Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

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Serie1926
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Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Serie1926 » Mon Jun 11, 2018 1:01 pm

Re beating the market. Please not looking to start another debate on the pros and cons of Ramsey, just thought it was interesting.

https://youtu.be/OqAi61YrkBc

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nedsaid
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Re: Interesting video from Ramsey today

Post by nedsaid » Mon Jun 11, 2018 1:50 pm

There are definitely fund companies that are better than others at the game of active management. There are folks out there who have beat the indexes. Problem is, there aren't many of them and it is hard to know ahead of time who will beat the market. There are companies out there that Larry Swedroe has analyzed that he has said nice things about: Dimensional Fund Advisors, American Funds, and T. Rowe Price. He has even analyzed Warren Buffett's success. In addition, Vanguard has good managed funds as well.

What you will fund is that this success has been factor based, these companies have focused on Value with an eye towards Quality. Larry would say that it is the factors and not stock picking that has been key to their success. Over time, most of the great managers are Value based or Quality based or a combination of both. Good managers get old and retire just like the rest of us. The average tenure of a manager at a fund is about five years. So relying on a superstar manager is a flawed approach, better to have a team approach.

A couple of issues that Dave Ramsey dismisses. First is costs. Costs do matter. Morningstar says that fees are the number one predictor of future performance, the lower the better. Ramsey also dismisses the compounding effect of expenses, just as returns compound so do expenses. Second, the odds of beating the indexes are pretty low. The longer the time period, the lower the odds.

Ramsey has thrown his lot in with American Funds, which are an excellent fund group. Lower costs, team management, long manager tenure, and a solid investment philosophy. Historically, this fund group has been a great place to put your money. Of course success brings new monies and many of these funds are quite large. It gets harder and harder to beat the averages as portfolio size gets larger and larger.

The $64,000 question is whether or not American Funds can keep up their success into the future. My guess is maybe not as the academics learn more and more about factors. Pretty much the secret sauce has been revealed to the world. There is even a pretty good debate as to whether the outperformance of factors will continue.

Indexing will assure that your investments will be in the top quartile of funds over time. Hold on long enough, your investments will be in the top 10% of funds. Pretty much a no brainer and you can do this without knowing in advance who will beat the market.
A fool and his money are good for business.

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Re: Interesting video from Ramsey today

Post by Nate79 » Mon Jun 11, 2018 1:51 pm

Serie1926 wrote:
Mon Jun 11, 2018 1:01 pm
Re beating the market. Please not looking to start another debate on the pros and cons of Ramsey, just thought it was interesting.

https://youtu.be/OqAi61YrkBc
I do not know how you think posting a video by DR that is pro-active mutual funds and against index funds is going to be anything but a debate about pros and cons of DR.

Has it already been a couple of days since the last anti-DR thread?

DR believes in American funds though he doesn't directly promote them (very seldom does he mention the fund family name and he actually does in this video). American funds have a very good history, their performance has been excellent and some on BH own a few of their funds.

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JoMoney
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Re: Interesting video from Ramsey today

Post by JoMoney » Mon Jun 11, 2018 2:01 pm

I like the bit between 4:32 - 4:46
:D
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Interesting video from Ramsey today

Post by willthrill81 » Mon Jun 11, 2018 2:56 pm

nedsaid wrote:
Mon Jun 11, 2018 1:50 pm
Indexing will assure that your investments will be in the top quartile of funds over time. Hold on long enough, your investments will be in the top 10% of funds. Pretty much a no brainer and you can do this without knowing in advance who will beat the market.
I think that Ramsey and other stock-picking advocates don't acknowledge that even if their probability of outperforming the index is 50% (which history says it isn't), their upside potential is very likely a lot smaller than their downside risk (i.e. you're not going to dramatically outperform the index, but you could dramatically underperform it).

Ramsay really strikes me as the kind of person who refuses to learn. His condescension toward virtually the entire academic community, never mind Bogleheads, is truly astounding. The fact that he still espouses 8% withdrawals alone is enough to make me completely avoid listening to anything he has to say.
“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: Interesting video from Ramsey today

Post by anonsdca » Mon Jun 11, 2018 3:02 pm

willthrill81 wrote:
Mon Jun 11, 2018 2:56 pm
nedsaid wrote:
Mon Jun 11, 2018 1:50 pm
Indexing will assure that your investments will be in the top quartile of funds over time. Hold on long enough, your investments will be in the top 10% of funds. Pretty much a no brainer and you can do this without knowing in advance who will beat the market.
I think that Ramsey and other stock-picking advocates don't acknowledge that even if their probability of outperforming the index is 50% (which history says it isn't), their upside potential is very likely a lot smaller than their downside risk (i.e. you're not going to dramatically outperform the index, but you could dramatically underperform it).

Ramsay really strikes me as the kind of person who refuses to learn. His condescension toward virtually the entire academic community, never mind Bogleheads, is truly astounding. The fact that he still espouses 8% withdrawals alone is enough to make me completely avoid listening to anything he has to say.
LOL, what does he have to learn? He has his system and its made him a multi-millionaire. I don't follow DR's investment concepts, but jeeze, he doesn't need to change a thing for himself.

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Re: Interesting video from Ramsey today

Post by AerialP » Mon Jun 11, 2018 3:03 pm

JoMoney wrote:
Mon Jun 11, 2018 2:01 pm
I like the bit between 4:32 - 4:46
:D
Bingo.

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willthrill81
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Re: Interesting video from Ramsey today

Post by willthrill81 » Mon Jun 11, 2018 3:09 pm

anonsdca wrote:
Mon Jun 11, 2018 3:02 pm
willthrill81 wrote:
Mon Jun 11, 2018 2:56 pm
nedsaid wrote:
Mon Jun 11, 2018 1:50 pm
Indexing will assure that your investments will be in the top quartile of funds over time. Hold on long enough, your investments will be in the top 10% of funds. Pretty much a no brainer and you can do this without knowing in advance who will beat the market.
I think that Ramsey and other stock-picking advocates don't acknowledge that even if their probability of outperforming the index is 50% (which history says it isn't), their upside potential is very likely a lot smaller than their downside risk (i.e. you're not going to dramatically outperform the index, but you could dramatically underperform it).

Ramsay really strikes me as the kind of person who refuses to learn. His condescension toward virtually the entire academic community, never mind Bogleheads, is truly astounding. The fact that he still espouses 8% withdrawals alone is enough to make me completely avoid listening to anything he has to say.
LOL, what does he have to learn? He has his system and its made him a multi-millionaire. I don't follow DR's investment concepts, but jeeze, he doesn't need to change a thing for himself.
His 'system' was selling books. That's how he got his wealth.
“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

Serie1926
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Re: Interesting video from Ramsey today

Post by Serie1926 » Mon Jun 11, 2018 3:29 pm

Mods, you may want to go ahead and shut this one down. I knew better. Please accept my apologies.

anonsdca
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Re: Interesting video from Ramsey today

Post by anonsdca » Mon Jun 11, 2018 3:32 pm

willthrill81 wrote:
Mon Jun 11, 2018 3:09 pm
anonsdca wrote:
Mon Jun 11, 2018 3:02 pm
willthrill81 wrote:
Mon Jun 11, 2018 2:56 pm
nedsaid wrote:
Mon Jun 11, 2018 1:50 pm
Indexing will assure that your investments will be in the top quartile of funds over time. Hold on long enough, your investments will be in the top 10% of funds. Pretty much a no brainer and you can do this without knowing in advance who will beat the market.
I think that Ramsey and other stock-picking advocates don't acknowledge that even if their probability of outperforming the index is 50% (which history says it isn't), their upside potential is very likely a lot smaller than their downside risk (i.e. you're not going to dramatically outperform the index, but you could dramatically underperform it).

Ramsay really strikes me as the kind of person who refuses to learn. His condescension toward virtually the entire academic community, never mind Bogleheads, is truly astounding. The fact that he still espouses 8% withdrawals alone is enough to make me completely avoid listening to anything he has to say.
LOL, what does he have to learn? He has his system and its made him a multi-millionaire. I don't follow DR's investment concepts, but jeeze, he doesn't need to change a thing for himself.
His 'system' was selling books. That's how he got his wealth.
Well, ok you have a problem with his business. That is fine. His investments are mutual funds and real estate. Why would he change?

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Re: Interesting video from Ramsey today

Post by Dottie57 » Mon Jun 11, 2018 3:37 pm

JoMoney wrote:
Mon Jun 11, 2018 2:01 pm
I like the bit between 4:32 - 4:46
:D
He sounds like a bully during the first part starting around 4:30.

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willthrill81
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Re: Interesting video from Ramsey today

Post by willthrill81 » Mon Jun 11, 2018 3:48 pm

anonsdca wrote:
Mon Jun 11, 2018 3:32 pm
willthrill81 wrote:
Mon Jun 11, 2018 3:09 pm
anonsdca wrote:
Mon Jun 11, 2018 3:02 pm
willthrill81 wrote:
Mon Jun 11, 2018 2:56 pm
nedsaid wrote:
Mon Jun 11, 2018 1:50 pm
Indexing will assure that your investments will be in the top quartile of funds over time. Hold on long enough, your investments will be in the top 10% of funds. Pretty much a no brainer and you can do this without knowing in advance who will beat the market.
I think that Ramsey and other stock-picking advocates don't acknowledge that even if their probability of outperforming the index is 50% (which history says it isn't), their upside potential is very likely a lot smaller than their downside risk (i.e. you're not going to dramatically outperform the index, but you could dramatically underperform it).

Ramsay really strikes me as the kind of person who refuses to learn. His condescension toward virtually the entire academic community, never mind Bogleheads, is truly astounding. The fact that he still espouses 8% withdrawals alone is enough to make me completely avoid listening to anything he has to say.
LOL, what does he have to learn? He has his system and its made him a multi-millionaire. I don't follow DR's investment concepts, but jeeze, he doesn't need to change a thing for himself.
His 'system' was selling books. That's how he got his wealth.
Well, ok you have a problem with his business. That is fine. His investments are mutual funds and real estate. Why would he change?
I don't have a problem with what he's done to make his wealth. Where I have a problem is with his telling people that his investment 'strategies' are superior to everything else, despite extensive research that has conclusively shown many of them to be decidedly inferior to everything else. This has been pointed out to him repeatedly, and he only doubles-down on his recommendations, holding anyone who holds contrary viewpoints in utter disdain. He even refuses to acknowledge when simple math proves him wrong.

He doesn't tell people "This is how I made my money. Maybe you could do the same." Instead he says "Here's the best way for YOU to become wealthy." That's a very big difference.
“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: Interesting video from Ramsey today

Post by jibantik » Mon Jun 11, 2018 6:50 pm

Dottie57 wrote:
Mon Jun 11, 2018 3:37 pm
JoMoney wrote:
Mon Jun 11, 2018 2:01 pm
I like the bit between 4:32 - 4:46
:D
He sounds like a bully during the first part starting around 4:30.
It sounds that way because he is one. Anyone who has listened to his show for more than 10 minutes will know this.

willthrill81 wrote:
Mon Jun 11, 2018 3:48 pm
I don't have a problem with what he's done to make his wealth. Where I have a problem is with his telling people that his investment 'strategies' are superior to everything else, despite extensive research that has conclusively shown many of them to be decidedly inferior to everything else. This has been pointed out to him repeatedly, and he only doubles-down on his recommendations, holding anyone who holds contrary viewpoints in utter disdain. He even refuses to acknowledge when simple math proves him wrong.

He doesn't tell people "This is how I made my money. Maybe you could do the same." Instead he says "Here's the best way for YOU to become wealthy." That's a very big difference.
Ding ding ding, dead on.

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by md&pharmacist » Mon Jun 11, 2018 7:04 pm

My active fund mix easily out-performs the overall market. See my last thread, the holdings with returns are displayed.

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nisiprius
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by nisiprius » Mon Jun 11, 2018 7:57 pm

With regard to what he says at 4:13, first of all, not that it matters, but he is simply wrong on a fact. It happens to be a very unimportant fact. AIVSX. the American Funds Investment Company of America, inception 1/2/1934, is not "the oldest fund out there." It's a very, very old fund. However, the Vanguard Wellington fund, inception 7/1/1929 is older, and MFS Massachusetts Investors' Trust, MITTX, inception 7/15/1924 is older yet.

It's unimportant with respect to any investing issue, but it's fairly important with regard to Dave Ramsey's carelessness with the facts.

Second, what Ramsey has been criticized for in the past is mis-stating the average return of the S&P 500, and saying that you can expect to make 12% going forward. From his website:

The 12% Reality
When Dave says you can expect to make a 12% return on your investments, he’s using a real number that’s based on the historical average annual return of the S&P 500.

The S&P 500 gauges the performance of the stocks of the 500 largest, most stable companies in the New York Stock Exchange—it’s often considered the most accurate measure of the stock market as a whole.

The current average annual return from 1923 (the year of the S&P’s inception) through 2016 is 12.25%.
Let's enumerate the errors he makes here. Let's begin with the most important one. He a source; it's Moneychimp's CAGR of the Stock Market.

Image

The problem is that his own source states clearly that what they call the "Annualize return (=true CAGR)" is about 10%. And that source puts the arithmetic average, about 12%, in scare quotes to warn you that it is not the right number to use. In all mutual fund literature, the SEC requires the number called the "average" return to be the CAGR, the actual compounded growth rate that would be experienced by an investor. The arithmetic mean does have some legitimate uses in some calculations involving MPT, but it is not a suitable number to use when gauging the growth of an investment.

Ramsey has had this explained to him, yet he refuses to correct his statements.

Notice that on his website, he doesn't say "you could possibly have gotten 12% if you'd happened to pick one fund, AIVSX, which we know today in hindsight returned 12%." He says "you can expect to get it because that's what what the S&P 500 has returned."

Note that in 1934 you wouldn't necessarily have picked AIVSX. You might well have chosen MITTX instead of AIVSX. In that case you'd have gotten 10.01%, not 12%. 10.01% is pretty good, but it isn't good if you've planned on getting 12%.

So can you expect to get 12% by investing in AIVSX? Not unless past performance is a guarantee of future results.

Along the way he manages to drop in three other small errors.
  • The S&P 500 had its inception in 1957, not 1923.
  • The S&P 500 does not include the largest companies in the New York Stock Exchange. It includes S&P's choice of "leading companies in leading industries," which is predominantly, but not exclusively the largest companies.
  • The S&P 500 is not "often considered the most accurate measure of the stock market as a whole." It is often considered an adequate measure, but I think it would be hard to find anyone who would say it is "the most accurate measure of the stock market as a whole." S&P itself says "The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities." S&P also says "The S&P Total Market Index (TMI) is designed to track the broad equity market, including large-, mid-, small-, and micro-cap stocks."
That's a total of four errors (average return of the S&P 500, inception of the S&P 500, composition of the S&P 500, and claim that the S&P 500 is the considered the most accurate measure of the stock market as a whole. Four errors in 87 words.
Last edited by nisiprius on Mon Jun 11, 2018 8:17 pm, edited 4 times in total.
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Serie1926
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Serie1926 » Mon Jun 11, 2018 8:07 pm

Pretty comical no one heard his message of “rate of savings” and how this is 74% success rate of wealth in retirement. Start saving now.

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Reb Tevye
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Reb Tevye » Mon Jun 11, 2018 8:12 pm

DR is clearly a good student of financial history, having learned this lesson that all too many people seem to forget,
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it.
"So, what would have been so terrible if I had a small fortune?"

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by nedsaid » Mon Jun 11, 2018 8:26 pm

I don't want this to be a Dave Ramsey bashing session but I pointed out that indexing is a great approach and you get great results without having to pick the right funds. Yes, it is possible to beat the indexes but the vast majority of fund managers fail to do so. The American Funds are a good place to put your money and historically, these funds have performed well. I can think of a lot worse things someone can do than put their money into American Funds. One note, is that even though American Funds have relatively low turnover compared to other active funds, their funds will still be less tax efficient than a Total Market Index Fund or an S&P 500 Index fund.
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by willthrill81 » Mon Jun 11, 2018 8:55 pm

nedsaid wrote:
Mon Jun 11, 2018 8:26 pm
I don't want this to be a Dave Ramsey bashing session
Image

It's awfully hard to separate one thing a person says from everything else they say.
“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: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by whodidntante » Mon Jun 11, 2018 9:08 pm

Dave Ramsey is an entertainer. And boy does he do his job.

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by 1210sda » Mon Jun 11, 2018 9:12 pm

are his boasts all anecdotal, or has he ever provided audited statements ??

1210

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Nate79 » Mon Jun 11, 2018 9:25 pm

1210sda wrote:
Mon Jun 11, 2018 9:12 pm
are his boasts all anecdotal, or has he ever provided audited statements ??

1210
Boasts about what? If referring to fund returns he is only quoting the returns directly off of American funds website.

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by knpstr » Mon Jun 11, 2018 9:31 pm

Dave gets beat up a little too much on this forum in my opinion.

If you follow his advice to the letter, by getting out of debt and investing your money you will get wealthy. Perhaps not as wealthy if you stayed in debt with low interest rate and invested the difference, perhaps not as wealthy as if you invested in index funds versus funds he suggests, perhaps not as wealthy as paying off the highest interest rate first rather than smallest balance first; but there is no denying for many (if not most) people, if they would follow his advice they'd be better off.

He does a LOT of good for a LOT of people. :beer
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by nisiprius » Mon Jun 11, 2018 9:32 pm

Nate79 wrote:
Mon Jun 11, 2018 9:25 pm
1210sda wrote:
Mon Jun 11, 2018 9:12 pm
are his boasts all anecdotal, or has he ever provided audited statements ??

1210
Boasts about what? If referring to fund returns he is only quoting the returns directly off of American funds website.
He ought to show, not that there was one American Fund that achieved a 12% CAGR and outperformed the stock market. He needs to show what his actual portfolio recommendations have been over the years, and shown that investors following his recommendations have achieved 12% CAGR.

For example, he mentions AIVSX, American Funds Investment Company of America by name as a fund that achieved a CAGR. Well, if he has consistently told his followers "put 100% of your investment money into AIVSX," then his followers have obtained average (CAGR) returns of 8.87% over the last 15 years, 8.74% over the last 10, and, yes, 12.49% over the last 5.

But if he wasn't recommending a portfolio of 100% AIVSX then his followers would have been getting different numbers.

He should be showing us the actual results obtained with the actual complete portfolios he was recommending.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by md&pharmacist » Mon Jun 11, 2018 9:40 pm

nisiprius wrote:
Mon Jun 11, 2018 9:32 pm
Nate79 wrote:
Mon Jun 11, 2018 9:25 pm
1210sda wrote:
Mon Jun 11, 2018 9:12 pm
are his boasts all anecdotal, or has he ever provided audited statements ??

1210
Boasts about what? If referring to fund returns he is only quoting the returns directly off of American funds website.
He ought to show, not that there was one American Fund that achieved a 12% CAGR and outperformed the stock market. He needs to show what his actual portfolio recommendations have been over the years, and shown that investors following his recommendations have achieved 12% CAGR.

For example, he mentions AIVSX, American Funds Investment Company of America by name as a fund that achieved a CAGR. Well, if he has consistently told his followers "put 100% of your investment money into AIVSX," then his followers have obtained average (CAGR) returns of 8.87% over the last 15 years, 8.74% over the last 10, and, yes, 12.49% over the last 5.

But if he wasn't recommending a portfolio of 100% AIVSX then his followers would have been getting different numbers.

He should be showing us the actual results obtained with the actual complete portfolios he was recommending.
I did that with my portfolio including YTD, 1, 3, 5, 10 year returns! See my last post. Significantly outperformed overall markets!

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Nate79 » Mon Jun 11, 2018 9:43 pm

nisiprius wrote:
Mon Jun 11, 2018 9:32 pm
Nate79 wrote:
Mon Jun 11, 2018 9:25 pm
1210sda wrote:
Mon Jun 11, 2018 9:12 pm
are his boasts all anecdotal, or has he ever provided audited statements ??

1210
Boasts about what? If referring to fund returns he is only quoting the returns directly off of American funds website.
He ought to show, not that there was one American Fund that achieved a 12% CAGR and outperformed the stock market. He needs to show what his actual portfolio recommendations have been over the years, and shown that investors following his recommendations have achieved 12% CAGR.

For example, he mentions AIVSX, American Funds Investment Company of America by name as a fund that achieved a CAGR. Well, if he has consistently told his followers "put 100% of your investment money into AIVSX," then his followers have obtained average (CAGR) returns of 8.87% over the last 15 years, 8.74% over the last 10, and, yes, 12.49% over the last 5.

But if he wasn't recommending a portfolio of 100% AIVSX then his followers would have been getting different numbers.

He should be showing us the actual results obtained with the actual complete portfolios he was recommending.
He doesn't recommend actual funds or fund families. He has rarely if ever mentioned an actual fund name on his show. The video is one example. But you could do this because the categories he recommends are verbatim off of the American site so it doesn't take much to figure out which funds he is likely talking about.

His vagueness is probably legally on purpose because doesn't endorse American funds.

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by drk » Mon Jun 11, 2018 9:55 pm

Serie1926 wrote:
Mon Jun 11, 2018 1:01 pm
Please not looking to start another debate on the pros and cons of Ramsey
You can easily avoid doing that by not posting about a snake-oil salesman who advocates investing strategies completely contradictory to the philosophy of this site. The guy is neither rigorous nor data-driven, so I don't know what you expect on this board.

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by 1210sda » Mon Jun 11, 2018 9:55 pm

i have no doubt that certain funds have beat the market over the years. Picking them after the fact is quite easy. I'm just asking if dr can show that he actually made these investments back then, as opposed to laying claim to them only today.
1210

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Nate79 » Mon Jun 11, 2018 10:24 pm

1210sda wrote:
Mon Jun 11, 2018 9:55 pm
i have no doubt that certain funds have beat the market over the years. Picking them after the fact is quite easy. I'm just asking if dr can show that he actually made these investments back then, as opposed to laying claim to them only today.
1210
Yes, he has pretty much been saying the same thing for many many years (20+). The entire plan has been basically the same since he went on the radio in 1992.

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Re: Interesting video from Ramsey today

Post by SelfEmployed123 » Mon Jun 11, 2018 10:33 pm

willthrill81 wrote:
Mon Jun 11, 2018 2:56 pm
Ramsay really strikes me as the kind of person who refuses to learn. His condescension toward virtually the entire academic community, never mind Bogleheads, is truly astounding. The fact that he still espouses 8% withdrawals alone is enough to make me completely avoid listening to anything he has to say.
It's not just stubbornness on Dave Ramsey's part to resist academia and research on index funds. Dave Ramsey is also in the business of connecting every day investors with financial planners. He calls them SmartVestor Pros. They pay a monthly advertising fee through his website so that they can get connected to potential clients. I'm not sure how much money Dave Ramsey is making off of that one venture, but it's probably not insignificant. This puts him in the same boat as all of the other active fund managers in my opinion. Not the best source of information for investing decisions by any means.
knpstr wrote:
Mon Jun 11, 2018 9:31 pm
Dave gets beat up a little too much on this forum in my opinion.

If you follow his advice to the letter, by getting out of debt and investing your money you will get wealthy. Perhaps not as wealthy if you stayed in debt with low interest rate and invested the difference, perhaps not as wealthy as if you invested in index funds versus funds he suggests, perhaps not as wealthy as paying off the highest interest rate first rather than smallest balance first; but there is no denying for many (if not most) people, if they would follow his advice they'd be better off.

He does a LOT of good for a LOT of people. :beer
I totally agree. The man has his place. He helped me get out of debt and find this forum.

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by willthrill81 » Mon Jun 11, 2018 10:50 pm

knpstr wrote:
Mon Jun 11, 2018 9:31 pm
Dave gets beat up a little too much on this forum in my opinion.

If you follow his advice to the letter, by getting out of debt and investing your money you will get wealthy. Perhaps not as wealthy if you stayed in debt with low interest rate and invested the difference, perhaps not as wealthy as if you invested in index funds versus funds he suggests, perhaps not as wealthy as paying off the highest interest rate first rather than smallest balance first; but there is no denying for many (if not most) people, if they would follow his advice they'd be better off.

He does a LOT of good for a LOT of people. :beer
I don't have a huge problem with him recommending active over passive funds. I actually think that his advice regarding getting out of debt is what most people desperately need to here, though if I had taken it deeply to heart, I might not have gotten the degree I did that enabled me to get into a career where my first year's salary was 5x the amount of the student loans it took to get me there.

But there are two figures that DR tosses around that are absolutely horrific, worse than almost any advice I've heard from financial advisors (aka salespeople): you will get 12% returns in stocks, and you can safely withdraw 8% from your portfolio every year in retirement. Taken together, this is a recipe for financial ruin in retirement.

If people believe they'll get 12% returns and instead get 7% real returns (I've never heard DR explain the difference between nominal and real returns, but perhaps he has), they could easily end up with half as much as they think they'll have, possibly much less. And then they think they need 12.5X their annual expenses to retire while they may easily need 25x or more. Taken together, people could easily wind up with 25% or less of what they actually need to retire with a reasonable margin of safety.

Are these people better off than they would have been otherwise? Probably, but that's along the lines of what I've heard called the "better than nothing" fallacy. There can be a big gulf between "better than nothing" and adequate. DR's advice here is akin to throwing a person 200 miles offshore a tiny lifebuoy. It's far better than nothing, but it's also a far cry from what they really need to get where they want to go safely.
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by stlutz » Mon Jun 11, 2018 11:29 pm

I think I recall from a prior thread that he gets the 12% by taking an arithmetic average of a fund that has beaten the market as opposed to a CAGR.

I'm curious if anyone has ever called his show and asked something like, "I'm 52 years old and have $500,000 saved up. I think I'm going to retire. What do you think?" My guess is that he wouldn't endorse an 8% withdrawal rate in this type of real-life scenario.

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by OffGridder » Tue Jun 12, 2018 1:27 am

stlutz wrote:
Mon Jun 11, 2018 11:29 pm
I think I recall from a prior thread that he gets the 12% by taking an arithmetic average of a fund that has beaten the market as opposed to a CAGR.

I'm curious if anyone has ever called his show and asked something like, "I'm 52 years old and have $500,000 saved up. I think I'm going to retire. What do you think?" My guess is that he wouldn't endorse an 8% withdrawal rate in this type of real-life scenario.
Actually he did just that today. A caller wanted to know if he could retire early at age 57. Dave Ramsey asked the caller what his net worth was. The caller answered that he had $1.1M in stock. mutual funds and cash. Ramsey told the caller he can go ahead and retire if he can live on $110K / year, based on a 10% annual return using Ramsey's recommended mutual fund allocations.
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Mr.BB » Tue Jun 12, 2018 1:35 am

I listen sometimes to DR on my drive to work. I like some of his ideas on getting out of debt. However he is way off base on his savings approach. He totally misses the point of time being the most valuable asset you can have. Like Warren Buffet says, "You don't need a big snowball, just a big hill."
The years people miss out on savings while trying to pay off all the debt including their house, screws them out of all those years of compounding interest.
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by MTF » Tue Jun 12, 2018 3:00 am

Mr.BB wrote:
Tue Jun 12, 2018 1:35 am
I listen sometimes to DR on my drive to work. I like some of his ideas on getting out of debt. However he is way off base on his savings approach. He totally misses the point of time being the most valuable asset you can have. Like Warren Buffet says, "You don't need a big snowball, just a big hill."
The years people miss out on savings while trying to pay off all the debt including their house, screws them out of all those years of compounding interest.
I wonder if the antipathy toward DR apparently felt by many on this forum means no one really listens to what he is actually saying. I’m no apologist for him. And I admit that the linked video above is the first of his content I’ve seen. But it seems wrong, to me, to say he “totally misses the point of time being the most valuable asset you can have”.

It is true that the actual advice in the video is buried in (unnecessary, annoying, probably wrong and thinly vieled) boasting about his fund picks, and the opportunity to outperform the market, but the thesis (or at least his takeaway message at the end) seemed to me to be that a high savings rate (so, at least implicitly, this poster’s “time”) was the single most important factor.

In that connection, in addition to quoting a statistic apparently supporting the importance of a good savings/investing rate, he said at least once that investors should stop being affected by paralysis about what to invest in, based on the active vs passive management debate, and make sure they were increasing their savings rate.

Whether you agree with the rest of what he says, that seems sensible advice to me. I can’t count the number of times I’ve seen (apparently intelligent) people posting in this forum who are so worked up about how to squeeze the maximum possible return out of their investments that they haven’t really gotten around to investing at all.

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by nisiprius » Tue Jun 12, 2018 6:48 am

MTF wrote:
Tue Jun 12, 2018 3:00 am
...I wonder if the antipathy toward DR apparently felt by many on this forum means no one really listens to what he is actually saying...
serie1926 introduced the video by saying we should pay attention to what he said "Re beating the market." So I was paying attention to what he said about beating the market.
the thesis (or at least his takeaway message at the end) seemed to me to be that a high savings rate... was the single most important factor.
So Ramsey (like other investing media celebrities, Ric Edelman, Suze Orman, etc.) delivers a mix of good advice and bad advice--including misinformation that is plain and simple factually incorrect. That shouldn't render him immune to criticism.

Very well, Ramsey is a curate's egg. (The bishop notices that the curate isn't eating his egg, and asks if it is bad. The polite curate says "parts of it are excellent!")
Last edited by nisiprius on Tue Jun 12, 2018 7:24 am, edited 1 time in total.
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by goblue100 » Tue Jun 12, 2018 7:07 am

OffGridder wrote:
Tue Jun 12, 2018 1:27 am
stlutz wrote:
Mon Jun 11, 2018 11:29 pm
I think I recall from a prior thread that he gets the 12% by taking an arithmetic average of a fund that has beaten the market as opposed to a CAGR.

I'm curious if anyone has ever called his show and asked something like, "I'm 52 years old and have $500,000 saved up. I think I'm going to retire. What do you think?" My guess is that he wouldn't endorse an 8% withdrawal rate in this type of real-life scenario.
Actually he did just that today. A caller wanted to know if he could retire early at age 57. Dave Ramsey asked the caller what his net worth was. The caller answered that he had $1.1M in stock. mutual funds and cash. Ramsey told the caller he can go ahead and retire if he can live on $110K / year, based on a 10% annual return using Ramsey's recommended mutual fund allocations.
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Grt2bOutdoors » Tue Jun 12, 2018 7:18 am

nedsaid wrote:
Mon Jun 11, 2018 8:26 pm
I don't want this to be a Dave Ramsey bashing session but I pointed out that indexing is a great approach and you get great results without having to pick the right funds. Yes, it is possible to beat the indexes but the vast majority of fund managers fail to do so. The American Funds are a good place to put your money and historically, these funds have performed well. I can think of a lot worse things someone can do than put their money into American Funds. One note, is that even though American Funds have relatively low turnover compared to other active funds, their funds will still be less tax efficient than a Total Market Index Fund or an S&P 500 Index fund.
Who's bashing him? The posters are simply pointing out that on a factual basis there is a lack of accuracy in the responses. It's no different than if taking a school exam, you put the wrong answer or an incomplete answer you will get points deducted. So, DR gets 100 when it comes to getting out of debt, staying out debt, common sense personal finance, but he doesn't get 100 when it comes to investment facts.

I like American Funds, what I don't like is you have to pay a load or sales charge to enter the funds.
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Grt2bOutdoors » Tue Jun 12, 2018 7:22 am

Mr.BB wrote:
Tue Jun 12, 2018 1:35 am
I listen sometimes to DR on my drive to work. I like some of his ideas on getting out of debt. However he is way off base on his savings approach. He totally misses the point of time being the most valuable asset you can have. Like Warren Buffet says, "You don't need a big snowball, just a big hill."
The years people miss out on savings while trying to pay off all the debt including their house, screws them out of all those years of compounding interest.
Yes, but they get to do a DEBT FREE SCREAM!!! and if they are lucky, they can do it live on the show. If they're able to do it at an early enough age, they still have time to compound interest. You have to think that DR is getting to younger folks more and more, nothing like being debt free at a young age. Getting rid of student loan debt, I'd say that's a plus, getting rid of consumer debt including usurious credit cards, personal loans, some of those auto loans are off the charts, yeah, it's better than putting your money at risk, when you can get a guaranteed risk free return of 10% without having to visit a SmartVestor Pro and pay them a load. The average DR listener doesn't know a savings account from a mutual fund, doesn't know what a stock, bond or money market instrument is. They can learn, but the easiest thing for them to understand is "no more debt", "no more shackles", "they can instead make a monthly payment to themselves".
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Grt2bOutdoors » Tue Jun 12, 2018 7:28 am

knpstr wrote:
Mon Jun 11, 2018 9:31 pm
Dave gets beat up a little too much on this forum in my opinion.

If you follow his advice to the letter, by getting out of debt and investing your money you will get wealthy. Perhaps not as wealthy if you stayed in debt with low interest rate and invested the difference, perhaps not as wealthy as if you invested in index funds versus funds he suggests, perhaps not as wealthy as paying off the highest interest rate first rather than smallest balance first; but there is no denying for many (if not most) people, if they would follow his advice they'd be better off.

He does a LOT of good for a LOT of people. :beer
+1 - there is no disputing that. There is no shortage of folks who need HELP.
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Cycle » Tue Jun 12, 2018 7:31 am

DR is good for paying down high interest debt and achieving a high savings rate. This is very important for about 90% of the population.

When it comes to getting good returns I think I'll just read this new book by Taylor on the 3-fund that is coming out.

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by indexonlyplease » Tue Jun 12, 2018 7:48 am

I just found this on my taxed deferred account. Is this where my money should be??

AMCAP Fund(R) - Class R6 Trade restrictions may apply. Please refer to the fund prospectus for more information.
Prospectus | Fact Sheet
3.40 19.40 10.95 14.36 10.86 11.98 05/01/1967 0.36

American Funds American Balanced Fund - Class R6
Prospectus | Fact Sheet
-1.15 9.78 8.06 9.68 8.24 10.99 07/25/1975 0.28

11.98 for life of fund not bad
10.99 for life of balance fund not bad either.

Can I get these returns for the next 30 years.

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Grt2bOutdoors » Tue Jun 12, 2018 8:17 am

indexonlyplease wrote:
Tue Jun 12, 2018 7:48 am
I just found this on my taxed deferred account. Is this where my money should be??

AMCAP Fund(R) - Class R6 Trade restrictions may apply. Please refer to the fund prospectus for more information.
Prospectus | Fact Sheet
3.40 19.40 10.95 14.36 10.86 11.98 05/01/1967 0.36

American Funds American Balanced Fund - Class R6
Prospectus | Fact Sheet
-1.15 9.78 8.06 9.68 8.24 10.99 07/25/1975 0.28

11.98 for life of fund not bad
10.99 for life of balance fund not bad either.

Can I get these returns for the next 30 years.
What does your crystal ball say?
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by knpstr » Tue Jun 12, 2018 9:08 am

willthrill81 wrote:
Mon Jun 11, 2018 10:50 pm
...
Are these people better off than they would have been otherwise? Probably, but that's along the lines of what I've heard called the "better than nothing" fallacy. There can be a big gulf between "better than nothing" and adequate. DR's advice here is akin to throwing a person 200 miles offshore a tiny lifebuoy. It's far better than nothing, but it's also a far cry from what they really need to get where they want to go safely.
His core advice is to put 15% into retirement accounts while you're getting out of debt and to max accounts (401k and Roth) for the rest of your life once out of debt. You'll end up with a little more than "a lifebuoy 200 miles offshore" following this advice.

One could easily end up with $1M+ dollars, have S.S. to supplement that, and have no debt of any kind by age 62. In a world where the median networth of people age 55-64 is $165,900 (as of 2014) I'd say that is an adequate result. I'm pretty sure there are retirees here on this board that had less than that and do just fine in retirement. When it comes to investments, Bogleheads tend to be a little of the "my way or the highway" type crowd. People are better off going with Vanguard for sure, but people could still do fine if Vanguard never existed.
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Nate79 » Tue Jun 12, 2018 10:40 am

Grt2bOutdoors wrote:
Tue Jun 12, 2018 7:18 am
nedsaid wrote:
Mon Jun 11, 2018 8:26 pm
I don't want this to be a Dave Ramsey bashing session but I pointed out that indexing is a great approach and you get great results without having to pick the right funds. Yes, it is possible to beat the indexes but the vast majority of fund managers fail to do so. The American Funds are a good place to put your money and historically, these funds have performed well. I can think of a lot worse things someone can do than put their money into American Funds. One note, is that even though American Funds have relatively low turnover compared to other active funds, their funds will still be less tax efficient than a Total Market Index Fund or an S&P 500 Index fund.
Who's bashing him? The posters are simply pointing out that on a factual basis there is a lack of accuracy in the responses. It's no different than if taking a school exam, you put the wrong answer or an incomplete answer you will get points deducted. So, DR gets 100 when it comes to getting out of debt, staying out debt, common sense personal finance, but he doesn't get 100 when it comes to investment facts.

I like American Funds, what I don't like is you have to pay a load or sales charge to enter the funds.
While I agree that American Funds are not good IF you have to pay the load but their funds may be available without the load. For example we have their international fund in my 401k, ER is ~0.5 and no load. I chose it over a very low expense international index fund and am willing to make the gamble on outperformance.

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Nate79 » Tue Jun 12, 2018 10:57 am

knpstr wrote:
Tue Jun 12, 2018 9:08 am
willthrill81 wrote:
Mon Jun 11, 2018 10:50 pm
...
Are these people better off than they would have been otherwise? Probably, but that's along the lines of what I've heard called the "better than nothing" fallacy. There can be a big gulf between "better than nothing" and adequate. DR's advice here is akin to throwing a person 200 miles offshore a tiny lifebuoy. It's far better than nothing, but it's also a far cry from what they really need to get where they want to go safely.
His core advice is to put 15% into retirement accounts while you're getting out of debt and to max accounts (401k and Roth) for the rest of your life once out of debt. You'll end up with a little more than "a lifebuoy 200 miles offshore" following this advice.

One could easily end up with $1M+ dollars, have S.S. to supplement that, and have no debt of any kind by age 62. In a world where the median networth of people age 55-64 is $165,900 (as of 2014) I'd say that is an adequate result. I'm pretty sure there are retirees here on this board that had less than that and do just fine in retirement. When it comes to investments, Bogleheads tend to be a little of the "my way or the highway" type crowd. People are better off going with Vanguard for sure, but people could still do fine if Vanguard never existed.
Actually people call in all the time with net worth in the $1-5m range who say they have followed the DR plan for so and so many years. Most of them have normal middle class income range salaries.

You actually hit on the reason that DR has been so successful and why people who follow his plan are more likely to be successful than using other plans. The reason is that his plan is simple, doesn't change, deliberate, no thinking involved, no alternative options, and lastly INTENSITY. When a caller calls in or you read his books his message is exactly clear what you should do. Steps 1-7. The problem with everyone else is that there is no one single simple plan. For example when someone calls into any other podcast/radio show the financial plan is customized, it has options, it makes the caller make decisions, and there is no clear definite direction the caller should go. This is no different than if a poster wrote on Bogleheads and asked for what they should do. They get 30 different opinions with no consistency. DR almost never makes exceptions to his plan. You know what he is going to recommend before he even speaks.

His investing advice reminds me of 20 years ago when you needed an advisor, American funds was the big dog, and people thought you could take 8% to live off of in retirement (though technically usually he recommends to only take the gains and leave the principle and usually gives caveats to the take 8% recommendation). Certainly having an advisor that DR recommends is not horrible because for the normal person investing can seem overwhelming and they may panic during a down turn. DR preaches buy and hold, no individual stocks, no permanent insurance and other scam products. The only problem with his investing advice is really the fees and the whole active vs passive index debate. But, there are many many many threads on BH on the topic of your favorite active fund. It is clear many many BH choose to invest in some big name active funds.

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by nedsaid » Tue Jun 12, 2018 11:21 am

Nate79 wrote:
Tue Jun 12, 2018 10:40 am
Grt2bOutdoors wrote:
Tue Jun 12, 2018 7:18 am
nedsaid wrote:
Mon Jun 11, 2018 8:26 pm
I don't want this to be a Dave Ramsey bashing session but I pointed out that indexing is a great approach and you get great results without having to pick the right funds. Yes, it is possible to beat the indexes but the vast majority of fund managers fail to do so. The American Funds are a good place to put your money and historically, these funds have performed well. I can think of a lot worse things someone can do than put their money into American Funds. One note, is that even though American Funds have relatively low turnover compared to other active funds, their funds will still be less tax efficient than a Total Market Index Fund or an S&P 500 Index fund.
Who's bashing him? The posters are simply pointing out that on a factual basis there is a lack of accuracy in the responses. It's no different than if taking a school exam, you put the wrong answer or an incomplete answer you will get points deducted. So, DR gets 100 when it comes to getting out of debt, staying out debt, common sense personal finance, but he doesn't get 100 when it comes to investment facts.

I like American Funds, what I don't like is you have to pay a load or sales charge to enter the funds.
While I agree that American Funds are not good IF you have to pay the load but their funds may be available without the load. For example we have their international fund in my 401k, ER is ~0.5 and no load. I chose it over a very low expense international index fund and am willing to make the gamble on outperformance.
At certain brokerages, you can buy certain American Funds without a sales load. I saw this at Fidelity for example.
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Jebediah » Tue Jun 12, 2018 11:40 am

AIVSX returns after-tax are 8.91% since inception (per morningstar), and it trails the market by over 2% over the last 15 years.

VFINX (Vanguard 500) has a 9.58% after-tax return since inception.

Image
Last edited by Jebediah on Tue Jun 12, 2018 11:53 am, edited 1 time in total.

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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by Grt2bOutdoors » Tue Jun 12, 2018 11:50 am

nedsaid wrote:
Tue Jun 12, 2018 11:21 am
Nate79 wrote:
Tue Jun 12, 2018 10:40 am
Grt2bOutdoors wrote:
Tue Jun 12, 2018 7:18 am
nedsaid wrote:
Mon Jun 11, 2018 8:26 pm
I don't want this to be a Dave Ramsey bashing session but I pointed out that indexing is a great approach and you get great results without having to pick the right funds. Yes, it is possible to beat the indexes but the vast majority of fund managers fail to do so. The American Funds are a good place to put your money and historically, these funds have performed well. I can think of a lot worse things someone can do than put their money into American Funds. One note, is that even though American Funds have relatively low turnover compared to other active funds, their funds will still be less tax efficient than a Total Market Index Fund or an S&P 500 Index fund.
Who's bashing him? The posters are simply pointing out that on a factual basis there is a lack of accuracy in the responses. It's no different than if taking a school exam, you put the wrong answer or an incomplete answer you will get points deducted. So, DR gets 100 when it comes to getting out of debt, staying out debt, common sense personal finance, but he doesn't get 100 when it comes to investment facts.

I like American Funds, what I don't like is you have to pay a load or sales charge to enter the funds.
While I agree that American Funds are not good IF you have to pay the load but their funds may be available without the load. For example we have their international fund in my 401k, ER is ~0.5 and no load. I chose it over a very low expense international index fund and am willing to make the gamble on outperformance.
At certain brokerages, you can buy certain American Funds without a sales load. I saw this at Fidelity for example.
I would not purchase an actively managed fund in a taxable account, load or no-load. Paying taxes because you realized a gain on purpose is one thing, having to pay taxes on gains realized because a manager undertook some action might push you into another tax bracket exposing your entire income to a whole host of unwanted problems - no thank you.
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Re: Interesting video from Ramsey today [How Ramsey Outperforms The Stock Market]

Post by FOGU » Tue Jun 12, 2018 11:52 am

He is absolutely right about the most important thing being the savings rate and being invested. You can substitute funds and tweak asset allocation all you want, but you cannot replace saving.
~ Don't just do something. Sit there. ~

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