm In the case of Dave's 401k, they would not be paying any loads in the 401k plan due to being past the breakpoints. I think he takes that assumption(liberally) that we'll all be millionaires and won't be paying loads. He's fast forwarding a bit but he keeps the end in mind. The positive that he has brought to so many should be respected.
It's really easy because the market returns 12% each year. :twisted:
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