Dave Ramsey spends two segments on his investing advice

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Helo80
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Dave Ramsey spends two segments on his investing advice

Post by Helo80 » Sun Aug 13, 2017 8:33 am

https://www.daveramsey.com/show/archive ... mode=watch
It was the August 11, 2017, show and appears to have been a previously recorded episode.

If you start the video at hour number 2 of the show (time mark 1:06:50), he spends the first two segments of his show ~ roughly 20 minutes ~ (there's a quick commercial break in-between) talking about investments.

Some observations:
1. He provides generic advice about how the four types of funds he invests in.

2. At no point does he identify specific fund companies or funds he puts money in (though, he has a quick jab early on that he gave up all his licenses, bar Real Estate, as he wanted to be free to say what he wanted to on the air.... but I guess he does not want to funnel listeners to one broker or fund)

3. He has no problem paying the ERs of mutual fund managers (he's said a number of times in other shows, he's happy to pay commissions if he thinks the service is worth the money).

4. He kind of mocks index funds --- and to a disservice of his listeners, IMHO, makes anybody think that they can "outperform" the market long term by just "picking the right mutual funds" with 10-yr track records that outperform the S&P500.


I would still like to know the specific funds he privately/personally invests in and how the ERs stack up to Index funds

Jags4186
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Re: Dave Ramsey spends two segments on his investing advice

Post by Jags4186 » Sun Aug 13, 2017 9:18 am

He ihas mentioned a few times that he nvests in American Funds and they do have long term track records of outperforming the S&P 500.

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stemikger
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Re: Dave Ramsey spends two segments on his investing advice

Post by stemikger » Sun Aug 13, 2017 9:24 am

Jags4186 wrote:
Sun Aug 13, 2017 9:18 am
He ihas mentioned a few times that he nvests in American Funds and they do have long term track records of outperforming the S&P 500.
+1

I believe there was someone on this board (years ago) that figured out which funds Dave invested in. They were all American Funds. I guess you can do a search and find it. Either way, I'm not interested. I'm a 100% index investor, so no reason to do the work to see if American Funds are the panacea many claim they are.

I have American Funds in my 401K and they do have a great reputation, just not for me.
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Tamalak
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Re: Dave Ramsey spends two segments on his investing advice

Post by Tamalak » Sun Aug 13, 2017 9:30 am

It's always been my policy that if your net worth is below zero, listen to Dave Ramsey, and if it's above zero, listen to Bogleheads.

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Re: Dave Ramsey spends two segments on his investing advice

Post by Jags4186 » Sun Aug 13, 2017 9:31 am

Growth Fund of America and Investment Company of America are two funds which have outperformed the S&P 500 and ones I have heard him specifically mention on air. This was during an episode where he was "debating" aka yelling at someone who wrote an article on Market Watch I believe who said that DR's investment advice is dangerous.

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Re: Dave Ramsey spends two segments on his investing advice

Post by Nate79 » Sun Aug 13, 2017 9:37 am

Great, wonder if this is going to turn out to be another DR bash thread?

How is this actionable?

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stemikger
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Re: Dave Ramsey spends two segments on his investing advice

Post by stemikger » Sun Aug 13, 2017 9:52 am

Nate79 wrote:
Sun Aug 13, 2017 9:37 am
Great, wonder if this is going to turn out to be another DR bash thread?

How is this actionable?
Not about bashing Dave, I think he helps a lot of people get out of debt. Having said that, I wish he could chill out sometimes when people disagree with him. The bottom line is whether you listen to Dave or someone else, it is a good thing that people are taking control of your finances.

The one thing I find a little sad is when you go to Barnes & Nobel, you can find all Dave's books on the shelves, but you would be lucky to find one John Bogle book. Dave certainly has more of a voice when it comes to the novice than John Bogle. Hopefully many start with Dave and end with Jack. It would save them a ton of money in the long run.
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Re: Dave Ramsey spends two segments on his investing advice

Post by mptfan » Sun Aug 13, 2017 10:06 am

Tamalak wrote:
Sun Aug 13, 2017 9:30 am
It's always been my policy that if your net worth is below zero, listen to Dave Ramsey, and if it's above zero, listen to Bogleheads.
Someone could have a house valued at $300,000 and $100,000 in credit card debt and they would have a net worth above zero, but I would still recommend that they listen to Dave Ramsey.
I eat risk for breakfast. :)

Helo80
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Re: Dave Ramsey spends two segments on his investing advice

Post by Helo80 » Sun Aug 13, 2017 3:17 pm

Nate79 wrote:
Sun Aug 13, 2017 9:37 am
Great, wonder if this is going to turn out to be another DR bash thread?

How is this actionable?

Nope -- thought I'd merely share his thoughts as it was from the episode two days ago (albeit a previously recorded episode, but good luck finding it in his archives --- I kind of figured it was previously recorded as a later caller brought up a baby due in July).

I like Dave Ramseys' show --- calm voice of reason, helps people get out of debt and financial servitude, gets people excited about paying off the mortgage and being truly financially independent (in the zero debt sense), and overall what he does day to day. I think it's comical that he calls bank CDs - certificates of depression... a little harsh, but he means well, and 9 times out of 10, if you're using CDs to build retirement savings, you're doing it wrong and he's absolutely right about that.

Helo80
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Re: Dave Ramsey spends two segments on his investing advice

Post by Helo80 » Sun Aug 13, 2017 3:20 pm

Jags4186 wrote:
Sun Aug 13, 2017 9:18 am
He ihas mentioned a few times that he nvests in American Funds and they do have long term track records of outperforming the S&P 500.


Thanks for sharing... I did not know that. I'll check them out out of more curiosity than anything.

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Re: Dave Ramsey spends two segments on his investing advice

Post by willthrill81 » Sun Aug 13, 2017 3:34 pm

Let's take an objective look at some of Dave's "investing advice."

1. He says that paying a 5.75% front end load for a mutual fund is money well spent.
2. He says that ERs don't really matter.
3. He says that active management of stocks will easily beat passive management.
4. He says that growth funds outperform everything else.
5. He says the market averages 12% a year.
6. He says you can safely use an 8% withdrawal rate.

I think that pretty much sums up his "investment advice."

On all six points above, it can be easily demonstrated that he's absolutely wrong or, at best, extremely misleading (i.e. the arithmetic average of U.S. market returns is indeed around 12%, but that's irrelevant to investors).
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Dave Ramsey spends two segments on his investing advice

Post by willthrill81 » Sun Aug 13, 2017 3:35 pm

Helo80 wrote:
Sun Aug 13, 2017 3:20 pm
Jags4186 wrote:
Sun Aug 13, 2017 9:18 am
He ihas mentioned a few times that he nvests in American Funds and they do have long term track records of outperforming the S&P 500.


Thanks for sharing... I did not know that. I'll check them out out of more curiosity than anything.
Fidelity's Magellan fund outperformed the S&P 500 for years...until it didn't anymore.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Dave Ramsey spends two segments on his investing advice

Post by Grt2bOutdoors » Sun Aug 13, 2017 4:11 pm

willthrill81 wrote:
Sun Aug 13, 2017 3:35 pm
Helo80 wrote:
Sun Aug 13, 2017 3:20 pm
Jags4186 wrote:
Sun Aug 13, 2017 9:18 am
He ihas mentioned a few times that he nvests in American Funds and they do have long term track records of outperforming the S&P 500.


Thanks for sharing... I did not know that. I'll check them out out of more curiosity than anything.
Fidelity's Magellan fund outperformed the S&P 500 for years...until it didn't anymore.
Magellan was solo skippered, American Funds I believe take a team approach to fund management. That said, past performance is not indicative of future returns. :wink:
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Re: Dave Ramsey spends two segments on his investing advice

Post by LEB1230 » Sun Aug 13, 2017 4:22 pm

We've followed Dave on our way out of debt. As we are close to step 4 I began several weeks ago educating myself on investing, which is what has lead me here. I've learned what many others have already said on this forum that his advice on dumping debt is sound but when it comes to investing do your own research.

I enjoyed the part of the segment when he went on a rant and said everyone has an opinion on investing and they are all crap. All I could think was you just gave your opinion on investing and guess what...

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Re: Dave Ramsey spends two segments on his investing advice

Post by Jack FFR1846 » Sun Aug 13, 2017 4:39 pm

Jags4186 wrote:
Sun Aug 13, 2017 9:31 am
Growth Fund of America and Investment Company of America are two funds which have outperformed the S&P 500 and ones I have heard him specifically mention on air. This was during an episode where he was "debating" aka yelling at someone who wrote an article on Market Watch I believe who said that DR's investment advice is dangerous.
Is that really true? I played around comparing AGTHX with SPY a bit and they seem near equal if I ignore the 5.75% load and the 12b-1 fee of growth. I'm not adept enough to put all the fees into a chart but looking at various time frames, if AGTHX really did beat SPY, it was not by much and ignored the huge drag of the load.
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Helo80
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Re: Dave Ramsey spends two segments on his investing advice

Post by Helo80 » Sun Aug 13, 2017 4:57 pm

willthrill81 wrote:
Sun Aug 13, 2017 3:34 pm
Let's take an objective look at some of Dave's "investing advice."

1. He says that paying a 5.75% front end load for a mutual fund is money well spent.
2. He says that ERs don't really matter.
3. He says that active management of stocks will easily beat passive management.
4. He says that growth funds outperform everything else.
5. He says the market averages 12% a year.
6. He says you can safely use an 8% withdrawal rate.

I think that pretty much sums up his "investment advice."

On all six points above, it can be easily demonstrated that he's absolutely wrong or, at best, extremely misleading (i.e. the arithmetic average of U.S. market returns is indeed around 12%, but that's irrelevant to investors).
I completely agree.... Overall though, BH have been harsh on DR and this thread is not meant to turn into a DR bash fest. Rather, I think DR focuses on getting people out of debt as efficiently and quickly as possible. I love how he takes ordinary, everyday people whom have cut the fat out of their lives and paid off the mortgage on very ordinary and average incomes... inspiring all of his listeners to follow their path. Great success stories and stern father type talk to his callers and he has a great show.

That being said ---- I'd rather have somebody investing with front load fees, EJ AUM fees, and other standard expense ratios if that's what it takes to get them to invest rather than putting all of their savings in the bank with that paltry interest, CDs, or government bonds or whatever. Long term, AMFs with 1% ERs will grow more than the former examples IMHO. So, if that's what it takes to lead the horse to water....

I did not care for his quip on index funds, when it's the one fund that promises to match the S&P500 --- no better, no worse.... all for 3-4 basis points per year. Every fund manager wants to beat the market... if not for the fame, fortune, and the cut they get from the fees, but to do what's best for the fund holders. But, we see many funds do better than average for a while, do worse than average for a while, and then long-term probably won't beat S&P500.

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Re: Dave Ramsey spends two segments on his investing advice

Post by SleepKing » Sun Aug 13, 2017 5:00 pm

Tamalak wrote:
Sun Aug 13, 2017 9:30 am
It's always been my policy that if your net worth is below zero, listen to Dave Ramsey, and if it's above zero, listen to Bogleheads.
I must admit, DW and I spent much time listening to Dave and Suze Orman in our early 20s, when we had $0 in the bank, lots of student debt, etc... Honestly, not a bad place to START your financial education and get your interest stoked. Just need to mature and keep learning from there. He gets you motivated to start saving, stop spending, cut up the credit cards, live below your means, get rid of debt....advice most people actually need in a somewhat entertaining way!

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Re: Dave Ramsey spends two segments on his investing advice

Post by Jags4186 » Sun Aug 13, 2017 6:12 pm

Jack FFR1846 wrote:
Sun Aug 13, 2017 4:39 pm
Jags4186 wrote:
Sun Aug 13, 2017 9:31 am
Growth Fund of America and Investment Company of America are two funds which have outperformed the S&P 500 and ones I have heard him specifically mention on air. This was during an episode where he was "debating" aka yelling at someone who wrote an article on Market Watch I believe who said that DR's investment advice is dangerous.
Is that really true? I played around comparing AGTHX with SPY a bit and they seem near equal if I ignore the 5.75% load and the 12b-1 fee of growth. I'm not adept enough to put all the fees into a chart but looking at various time frames, if AGTHX really did beat SPY, it was not by much and ignored the huge drag of the load.
Investment Company of America

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Growth Company of America

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Re: Dave Ramsey spends two segments on his investing advice

Post by gvsucavie03 » Sun Aug 13, 2017 6:22 pm

Tamalak wrote:
Sun Aug 13, 2017 9:30 am
It's always been my policy that if your net worth is below zero, listen to Dave Ramsey, and if it's above zero, listen to Bogleheads.
Good one!

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Re: Dave Ramsey spends two segments on his investing advice

Post by gvsucavie03 » Sun Aug 13, 2017 6:29 pm

mptfan wrote:
Sun Aug 13, 2017 10:06 am
Tamalak wrote:
Sun Aug 13, 2017 9:30 am
It's always been my policy that if your net worth is below zero, listen to Dave Ramsey, and if it's above zero, listen to Bogleheads.
Someone could have a house valued at $300,000 and $100,000 in credit card debt and they would have a net worth above zero, but I would still recommend that they listen to Dave Ramsey.
Both sides would say 100k in cc debt is stupid...

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Re: Dave Ramsey spends two segments on his investing advice

Post by gvsucavie03 » Sun Aug 13, 2017 6:37 pm

I'll chime in before the advisory board shuts down this latest DR thread...

Is Bogle or DR investing advice better... no one knows. 100% stocks till death is likely to have more $ in retirement than age in bonds or -10, -15, etc. You will lose a fortune in fees with the DR plan and also have much higher risk. Still, we have no idea today which approach will be better in the future.

If you follow DR to the absolute letter, you are still better off than if you never thought about retirement or investing. His advice is flawed, but in the general scope of society, it isn't horrible.

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Re: Dave Ramsey spends two segments on his investing advice

Post by selters » Sun Aug 13, 2017 6:49 pm

Dave Ramsey doesn't mention this very often, but I've been listening to his show more than I probably should in the last year, and he's said a few times that he has all of his taxable investments in the Vanguard S&P 500 index fund, but that he uses active funds for his tax deferred accounts. His tax deferred accounts seem to use American Funds. He's also stated that he has less than ten funds across all of his accounts.

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Re: Dave Ramsey spends two segments on his investing advice

Post by whodidntante » Sun Aug 13, 2017 6:58 pm

Tamalak wrote:
Sun Aug 13, 2017 9:30 am
It's always been my policy that if your net worth is below zero, listen to Dave Ramsey, and if it's above zero, listen to Bogleheads.
Lol

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Re: Dave Ramsey spends two segments on his investing advice

Post by garlandwhizzer » Sun Aug 13, 2017 6:58 pm

Jags4186 made the point with a graph that American's Growth Fund (AGTHX) has outperformed the S&P 500 (VFINX) since its inception in the early 1970s, more than 40 years ago. That outperformance came early on and, as its success became common knowledge, lots of assets flowed into AGTHX which now has 160 billion in assets to invest. Markets in the 1970s, 1980s, and early 1990s were considerably less efficient than now as Peter Lynch's success with Magellan demonstrated. There was asymmetrical knowledge, much less professional management, and essentially no knowledge of factors, etc.. Those early results do not give a reliable history of AGTHX's relative performance in the more recent past, now, or especially with the current asset bloat, the future. I have no trouble believing that talented management working with a small asset base in the 70s, 80s, and early 90s could be nimble and outperform comparable indexes. There were inefficiencies to be exploited back then. I have a great deal of trouble believing that with a large asset base to invest going forward in our professionally driven more efficient markets, they can perform as well as comparable indexes.

Making an apples to apples comparison, AGTHX to VUG Vanguard's Growth Fund, both working in the LC growth space is a valid comparison. Since its inception about 12 years ago, VUG and even VFINX (LCB) have handily outperformed AGTHX. Magellan Fund has underperformed the S&P 500 for the last 30 years and even Warren Buffett, perhaps the leading investing genius of our age, is banging his head against the stone wall of the S&P 500 index these days even though in early years, with less to invest in less efficient markets, he massively outperformed. I could be wrong on this, but I would expect a similar fate for AGTHX going forward.

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Re: Dave Ramsey spends two segments on his investing advice

Post by willthrill81 » Sun Aug 13, 2017 7:19 pm

garlandwhizzer wrote:
Sun Aug 13, 2017 6:58 pm
Jags4186 made the point with a graph that American's Growth Fund (AGTHX) has outperformed the S&P 500 (VFINX) since its inception in the early 1970s, more than 40 years ago. That outperformance came early on and, as its success became common knowledge, lots of assets flowed into AGTHX which now has 160 billion in assets to invest. Markets in the 1970s, 1980s, and early 1990s were considerably less efficient than now as Peter Lynch's success with Magellan demonstrated. There was asymmetrical knowledge, much less professional management, and essentially no knowledge of factors, etc.. Those early results do not give a reliable history of AGTHX's relative performance in the more recent past, now, or especially with the current asset bloat, the future. I have no trouble believing that talented management working with a small asset base in the 70s, 80s, and early 90s could be nimble and outperform comparable indexes. There were inefficiencies to be exploited back then. I have a great deal of trouble believing that with a large asset base to invest going forward in our professionally driven more efficient markets, they can perform as well as comparable indexes.
I have trouble too believing that there is much alpha left to exploit, especially after expenses.

That being said, AGTHX has actually outperformed the S&P 500 by .48% CAGR from Jan. 2007 until now, though I don't know if you would actually be ahead after the 5.75% load. I doubt it.
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Re: Dave Ramsey spends two segments on his investing advice

Post by Lancelot » Sun Aug 13, 2017 7:32 pm

Jags4186 wrote:
Sun Aug 13, 2017 9:18 am
He ihas mentioned a few times that he nvests in American Funds and they do have long term track records of outperforming the S&P 500.
After fees and loads?

What specific time periods?
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Re: Dave Ramsey spends two segments on his investing advice

Post by Jags4186 » Sun Aug 13, 2017 7:42 pm

There is no guarantee that American Funds can continue to outperform, but the reality is they have outperformed in most 10+ year time periods and have "long term track records of out performing the S&P 500" as DR would say. And now that they are available in F-1 class shares with no load, you don't need to consider the 5.75% load fee (although, you do need to account for a slightly higher ER).

I have no interest in using American Funds, but as a fund family they have done well. The reality is, as long as there is active management some funds will out perform, some will underperform, and some will market perform.

Please remember, index investing is not the best investment strategy. But there are 1000s worse ones.

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Re: Dave Ramsey spends two segments on his investing advice

Post by willthrill81 » Sun Aug 13, 2017 7:46 pm

Jags4186 wrote:
Sun Aug 13, 2017 7:42 pm
There is no guarantee that American Funds can continue to outperform, but the reality is they have outperformed in most 10+ year time periods and have "long term track records of out performing the S&P 500" as DR would say. And now that they are available in F-1 class shares with no load, you don't need to consider the 5.75% load fee (although, you do need to account for a slightly higher ER).

I have no interest in using American Funds, but as a fund family they have done well. The reality is, as long as there is active management some funds will out perform, some will underperform, and some will market perform.

Please remember, index investing is not the best investment strategy. But there are 1000s worse ones.
Without foreknowledge of future events, I don't think that's correct if you mean "best" to be highest returns. If we could predict which funds would outperform the rest after all fees, we would invest in those, be they indexed or no. But since we can't, history indicates that indexing is superior on an after-fee basis.
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Re: Dave Ramsey spends two segments on his investing advice

Post by Lancelot » Sun Aug 13, 2017 7:56 pm

Jags4186 wrote:
Sun Aug 13, 2017 7:42 pm
There is no guarantee that American Funds can continue to outperform, but the reality is they have outperformed in most 10+ year time periods and have "long term track records of out performing the S&P 500" as DR would say. And now that they are available in F-1 class shares with no load, you don't need to consider the 5.75% load fee (although, you do need to account for a slightly higher ER).

I have no interest in using American Funds, but as a fund family they have done well. The reality is, as long as there is active management some funds will out perform, some will underperform, and some will market perform.

Please remember, index investing is not the best investment strategy. But there are 1000s worse ones.
I wonder how CAGR of Vanguard's S&P fund would compare with The Growth Fund of America. In any case I don't follow Dave Ramsey closely, so I had wondered what specific funds he recommended.

According to this link https://www.americanfunds.com/individua ... .html.html five American funds have beaten Vanguards 500 Index fund, since its inception in 1976. I'm still chewing on that one.

If I'm going to look back, Berkshire has done well since 1976 :mrgreen:
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Re: Dave Ramsey spends two segments on his investing advice

Post by Jags4186 » Sun Aug 13, 2017 8:13 pm

willthrill81 wrote:
Sun Aug 13, 2017 7:46 pm
Jags4186 wrote:
Sun Aug 13, 2017 7:42 pm
There is no guarantee that American Funds can continue to outperform, but the reality is they have outperformed in most 10+ year time periods and have "long term track records of out performing the S&P 500" as DR would say. And now that they are available in F-1 class shares with no load, you don't need to consider the 5.75% load fee (although, you do need to account for a slightly higher ER).

I have no interest in using American Funds, but as a fund family they have done well. The reality is, as long as there is active management some funds will out perform, some will underperform, and some will market perform.

Please remember, index investing is not the best investment strategy. But there are 1000s worse ones.
Without foreknowledge of future events, I don't think that's correct if you mean "best" to be highest returns. If we could predict which funds would outperform the rest after all fees, we would invest in those, be they indexed or no. But since we can't, history indicates that indexing is superior on an after-fee basis.
I guess I should rephrase. Market weight index investing isn't necessarily the best method. :sharebeer

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Re: Dave Ramsey spends two segments on his investing advice

Post by Jags4186 » Sun Aug 13, 2017 8:18 pm

Lancelot wrote:
Sun Aug 13, 2017 7:56 pm
I wonder how CAGR of Vanguard's S&P fund would compare with The Growth Fund of America. In any case I don't follow Dave Ramsey closely, so I had wondered what specific funds he recommended.

According to this link https://www.americanfunds.com/individua ... .html.html five American funds have beaten Vanguards 500 Index fund, since its inception in 1976. I'm still chewing on that one.

If I'm going to look back, Berkshire has done well since 1976 :mrgreen:
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Re: Dave Ramsey spends two segments on his investing advice

Post by nura » Sun Aug 13, 2017 8:26 pm

willthrill81 wrote:
Sun Aug 13, 2017 3:34 pm
Let's take an objective look at some of Dave's "investing advice."

1. He says that paying a 5.75% front end load for a mutual fund is money well spent.
2. He says that ERs don't really matter.
3. He says that active management of stocks will easily beat passive management.
4. He says that growth funds outperform everything else.
5. He says the market averages 12% a year.
6. He says you can safely use an 8% withdrawal rate.
7. Payoff your 0% car loan and credit card while forfeiting matching 401k contributions from employer.

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Re: Dave Ramsey spends two segments on his investing advice

Post by Lancelot » Sun Aug 13, 2017 8:28 pm

^Cool. @Jags graph

Around the dot com bubble the managed fund made some good stock picks and it seems the index fund never closed the gap. Over the ten year period ending in March 2017 the managed fund returned 6.99% net of fees; index 7.39.

I would still choose Vanguard Total Market :D

Back to Dave, he gives good advice about living below your means, but he is a bully when any one disagrees with his investing advice. But he has a financial interest in promoting his advisors :moneybag
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Re: Dave Ramsey spends two segments on his investing advice

Post by knpstr » Sun Aug 13, 2017 8:34 pm

FWIW, my father is evidence that American Funds are "good enough" to be able to meet/exceed your retirement goals. I'm sure he probably would have had more through Vanguard, who knows? But he thinks he made out like a bandit and is happy to retire at the end of this year.

That said, I think index funds are the way to go.
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Last edited by knpstr on Sun Aug 13, 2017 8:37 pm, edited 1 time in total.
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Lancelot
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Re: Dave Ramsey spends two segments on his investing advice

Post by Lancelot » Sun Aug 13, 2017 8:35 pm

nura wrote:
Sun Aug 13, 2017 8:26 pm
willthrill81 wrote:
Sun Aug 13, 2017 3:34 pm
Let's take an objective look at some of Dave's "investing advice."

1. He says that paying a 5.75% front end load for a mutual fund is money well spent.
2. He says that ERs don't really matter.
3. He says that active management of stocks will easily beat passive management.
4. He says that growth funds outperform everything else.
5. He says the market averages 12% a year.
6. He says you can safely use an 8% withdrawal rate.
7. Payoff your 0% car loan and credit card while forfeiting matching 401k contributions from employer.
Yeah I agree about not caring a balance on your credit cards; however, I've received some nice perks from credit cards (first class tickets.) Of course I pay the balance in full every month.

For me, Dave sends out a mixed message: we should all be smart enough to earn 12% returns in the stock market but we're not smart enough to manage our credit cards by paying off the balance after every statement.
No Where for Very Long...

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knpstr
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Re: Dave Ramsey spends two segments on his investing advice

Post by knpstr » Sun Aug 13, 2017 8:40 pm

Lancelot wrote:
Sun Aug 13, 2017 8:35 pm

For me, Dave sends out a mixed message: we should all be smart enough to earn 12% returns in the stock market but we're not smart enough to manage our credit cards by paying off the balance after every statement.
Just to be fair, he doesn't say YOU must be smart enough to earn 12% returns in the stock market, he says to hire an advisor (like he does) to do that for you.

Disagreeing with the practicality of that statement is fair game.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

palaheel
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Re: Dave Ramsey spends two segments on his investing advice

Post by palaheel » Sun Aug 13, 2017 8:50 pm

We should separate his "get out of debt" advice from his investment advice. The former can be life changing for those in debt. The latter, well, it's not the Boglehead way.
Markets crash. Markets recover. Inflation takes your money FOREVER.

TheHouse7
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Re: Dave Ramsey spends two segments on his investing advice

Post by TheHouse7 » Sun Aug 13, 2017 8:58 pm

His program showed us how to get out of debt, and wouldn't able to consider BH advise without it. The biggest red flag in his program is accepting front loaded funds. :beer
"PSX will always go up 20%, why invest in anything else?!" -Father-in-law early retired.

garlandwhizzer
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Re: Dave Ramsey spends two segments on his investing advice

Post by garlandwhizzer » Sun Aug 13, 2017 9:37 pm

Lancelot wrote:
According to this link https://www.americanfunds.com/individua ... .html.html five American funds have beaten Vanguards 500 Index fund, since its inception in 1976. I'm still chewing on that one.
Does that include the 5.75% load? American Funds start out with 94.25 while the 500 Index starts out with 100 on day one. Also does it also take into account management fees? In order for a fund with a 5.75% sales load and a 0.66% annual expense ratio (AGTHX according to Morningstar) to beat a load free, 0.04% expense ratio Vanguard 500 Admiral Shares its portfolio would have to outperform the 500 portfolio on an annual basis 6.37%. The load does not just impact the investor for year one but for many years because future portfolio gains are less going forward when you start out absent 5.75% of your portfolio gone on day one, your money which went into the seller's pocket. Naturally the backtesting comparisons from Portfolio Visualizer do not take that big sales load into account when it compares portfolios.

By the way, the American Funds website https://www.americanfunds.com/individua ... fund/agthx has a bar graph showing returns of AGTHX versus S&P 500 Index as of 8/11/2017. It turns out that, even not including the 5.75% gouge on day 1, the S&P 500 Index has outperformed AGTHX 1Yr, 3Yr, 5Yr, and 10 Yr.. I don't know where the numbers for Portfolio Visualizer come from but these figures come from the company that runs this fund. Personally, I think a 5.75% sales load is unconscionable these days and that recommending such a fund that has also underperformed for a decade fails to meet appropriate fiduciary standard for advisors, but that's just my opinion.

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whodidntante
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Re: Dave Ramsey spends two segments on his investing advice

Post by whodidntante » Sun Aug 13, 2017 10:06 pm

palaheel wrote:
Sun Aug 13, 2017 8:50 pm
We should separate his "get out of debt" advice from his investment advice. The former can be life changing for those in debt. The latter, well, it's not the Boglehead way.
His advice on personal finance is junk, too. He preaches extreme debt aversion and if you follow his advice, you'll end up directing cash flow to pay off low interest debts instead of reaping maximum benefit from tax advantaged accounts.

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nedsaid
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Re: Dave Ramsey spends two segments on his investing advice

Post by nedsaid » Sun Aug 13, 2017 10:12 pm

willthrill81 wrote:
Sun Aug 13, 2017 3:34 pm
Let's take an objective look at some of Dave's "investing advice."

1. He says that paying a 5.75% front end load for a mutual fund is money well spent.
2. He says that ERs don't really matter.
3. He says that active management of stocks will easily beat passive management.
4. He says that growth funds outperform everything else.
5. He says the market averages 12% a year.
6. He says you can safely use an 8% withdrawal rate.

I think that pretty much sums up his "investment advice."

On all six points above, it can be easily demonstrated that he's absolutely wrong or, at best, extremely misleading (i.e. the arithmetic average of U.S. market returns is indeed around 12%, but that's irrelevant to investors).
The Dave Ramsey seminar has been available at my church a few times. This is one reason that I declined to attend. I do like him and most of his advice is good but his investment advice is not very good. When a church member breathlessly told me that I could get 12% a year on my investments, I didn't say anything but I realized that just wasn't realistic. I am done with 100% stock portfolios. The investment advice by Dave Ramsey is incredibly naïve. Evidently, he hasn't been through a 50% down bear market, or he doesn't remember. I still remember the 2000-2002 and the 2008-2009 bear markets.
A fool and his money are good for business.

mrpotatoheadsays
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Re: Dave Ramsey spends two segments on his investing advice

Post by mrpotatoheadsays » Sun Aug 13, 2017 11:18 pm

Dave Ramsey is a salesman.

Why would anyone in their right mind blindly take investment advice from a guy who sells insurance, blinds and prepackaged meals?

:?

jbolden1517
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Re: Dave Ramsey spends two segments on his investing advice

Post by jbolden1517 » Sun Aug 13, 2017 11:26 pm

garlandwhizzer wrote:
Sun Aug 13, 2017 9:37 pm
Lancelot wrote:
According to this link https://www.americanfunds.com/individua ... .html.html five American funds have beaten Vanguards 500 Index fund, since its inception in 1976. I'm still chewing on that one.
Does that include the 5.75% load? American Funds start out with 94.25 while the 500 Index starts out with 100 on day one. Also does it also take into account management fees? In order for a fund with a 5.75% sales load and a 0.66% annual expense ratio (AGTHX according to Morningstar) to beat a load free, 0.04% expense ratio Vanguard 500 Admiral Shares its portfolio would have to outperform the 500 portfolio on an annual basis 6.37%. The load does not just impact the investor for year one but for many years because future portfolio gains are less going forward when you start out absent 5.75% of your portfolio gone on day one, your money which went into the seller's pocket.
Loads are bad, but they aren't that bad. You are counting the same money multiple times. On a one year basis that's what they would need to outperform by. On a 10 year basis the load is doing 54 basis points of damage per year and the ER is another 62, so 1.36%. On an annual basis (infinite time) the load effect approaches 0.

LEB1230
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Re: Dave Ramsey spends two segments on his investing advice

Post by LEB1230 » Mon Aug 14, 2017 7:27 am

Dave's vague investment advise is the put 25% in Growth, 25% in Growth and Income, 25% in Aggressive Growth, and 25% in International.

There have been two funds identified that have out performed the S&P overtime (excluding fees). I believe both of the funds would fall into the category of Growth. What other three funds are you now going to select to satisfy Growth and Income, Aggressive Growth, and International that are going to out perform the S&P 500 Index?

ryman554
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Re: Dave Ramsey spends two segments on his investing advice

Post by ryman554 » Mon Aug 14, 2017 8:14 am

whodidntante wrote:
Sun Aug 13, 2017 10:06 pm
palaheel wrote:
Sun Aug 13, 2017 8:50 pm
We should separate his "get out of debt" advice from his investment advice. The former can be life changing for those in debt. The latter, well, it's not the Boglehead way.
His advice on personal finance is junk, too. He preaches extreme debt aversion and if you follow his advice, you'll end up directing cash flow to pay off low interest debts instead of reaping maximum benefit from tax advantaged accounts.
The advice is not directed at folks that have a history of saving who care about these things.

The advice is directed at folks that can't budget and are drowning deep into the free money of unsecured debt.

I believe his advice is appropriate for the latter segment of the population. I, too, disagree with the extreme debt aversion, but really, for it to work it has to be simple and direct. Get out of debt as fast as you can. Stay out of debt, no matter what. Start saving for the future. After the last step, where the folks now have a track record of actually budgeting and LYBM, if you then want to discuss the details of taxable vs. tax-advantaged accounts, that's great. It's distracting noise to the folks who aren't even treading water.

To DR credit, he does this, too. "Put it in your roth". then your 401(k). go to my guys to manage it. Is it optimal? No. Is it terrible? No, after all they are saving -- which is the #1 goal. His political and self-interest views shape the advice here, but I'd hardly call it terrible for folks that just want to be told what to do. Let's hope that when he preaches to find someone with the heart of a teacher, he means it, they find it (or find us), and re-optimize what they are doing.

eldinerocheapo
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Re: Dave Ramsey spends two segments on his investing advice

Post by eldinerocheapo » Mon Aug 14, 2017 9:07 am

Taking advice from a guy who filed bankruptcy is like taking sailing lessons from the captain of the Titanic. His "do as I say, not as I did" mantra drips with condescension and hypocrisy when speaking to the rubes who call in or drop by his station to scream out their "we're debt free" drivel. The icing on the cake are the lobotomized cretins who call in asking DR's "permission" to buy the new Corvette, RV, or vacation home while already hundreds of thousands of dollars in debt from student loans, divorces, boob jobs, gambling debts.......etc. If you have to call some clown on a radio show to determine the feasibility of your own financial situation, you've got real problems. DR and his loyal following of idiots all deserve each other.

To me, he has all the credibility of a used car salesman who peddles cubic zirconium's on the side.

selters
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Re: Dave Ramsey spends two segments on his investing advice

Post by selters » Mon Aug 14, 2017 9:19 am

Some of Dave Ramsay's advice may be bad, but it is not bad because he filed for bankruptcy 30 years ago, has ads for blinds on his show or because he tells people to place their money in four not clearly defined categories of mutual funds (growth, growth and income, aggressive growth, and international).

Nate79
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Re: Dave Ramsey spends two segments on his investing advice

Post by Nate79 » Mon Aug 14, 2017 10:01 am

DR spends so little time on the investment advice side it hard to piece together what he actually recommends (maybe the classes give more info). I am not surprised that he actually uses American funds and its kind of better than all the other bad options out there. On one of the shows he explained that when he says, growth, aggressive growth, growth and income he is meaning mid cap, small cap, and large cap companies (people call up and their 401k funds don't match the DR descriptions so he mentioned the more common description).

DR recommends 100% stock. That is very common on this site for many bogleheads (not for me....). Yes it is controversial.
DR recommends absolutely do not buy individual stocks. - good
DR recommends put some in international. - Can be somewhat controversial but recommended by Vanguard.
DR recommends always use Roth. That is somewhat controversial but not the worst thing in the world.
He recommends S&P500 index fund for taxable account for tax efficiency and no need to use an advisor. Buffet agrees on this.

deltaneutral83
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Re: Dave Ramsey spends two segments on his investing advice

Post by deltaneutral83 » Mon Aug 14, 2017 10:06 am

He uses AF's and none of them have beaten their benchmarks with loads tacked on over the last ten years, and this of course doesn't take into account tax inefficiencies. In fact, most of them haven't beaten their benchmarks irrespective of loads the last ten years making them even bigger dogs. There's also style drift for active funds where you can't really use a benchmark because of the large/mid/small value/growth blends. You can say the S&P is a "close" benchmark to his two large AF funds, but certainly not close to being the same or comparable. There's also the fact that any fund 20 years ago almost certainly had different fund managers and market inefficiencies were easier to be spotted 20-30 years ago. Past performance is not.....

That being said, his investing advice is solid for the 85% of Americans who have no clue what a 401k is. His debt advice is rock solid for about 95% of Americans who have no clue how to use debt wisely. I have no idea why BH's on this forum criticize his aversion to debt. 95% out of 100 Americans have no business attempting to use debt to prosper. I question anyone who's been around the block who can't see this. So when you criticize this aspect of his debt teachings, you are essentially screaming about the 5 out of 100 Americans that his advice doesn't' apply toward. Guess what, that's not his audience. 95% of Americans are similar to me leaving several gallons of ice cream out and telling a room full of Kindergartners to not touch it and then turn your back on them and come back an hour later to a disaster.

The "12% a year" is obviously flawed and that's the only part that I think he really needs to cut out for the good of his listeners. I truly wonder what his objective is on that. Maybe just a selling point to get people to invest period.

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willthrill81
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Re: Dave Ramsey spends two segments on his investing advice

Post by willthrill81 » Mon Aug 14, 2017 10:25 am

Nate79 wrote:
Mon Aug 14, 2017 10:01 am
DR recommends 100% stock. That is very common on this site for many bogleheads (not for me....). Yes it is controversial.
I believe that the overwhelming majority of us who are 100% stocks, myself included, are so in part because we are still a long ways off from retirement. I certainly know that I won't be all stocks in retirement.
Nate79 wrote:
Mon Aug 14, 2017 10:01 am
DR recommends always use Roth. That is somewhat controversial but not the worst thing in the world.
I don't think that it's controversial at all; it's dead wrong and easily demonstrated to be so. For the overwhelming majority of retirees MFJ, the first ~$20k of income incurs no income tax. Using a 4% withdrawal rate, that means that $500k of tax-deferred assets will support a tax free income (tax free going in and tax free coming out). Similarly, if one can contribute to a tax deferred account when in the 25% bracket but then withdraw the money in the 10% or 15% brackets, then they are ahead with tax deferred compared to the Roth.

There is no controversy here, just simple math. I think that, like some other topics, Dave has simply bought into the idea that paying no income taxes on withdrawals is worth any price on the front-end without actually doing the math.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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