Dave Ramsey [“good growth mutual fund”]

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
Andrew321
Posts: 105
Joined: Sat Nov 10, 2018 11:10 am

Dave Ramsey [“good growth mutual fund”]

Post by Andrew321 » Thu Dec 27, 2018 4:08 pm

Dave Ramsey says he owns a “good growth mutual fund” that averages 14% per year and has done so for 75 years. Does anyone know what it is?

deltaneutral83
Posts: 1409
Joined: Tue Mar 07, 2017 4:25 pm

Re: Dave Ramsey

Post by deltaneutral83 » Thu Dec 27, 2018 4:13 pm

No, he does not, he cites AIVSX frequently (which has beaten the S&P I think since 1932 most of which wasn't any time in the last 20 years). His mix of AIVSX/AMCPX/AMRMX/AGTHX for actively managed funds to compare against the S&P has been beaten by the S&P over 10/15 year intervals and is beaten even more in a taxable. It's also growth tilted which makes it even more implausible that it can't even keep up. His investment advice isn't perfect or ideal, but is still fine for 90% of investors on their equity portions. AF's do well in the active arena and the portfolio his managers preach about is about 70/30 Dom/Intl.

Jags4186
Posts: 4094
Joined: Wed Jun 18, 2014 7:12 pm

Re: Dave Ramsey

Post by Jags4186 » Thu Dec 27, 2018 4:15 pm

Andrew321 wrote:
Thu Dec 27, 2018 4:08 pm
Dave Ramsey says he owns a “good growth mutual fund” that averages 14% per year and has done so for 75 years. Does anyone know what it is?
American Funds Investment Company of America. I believe it is closer to 12% than to 14%, however. Ticker AIVSX

sillysaver
Posts: 184
Joined: Thu Oct 08, 2015 5:24 pm

Re: Dave Ramsey

Post by sillysaver » Thu Dec 27, 2018 4:15 pm


Jags4186
Posts: 4094
Joined: Wed Jun 18, 2014 7:12 pm

Re: Dave Ramsey

Post by Jags4186 » Thu Dec 27, 2018 4:19 pm

deltaneutral83 wrote:
Thu Dec 27, 2018 4:13 pm
No, he does not, he cites AIVSX frequently (which has beaten the S&P I think since 1932 most of which wasn't any time in the last 20 years). His mix of AIVSX/AMCPX/AMRMX/AGTHX for actively managed funds to compare against the S&P has been beaten by the S&P over 10/15 year intervals and is beaten even more in a taxable. It's also growth tilted which makes it even more implausible that it can't even keep up. His investment advice isn't perfect or ideal, but is still fine for 90% of investors on their equity portions. AF's do well in the active arena and the portfolio his managers preach about is about 70/30 Dom/Intl.
AISVX has done quite well and beaten the SP500 over the past 20 years even after accounting for the 5.25% front end load and expense ratio.

That mix of mutual funds you listed split 25% each has also outperformed the SP500 over the last 20 years by nearly 1.8%.

raamakoti
Posts: 138
Joined: Mon Jul 31, 2017 10:20 am

Re: Dave Ramsey

Post by raamakoti » Thu Dec 27, 2018 4:25 pm

Jags4186 wrote:
Thu Dec 27, 2018 4:15 pm
Andrew321 wrote:
Thu Dec 27, 2018 4:08 pm
Dave Ramsey says he owns a “good growth mutual fund” that averages 14% per year and has done so for 75 years. Does anyone know what it is?
American Funds Investment Company of America. I believe it is closer to 12% than to 14%, however. Ticker AIVSX
https://www.americanfunds.com/individua ... fund/aivsx
from google for AIVSX
YTD return 1.21% (I am not sure if this is YTD yield)
Net assets 60.44B
Front load 5.75%
Yield (ttm) 1.62%
Expense ratio 0.58%

User avatar
knpstr
Posts: 2399
Joined: Thu Nov 20, 2014 8:57 pm
Location: Michigan

Re: Dave Ramsey

Post by knpstr » Thu Dec 27, 2018 4:29 pm

The key is to look for "average return" and not CAGR.

Make no mistake, CAGR is what you care about, but Average Returns is marketing speak.

$1 grows to $2 = 100% return
$2 goes to $1 = -50 % return
50/2 = 25% average return -- gaining no money.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

Dottie57
Posts: 7557
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: Dave Ramsey

Post by Dottie57 » Thu Dec 27, 2018 4:32 pm

knpstr wrote:
Thu Dec 27, 2018 4:29 pm
The key is to look for "average return" and not CAGR.

Make no mistake, CAGR is what you care about, but Average Returns is marketing speak.

$1 grows to $2 = 100% return
$2 goes to $1 = -50 % return
50/2 = 25% average return -- gaining no money.
Thanks for the example!

Jags4186
Posts: 4094
Joined: Wed Jun 18, 2014 7:12 pm

Re: Dave Ramsey

Post by Jags4186 » Thu Dec 27, 2018 4:36 pm

The key is to look at what gives you the best chance to reach your goals moving forward.

American Funds is a good fund company that has been in existence for many decades. Their mutual funds have performed very well. But that’s all in the past. You can’t invest in the past you can only invest in the future.

OP, index funds will never be the best performers and to think otherwise is foolish. We know that investing in index funds will give us the average return of the market minus fees. All active managers lumped together will also give you average return of the market minus almost always higher fees. Since we can’t know for sure which active managers will outperform and since the ones who do outperform can change year in and year out, our best chance to get good returns is to invest in the indexes.

User avatar
LadyGeek
Site Admin
Posts: 58811
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Dave Ramsey [“good growth mutual fund”]

Post by LadyGeek » Thu Dec 27, 2018 4:53 pm

This thread is now in the Investing - Theory, News & General forum (general discussion). I retitled the thread for clarity.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

User avatar
Phineas J. Whoopee
Posts: 9034
Joined: Sun Dec 18, 2011 6:18 pm

Re: Dave Ramsey [“good growth mutual fund”]

Post by Phineas J. Whoopee » Fri Dec 28, 2018 1:55 pm

Even if he has one he's not naming, past performance does not guarantee future results.
PJW

Grt2bOutdoors
Posts: 21773
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Dave Ramsey [“good growth mutual fund”]

Post by Grt2bOutdoors » Fri Dec 28, 2018 2:48 pm

Andrew321 wrote:
Thu Dec 27, 2018 4:08 pm
Dave Ramsey says he owns a “good growth mutual fund” that averages 14% per year and has done so for 75 years. Does anyone know what it is?
I've heard his podcasts before, he recommends a 25% slice in Aggressive Growth, Growth Fund, Growth & Income (S&P 500 fund) and 25% in an International Fund.

My guess for each - New Economy or New Perspective Fund
Growth Fund of America
Vanguard S&P 500 fund - DR specifically mentions this fund on his show and says he owns it.
Europacific Growth.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Blake7
Posts: 196
Joined: Fri Mar 30, 2018 2:52 pm
Location: USA

Re: Dave Ramsey [“good growth mutual fund”]

Post by Blake7 » Fri Dec 28, 2018 3:01 pm

Phineas J. Whoopee wrote:
Fri Dec 28, 2018 1:55 pm
Even if he has one he's not naming, past performance does not guarantee future results.
PJW
Not a guarantee (that legalese to cover mutual fund / brokerage firm's behinds), but is an indicator of an actively managed fund manager's abilities over time and possible future performance (at least for as long he or she is managing that fund. Index funds, of course, remove the fund manager risk).

Blake7
Posts: 196
Joined: Fri Mar 30, 2018 2:52 pm
Location: USA

Re: Dave Ramsey [“good growth mutual fund”]

Post by Blake7 » Fri Dec 28, 2018 3:12 pm

Grt2bOutdoors wrote:
Fri Dec 28, 2018 2:48 pm
Andrew321 wrote:
Thu Dec 27, 2018 4:08 pm
Dave Ramsey says he owns a “good growth mutual fund” that averages 14% per year and has done so for 75 years. Does anyone know what it is?
I've heard his podcasts before, he recommends a 25% slice in Aggressive Growth, Growth Fund, Growth & Income (S&P 500 fund) and 25% in an International Fund.

My guess for each - New Economy or New Perspective Fund
Growth Fund of America
Vanguard S&P 500 fund - DR specifically mentions this fund on his show and says he owns it.
Europacific Growth.
DR has said he does use SP500 Index funds in his taxable for tax efficiency. FWIW, considering so many Americans are living paycheck-to-paycheck and are carrying debt, once they get around to serious investing, whether they use actively managed versus index funds matters less than the fact they are actually saving for retirement. Yes, DR may be motivated to drive business to his Endorsed Local Providers who recommend actively managed funds, and most here believe (including me) that indexing is they way to go, but in the bigger picture, what DR is recommending is way better than not investing at all. :happy

User avatar
whodidntante
Posts: 7130
Joined: Thu Jan 21, 2016 11:11 pm
Location: outside the echo chamber

Re: Dave Ramsey [“good growth mutual fund”]

Post by whodidntante » Fri Dec 28, 2018 3:23 pm

Phineas J. Whoopee wrote:
Fri Dec 28, 2018 1:55 pm
Even if he has one he's not naming, past performance does not guarantee future results.
PJW
Mr. David Ramsey, who has a bachelor's degree in economics from the University of Tennessee, advises his followers to use past performance to pick good growth stock mutual funds. Beating the market is easy, according to Mr. David Ramsey. /sarcasm

The sarcasm is mine, but it's a fair characterization of what he has said.

User avatar
Phineas J. Whoopee
Posts: 9034
Joined: Sun Dec 18, 2011 6:18 pm

Re: Dave Ramsey [“good growth mutual fund”]

Post by Phineas J. Whoopee » Fri Dec 28, 2018 3:26 pm

Blake7 wrote:
Fri Dec 28, 2018 3:01 pm
Phineas J. Whoopee wrote:
Fri Dec 28, 2018 1:55 pm
Even if he has one he's not naming, past performance does not guarantee future results.
PJW
Not a guarantee (that legalese to cover mutual fund / brokerage firm's behinds), but is an indicator of an actively managed fund manager's abilities over time and possible future performance (at least for as long he or she is managing that fund. Index funds, of course, remove the fund manager risk).
For the claimed 75 years? How old do we expect this hypothetical fund manager to get before s/he retires?

Even before Bernie made off with the money he claimed little more return.

PJW
Last edited by Phineas J. Whoopee on Sat Dec 29, 2018 5:51 pm, edited 1 time in total.

User avatar
Stinky
Posts: 2861
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Dave Ramsey [“good growth mutual fund”]

Post by Stinky » Fri Dec 28, 2018 3:40 pm

Blake7 wrote:
Fri Dec 28, 2018 3:12 pm
Grt2bOutdoors wrote:
Fri Dec 28, 2018 2:48 pm

FWIW, considering so many Americans are living paycheck-to-paycheck and are carrying debt, once they get around to serious investing, whether they use actively managed versus index funds matters less than the fact they are actually saving for retirement.

Yes, DR may be motivated to drive business to his Endorsed Local Providers who recommend actively managed funds, and most here believe (including me) that indexing is they way to go, but in the bigger picture, what DR is recommending is way better than not investing at all. :happy
I think that DR has done a great job in promoting basic financial literacy to the masses. Get out of and stay out of debt, save for retirement, don’t spend crazy money on college, etc.

He could do even better by recommending index funds. But I ageee that the choice of funds is less important for his audience than the choice to invest at all.
It's a GREAT day to be alive - Travis Tritt

User avatar
Clever_Username
Posts: 1416
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: Dave Ramsey [“good growth mutual fund”]

Post by Clever_Username » Fri Dec 28, 2018 4:02 pm

Blake7 wrote:
Fri Dec 28, 2018 3:01 pm
Phineas J. Whoopee wrote:
Fri Dec 28, 2018 1:55 pm
Even if he has one he's not naming, past performance does not guarantee future results.
PJW
Not a guarantee (that legalese to cover mutual fund / brokerage firm's behinds), but is an indicator of an actively managed fund manager's abilities over time and possible future performance (at least for as long he or she is managing that fund. Index funds, of course, remove the fund manager risk).
That legalese is there because using past performance to estimate future results is such a bad idea, it's literally a legal requirement to inform you of just how bad an idea it is.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.

User avatar
JoMoney
Posts: 8194
Joined: Tue Jul 23, 2013 5:31 am

Re: Dave Ramsey [“good growth mutual fund”]

Post by JoMoney » Fri Dec 28, 2018 4:07 pm

Clever_Username wrote:
Fri Dec 28, 2018 4:02 pm
Blake7 wrote:
Fri Dec 28, 2018 3:01 pm
Phineas J. Whoopee wrote:
Fri Dec 28, 2018 1:55 pm
Even if he has one he's not naming, past performance does not guarantee future results.
PJW
Not a guarantee (that legalese to cover mutual fund / brokerage firm's behinds), but is an indicator of an actively managed fund manager's abilities over time and possible future performance (at least for as long he or she is managing that fund. Index funds, of course, remove the fund manager risk).
That legalese is there because using past performance to estimate future results is such a bad idea, it's literally a legal requirement to inform you of just how bad an idea it is.
He doesn't tell you fund names because he doesn't know which ones the "Endorsed Local Provider" he refers you to will be shilling for.
Can't have people going in asking for the fund "Dave Said" when the ELP makes his commission on load funds from a different fund family.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

User avatar
willthrill81
Posts: 15190
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Dave Ramsey [“good growth mutual fund”]

Post by willthrill81 » Fri Dec 28, 2018 4:16 pm

Clever_Username wrote:
Fri Dec 28, 2018 4:02 pm
Blake7 wrote:
Fri Dec 28, 2018 3:01 pm
Phineas J. Whoopee wrote:
Fri Dec 28, 2018 1:55 pm
Even if he has one he's not naming, past performance does not guarantee future results.
PJW
Not a guarantee (that legalese to cover mutual fund / brokerage firm's behinds), but is an indicator of an actively managed fund manager's abilities over time and possible future performance (at least for as long he or she is managing that fund. Index funds, of course, remove the fund manager risk).
That legalese is there because using past performance to estimate future results is such a bad idea, it's literally a legal requirement to inform you of just how bad an idea it is.
Nobody takes that 100% literally though, not even Bogleheads. We use past performance regularly to get an idea of what may be a plausible AA all the time, for instance.
“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

azanon
Posts: 2633
Joined: Mon Nov 07, 2011 10:34 am

Re: Dave Ramsey

Post by azanon » Fri Dec 28, 2018 4:25 pm

Jags4186 wrote:
Thu Dec 27, 2018 4:19 pm
deltaneutral83 wrote:
Thu Dec 27, 2018 4:13 pm
No, he does not, he cites AIVSX frequently (which has beaten the S&P I think since 1932 most of which wasn't any time in the last 20 years). His mix of AIVSX/AMCPX/AMRMX/AGTHX for actively managed funds to compare against the S&P has been beaten by the S&P over 10/15 year intervals and is beaten even more in a taxable. It's also growth tilted which makes it even more implausible that it can't even keep up. His investment advice isn't perfect or ideal, but is still fine for 90% of investors on their equity portions. AF's do well in the active arena and the portfolio his managers preach about is about 70/30 Dom/Intl.
AISVX has done quite well and beaten the SP500 over the past 20 years even after accounting for the 5.25% front end load and expense ratio.

That mix of mutual funds you listed split 25% each has also outperformed the SP500 over the last 20 years by nearly 1.8%.
I'm not seeing that at all. I loaded up AIVSX vs. VFINX (Vanguard Index 500) back to as far as it will go (Jan 85' to Nov 2018) at portfoliovisualizer.com and it's showing 11.16% vs. 11.02% CAGR for AIVSX and VFINX, respectively. For all practical purposes, AIVSX performs the same as S&P 500. To its credit, it did do so with less standard deviation, slightly less max drawdown, and slightly higher sharpe ratio, and all of that despite the higher expense ratio.

In fairness, i did change the test range to 20 years since that's what you quoted for outperformance, and the outperformance for AIVSX was (only) 0.65% CAGR..... So nothing close to 1.8%.

User avatar
JoMoney
Posts: 8194
Joined: Tue Jul 23, 2013 5:31 am

Re: Dave Ramsey [“good growth mutual fund”]

Post by JoMoney » Fri Dec 28, 2018 4:30 pm

^ here's a chart of a longer-term S&P index growth chart with AIVSX
Morningstar Link

It looks like the bulk of AIVSX out-performance can be narrowed to between 1965-1982
Keep in mind AIVSX has a front end load of 5.75% on all contributions... that will take a big bite out of whatever returns it did have, and is not included in the charts performance
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

User avatar
willthrill81
Posts: 15190
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Dave Ramsey [“good growth mutual fund”]

Post by willthrill81 » Fri Dec 28, 2018 4:33 pm

Andrew321 wrote:
Thu Dec 27, 2018 4:08 pm
Dave Ramsey says he owns a “good growth mutual fund” that averages 14% per year and has done so for 75 years. Does anyone know what it is?
As others have noted, he doesn't. And the 14% number is very misleading if not an outright lie.

If you want to an easy to buy asset class that has outperformed both the S&P 500 and the total stock market over the entire documented history of such things in the U.S., then you should buy a small cap value fund. Most brokerages offer one. VISVX is one of Vanguard's. It has underperformed the market for some time, but that's happened repeatedly throughout history. You would have had to own it through the good times and bad to get that overall performance. And it might not outperform over the long-term in the future either. So take from it what you will.
“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

Jeff Albertson
Posts: 741
Joined: Sat Apr 06, 2013 7:11 pm
Location: Springfield

Re: Dave Ramsey [“good growth mutual fund”]

Post by Jeff Albertson » Fri Dec 28, 2018 4:49 pm

It's remarkable how much credibility the public puts in these tv and radio actors. Whether the subject is cooking, personal finance, travel or business management, the primary reason these actors are on tv is not necessarily that they are knowledgeable in that subject, but because they know how to entertain an audience.

User avatar
willthrill81
Posts: 15190
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Dave Ramsey [“good growth mutual fund”]

Post by willthrill81 » Fri Dec 28, 2018 4:50 pm

Jeff Albertson wrote:
Fri Dec 28, 2018 4:49 pm
It's remarkable how much credibility the public puts in these tv and radio actors. Whether the subject is cooking, personal finance, travel or business management, the primary reason these actors are on tv is not necessarily that they are knowledgeable in that subject, but because they know how to entertain an audience.
+1

The key to understanding why the media does what it does can be summed up in two words: advertising revenue.
“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

Jags4186
Posts: 4094
Joined: Wed Jun 18, 2014 7:12 pm

Re: Dave Ramsey

Post by Jags4186 » Fri Dec 28, 2018 4:58 pm

azanon wrote:
Fri Dec 28, 2018 4:25 pm
Jags4186 wrote:
Thu Dec 27, 2018 4:19 pm
deltaneutral83 wrote:
Thu Dec 27, 2018 4:13 pm
No, he does not, he cites AIVSX frequently (which has beaten the S&P I think since 1932 most of which wasn't any time in the last 20 years). His mix of AIVSX/AMCPX/AMRMX/AGTHX for actively managed funds to compare against the S&P has been beaten by the S&P over 10/15 year intervals and is beaten even more in a taxable. It's also growth tilted which makes it even more implausible that it can't even keep up. His investment advice isn't perfect or ideal, but is still fine for 90% of investors on their equity portions. AF's do well in the active arena and the portfolio his managers preach about is about 70/30 Dom/Intl.
AISVX has done quite well and beaten the SP500 over the past 20 years even after accounting for the 5.25% front end load and expense ratio.

That mix of mutual funds you listed split 25% each has also outperformed the SP500 over the last 20 years by nearly 1.8%.
I'm not seeing that at all. I loaded up AIVSX vs. VFINX (Vanguard Index 500) back to as far as it will go (Jan 85' to Nov 2018) at portfoliovisualizer.com and it's showing 11.16% vs. 11.02% CAGR for AIVSX and VFINX, respectively. For all practical purposes, AIVSX performs the same as S&P 500. To its credit, it did do so with less standard deviation, slightly less max drawdown, and slightly higher sharpe ratio, and all of that despite the higher expense ratio.

In fairness, i did change the test range to 20 years since that's what you quoted for outperformance, and the outperformance for AIVSX was (only) 0.65% CAGR..... So nothing close to 1.8%.
AIVSX vs SP 500 last 20 years

Image

4 Fund 25% split evenly vs SP 500 last 20 years

Image

User avatar
Nate79
Posts: 5327
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Dave Ramsey [“good growth mutual fund”]

Post by Nate79 » Fri Dec 28, 2018 4:59 pm

It's been a while since there has been a Dave Ramsey bash thread.

User avatar
Raybo
Posts: 1865
Joined: Tue Feb 20, 2007 11:02 am
Location: San Francisco
Contact:

Re: Dave Ramsey [“good growth mutual fund”]

Post by Raybo » Fri Dec 28, 2018 5:00 pm

I always like when fund companies compare their offerings to the S&P500, a US large cap fund. In almost all cases, they use the index and not the actual returns. The index doesn't include dividends and the fund companies ignore front-end loads. Some ignore other costs, as well. Also, the funds compared are never just US large cap funds. Yet, it is the S&P500 that gets the attention.
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

Jags4186
Posts: 4094
Joined: Wed Jun 18, 2014 7:12 pm

Re: Dave Ramsey [“good growth mutual fund”]

Post by Jags4186 » Fri Dec 28, 2018 5:06 pm

JoMoney wrote:
Fri Dec 28, 2018 4:30 pm
^ here's a chart of a longer-term S&P index growth chart with AIVSX
Morningstar Link

It looks like the bulk of AIVSX out-performance can be narrowed to between 1965-1982
Keep in mind AIVSX has a front end load of 5.75% on all contributions... that will take a big bite out of whatever returns it did have, and is not included in the charts performance
The big outperformance in recent times came in 2000-2002. American Funds did not get caught up in the tech boom. Of course this leads to it having underperformance from 1995-1999. If you look at the most recent history, the fund has underperformed again in 2015-2018. I would assume it is a similar reasons—the fund hasn’t picked up as much of the tech stocks which has driven much of the market the last few years.
Last edited by Jags4186 on Fri Dec 28, 2018 5:12 pm, edited 1 time in total.

Jags4186
Posts: 4094
Joined: Wed Jun 18, 2014 7:12 pm

Re: Dave Ramsey [“good growth mutual fund”]

Post by Jags4186 » Fri Dec 28, 2018 5:10 pm

Nate79 wrote:
Fri Dec 28, 2018 4:59 pm
It's been a while since there has been a Dave Ramsey bash thread.
It has. I don’t believe Dave Ramsey’s investing advice is good. But if you are going invest in active funds American Funds is as good a choice as any. They do have a 70+ year track record of performance. There are worse places to put your money.

Woodshark
Posts: 456
Joined: Fri Jan 07, 2011 4:09 pm

Re: Dave Ramsey [“good growth mutual fund”]

Post by Woodshark » Fri Dec 28, 2018 5:49 pm

I'm no fan of loaded funds but those charts posted above do seem to indicate that, at least for the last 20 years, the funds have done better than a standard S&P 500 fund while pretty much mirroring there volatility. I'm not jumping horses mid-stream but they do seem to have the special sauce. I wonder if the charts factor in the initial load.

Jags4186
Posts: 4094
Joined: Wed Jun 18, 2014 7:12 pm

Re: Dave Ramsey [“good growth mutual fund”]

Post by Jags4186 » Fri Dec 28, 2018 6:03 pm

Woodshark wrote:
Fri Dec 28, 2018 5:49 pm
I'm no fan of loaded funds but those charts posted above do seem to indicate that, at least for the last 20 years, the funds have done better than a standard S&P 500 fund while pretty much mirroring there volatility. I'm not jumping horses mid-stream but they do seem to have the special sauce. I wonder if the charts factor in the initial load.
The charts do not factor in the load but you can easily just put in a lower initial amount for the funds and still see they will outperform—of course by not as much. You can buy American Funds with no loads now albeit with higher ongoing expense ratios.

There is no special sauce. As I said earlier the charts benefit from timing. American Funds did not load up on tech stocks in the 1990s. That lead to underperformance from 1995-1999. From 1985-1994 AIVSX slightly outperformed the SP500 by 26 basis points. From 1995-1999 the SP500 outperformed AIVSX by 195 basis points. From 2000-2002 AIVSX outperformed the SP500 by 923 basis points. From 2003-2010 the performed practically the same and from 2011-present the SP500 has outperformed by 67 basis points.

User avatar
Portfolio7
Posts: 708
Joined: Tue Aug 02, 2016 3:53 am

Re: Dave Ramsey [“good growth mutual fund”]

Post by Portfolio7 » Fri Dec 28, 2018 6:16 pm

Jags4186 wrote:
Fri Dec 28, 2018 6:03 pm
Woodshark wrote:
Fri Dec 28, 2018 5:49 pm
I'm no fan of loaded funds but those charts posted above do seem to indicate that, at least for the last 20 years, the funds have done better than a standard S&P 500 fund while pretty much mirroring there volatility. I'm not jumping horses mid-stream but they do seem to have the special sauce. I wonder if the charts factor in the initial load.
The charts do not factor in the load but you can easily just put in a lower initial amount for the funds and still see they will outperform—of course by not as much. You can buy American Funds with no loads now albeit with higher ongoing expense ratios.

There is no special sauce. As I said earlier the charts benefit from timing. American Funds did not load up on tech stocks in the 1990s. That lead to underperformance from 1995-1999. From 1985-1994 AIVSX slightly outperformed the SP500 by 26 basis points. From 1995-1999 the SP500 outperformed AIVSX by 195 basis points. From 2000-2002 AIVSX outperformed the SP500 by 923 basis points. From 2003-2010 the performed practically the same and from 2011-present the SP500 has outperformed by 67 basis points.
My understanding is that American Funds are not limited to a style or size when it comes to equity investments. Benchmarking vs the S&P500 likely is innappropriate.
"An investment in knowledge pays the best interest" - Benjamin Franklin

Trader Joe
Posts: 1442
Joined: Fri Apr 25, 2014 6:38 pm

Re: Dave Ramsey

Post by Trader Joe » Fri Dec 28, 2018 6:29 pm

Jags4186 wrote:
Fri Dec 28, 2018 4:58 pm
azanon wrote:
Fri Dec 28, 2018 4:25 pm
Jags4186 wrote:
Thu Dec 27, 2018 4:19 pm
deltaneutral83 wrote:
Thu Dec 27, 2018 4:13 pm
No, he does not, he cites AIVSX frequently (which has beaten the S&P I think since 1932 most of which wasn't any time in the last 20 years). His mix of AIVSX/AMCPX/AMRMX/AGTHX for actively managed funds to compare against the S&P has been beaten by the S&P over 10/15 year intervals and is beaten even more in a taxable. It's also growth tilted which makes it even more implausible that it can't even keep up. His investment advice isn't perfect or ideal, but is still fine for 90% of investors on their equity portions. AF's do well in the active arena and the portfolio his managers preach about is about 70/30 Dom/Intl.
AISVX has done quite well and beaten the SP500 over the past 20 years even after accounting for the 5.25% front end load and expense ratio.

That mix of mutual funds you listed split 25% each has also outperformed the SP500 over the last 20 years by nearly 1.8%.
I'm not seeing that at all. I loaded up AIVSX vs. VFINX (Vanguard Index 500) back to as far as it will go (Jan 85' to Nov 2018) at portfoliovisualizer.com and it's showing 11.16% vs. 11.02% CAGR for AIVSX and VFINX, respectively. For all practical purposes, AIVSX performs the same as S&P 500. To its credit, it did do so with less standard deviation, slightly less max drawdown, and slightly higher sharpe ratio, and all of that despite the higher expense ratio.

In fairness, i did change the test range to 20 years since that's what you quoted for outperformance, and the outperformance for AIVSX was (only) 0.65% CAGR..... So nothing close to 1.8%.
AIVSX vs SP 500 last 20 years

Image

4 Fund 25% split evenly vs SP 500 last 20 years

Image
Thank you very much for posting this information. I have always wondered what investment Dave Ramsey was referring to. This is great information!

User avatar
Random Musings
Posts: 5580
Joined: Thu Feb 22, 2007 4:24 pm
Location: Pennsylvania

Re: Dave Ramsey [“good growth mutual fund”]

Post by Random Musings » Fri Dec 28, 2018 10:08 pm

Could do with Vanguard actives as well. Primecap, Capital Opportunity, Windsor II and Growth & Income. Little more volatility, but higher returns 8.10% and same Sharpe 0.49 and Sortino 0.70

Shouldn't the American funds start below $10K, as FE loads, even conduiting through the bond fund first, reduce initial investment?

RM
I figure the odds be fifty-fifty I just might have something to say. FZ

jrmillions
Posts: 34
Joined: Mon Sep 03, 2012 5:26 am
Location: Columbus, OH

Re: Dave Ramsey [“good growth mutual fund”]

Post by jrmillions » Fri Dec 28, 2018 10:42 pm

Nate79 wrote:
Fri Dec 28, 2018 4:59 pm
It's been a while since there has been a Dave Ramsey bash thread.
Its seems like a monthly thing. It's always the same thing-mostly negative.

On a positive note, how about that Clark Howard? He is the one that introduced me to index funds.

User avatar
Starchild
Posts: 129
Joined: Fri Feb 09, 2018 9:01 am

Re: Dave Ramsey

Post by Starchild » Sat Dec 29, 2018 7:46 am

deltaneutral83 wrote:
Thu Dec 27, 2018 4:13 pm
No, he does not, he cites AIVSX frequently (which has beaten the S&P I think since 1932 most of which wasn't any time in the last 20 years). His mix of AIVSX/AMCPX/AMRMX/AGTHX for actively managed funds to compare against the S&P has been beaten by the S&P over 10/15 year intervals and is beaten even more in a taxable. It's also growth tilted which makes it even more implausible that it can't even keep up. His investment advice isn't perfect or ideal, but is still fine for 90% of investors on their equity portions. AF's do well in the active arena and the portfolio his managers preach about is about 70/30 Dom/Intl.
Are you sure these are his funds? Just doing a quick look up, there's not much international here.

Value52
Posts: 12
Joined: Fri Dec 02, 2011 12:54 pm

Re: Dave Ramsey [“good growth mutual fund”]

Post by Value52 » Sat Dec 29, 2018 4:01 pm

FWIW - Information on the holdings of The Lampo Group (Dave's company) 401(k) plan is publicly available on the DOL website. Here are the top holdings of the plan at 12/31/17:

Growth Fund of America
New Perspectives Fund
Smallcap World Fund
Investment Company of America
Capital World Growth & Income
American Balanced
Europacific Growth

There are a bunch of other investment options also but these seven had by far the most assets in them. So very likely Dave's personal four fund mix is found among this list.

Eric76
Posts: 176
Joined: Fri Nov 07, 2014 4:02 am

Re: Dave Ramsey [“good growth mutual fund”]

Post by Eric76 » Sat Dec 29, 2018 4:27 pm

I can't believe people will still pay a 5.75% load. That's insane.

OffGridder
Posts: 51
Joined: Thu Jul 23, 2015 8:03 am
Location: Eastern WA.

Re: Dave Ramsey [“good growth mutual fund”]

Post by OffGridder » Sat Dec 29, 2018 4:35 pm

Blake7 wrote:
Fri Dec 28, 2018 3:12 pm


DR has said he does use SP500 Index funds in his taxable for tax efficiency. FWIW, considering so many Americans are living paycheck-to-paycheck and are carrying debt, once they get around to serious investing, whether they use actively managed versus index funds matters less than the fact they are actually saving for retirement. Yes, DR may be motivated to drive business to his Endorsed Local Providers who recommend actively managed funds, and most here believe (including me) that indexing is they way to go, but in the bigger picture, what DR is recommending is way better than not investing at all. :happy
+1
It may not be optimum, but I am not going to beat up Dave Ramsey or his plan if it leads people out of life crushing debt and the worse thing that happens is after achieving freedom from debt they sign up with one of his ELP's and invest in front loaded actively managed mutual funds.
Last edited by OffGridder on Sat Dec 29, 2018 4:46 pm, edited 1 time in total.
"Goodness is the only investment that never fails." | H.D. Thoreau

User avatar
Nate79
Posts: 5327
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Dave Ramsey [“good growth mutual fund”]

Post by Nate79 » Sat Dec 29, 2018 4:39 pm

Eric76 wrote:
Sat Dec 29, 2018 4:27 pm
I can't believe people will still pay a 5.75% load. That's insane.
Paying a load may be the cheapest option to pay an advisor (vs AUM). Paying loads or AUM goes into the debate of whether someone should have an investment advisor or not though. For most people who have no clue at all about investing using American funds with a load paying the advisor is not horrible (especially as it keeps them out of picking stocks, playing with bitcoin, and selling during a market crash). But none of these funds require paying a load - they are regularly available without loads in 401k plans for example.

I have access and use the American funds Europac fund in my 401k, no load and ER of 0.49 which is perfectly fine.

columbia
Posts: 2160
Joined: Tue Aug 27, 2013 5:30 am

Re: Dave Ramsey [“good growth mutual fund”]

Post by columbia » Sat Dec 29, 2018 4:44 pm

Blake7 wrote:
Fri Dec 28, 2018 3:12 pm
Grt2bOutdoors wrote:
Fri Dec 28, 2018 2:48 pm
Andrew321 wrote:
Thu Dec 27, 2018 4:08 pm
Dave Ramsey says he owns a “good growth mutual fund” that averages 14% per year and has done so for 75 years. Does anyone know what it is?
I've heard his podcasts before, he recommends a 25% slice in Aggressive Growth, Growth Fund, Growth & Income (S&P 500 fund) and 25% in an International Fund.

My guess for each - New Economy or New Perspective Fund
Growth Fund of America
Vanguard S&P 500 fund - DR specifically mentions this fund on his show and says he owns it.
Europacific Growth.
DR has said he does use SP500 Index funds in his taxable for tax efficiency. FWIW, considering so many Americans are living paycheck-to-paycheck and are carrying debt, once they get around to serious investing, whether they use actively managed versus index funds matters less than the fact they are actually saving for retirement. Yes, DR may be motivated to drive business to his Endorsed Local Providers who recommend actively managed funds, and most here believe (including me) that indexing is they way to go, but in the bigger picture, what DR is recommending is way better than not investing at all. :happy

If the fund returns - before the load fee - less than 5.75% in any given year, it is in fact worse than holding cash.

lakja
Posts: 81
Joined: Mon Nov 06, 2017 5:34 pm

Re: Dave Ramsey

Post by lakja » Sat Dec 29, 2018 4:48 pm

:twisted:
Jags4186 wrote:
Fri Dec 28, 2018 4:58 pm
azanon wrote:
Fri Dec 28, 2018 4:25 pm
Jags4186 wrote:
Thu Dec 27, 2018 4:19 pm
deltaneutral83 wrote:
Thu Dec 27, 2018 4:13 pm
No, he does not, he cites AIVSX frequently (which has beaten the S&P I think since 1932 most of which wasn't any time in the last 20 years). His mix of AIVSX/AMCPX/AMRMX/AGTHX for actively managed funds to compare against the S&P has been beaten by the S&P over 10/15 year intervals and is beaten even more in a taxable. It's also growth tilted which makes it even more implausible that it can't even keep up. His investment advice isn't perfect or ideal, but is still fine for 90% of investors on their equity portions. AF's do well in the active arena and the portfolio his managers preach about is about 70/30 Dom/Intl.
AISVX has done quite well and beaten the SP500 over the past 20 years even after accounting for the 5.25% front end load and expense ratio.

That mix of mutual funds you listed split 25% each has also outperformed the SP500 over the last 20 years by nearly 1.8%.
I'm not seeing that at all. I loaded up AIVSX vs. VFINX (Vanguard Index 500) back to as far as it will go (Jan 85' to Nov 2018) at portfoliovisualizer.com and it's showing 11.16% vs. 11.02% CAGR for AIVSX and VFINX, respectively. For all practical purposes, AIVSX performs the same as S&P 500. To its credit, it did do so with less standard deviation, slightly less max drawdown, and slightly higher sharpe ratio, and all of that despite the higher expense ratio.

In fairness, i did change the test range to 20 years since that's what you quoted for outperformance, and the outperformance for AIVSX was (only) 0.65% CAGR..... So nothing close to 1.8%.
AIVSX vs SP 500 last 20 years

Image

4 Fund 25% split evenly vs SP 500 last 20 years

Image
I’m pretty sure those returns don’t include the 5.75% front load on the AIVSX and the annual .58 ER. The Vanguard VFIAX has no front load and an annual 0.04 ER.

A better comparison neglecting the annual ER difference, would be to have 10k in VFIAX and 9,425 on the AIVSX.

User avatar
Nate79
Posts: 5327
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Dave Ramsey

Post by Nate79 » Sat Dec 29, 2018 5:00 pm

lakja wrote:
Sat Dec 29, 2018 4:48 pm
:twisted:
Jags4186 wrote:
Fri Dec 28, 2018 4:58 pm
azanon wrote:
Fri Dec 28, 2018 4:25 pm
Jags4186 wrote:
Thu Dec 27, 2018 4:19 pm
deltaneutral83 wrote:
Thu Dec 27, 2018 4:13 pm
No, he does not, he cites AIVSX frequently (which has beaten the S&P I think since 1932 most of which wasn't any time in the last 20 years). His mix of AIVSX/AMCPX/AMRMX/AGTHX for actively managed funds to compare against the S&P has been beaten by the S&P over 10/15 year intervals and is beaten even more in a taxable. It's also growth tilted which makes it even more implausible that it can't even keep up. His investment advice isn't perfect or ideal, but is still fine for 90% of investors on their equity portions. AF's do well in the active arena and the portfolio his managers preach about is about 70/30 Dom/Intl.
AISVX has done quite well and beaten the SP500 over the past 20 years even after accounting for the 5.25% front end load and expense ratio.

That mix of mutual funds you listed split 25% each has also outperformed the SP500 over the last 20 years by nearly 1.8%.
I'm not seeing that at all. I loaded up AIVSX vs. VFINX (Vanguard Index 500) back to as far as it will go (Jan 85' to Nov 2018) at portfoliovisualizer.com and it's showing 11.16% vs. 11.02% CAGR for AIVSX and VFINX, respectively. For all practical purposes, AIVSX performs the same as S&P 500. To its credit, it did do so with less standard deviation, slightly less max drawdown, and slightly higher sharpe ratio, and all of that despite the higher expense ratio.

In fairness, i did change the test range to 20 years since that's what you quoted for outperformance, and the outperformance for AIVSX was (only) 0.65% CAGR..... So nothing close to 1.8%.
AIVSX vs SP 500 last 20 years

Image

4 Fund 25% split evenly vs SP 500 last 20 years

Image
I’m pretty sure those returns don’t include the 5.75% front load on the AIVSX and the annual .58 ER. The Vanguard VFIAX has no front load and an annual 0.04 ER.

A better comparison neglecting the annual ER difference, would be to have 10k in VFIAX and 9,425 on the AIVSX.
ER are always included in total return. Whether a load is paid or not depends on the account terms.

User avatar
Phineas J. Whoopee
Posts: 9034
Joined: Sun Dec 18, 2011 6:18 pm

Re: Dave Ramsey [“good growth mutual fund”]

Post by Phineas J. Whoopee » Sat Dec 29, 2018 5:03 pm

His helping people get a rational handle on their personal finances is laudable. Providing a reasonably successful (if not mathematically optimal) way to get out of excessive debt is stellar.

Lying to people about how much they can expect from investments, and pointing them to high-fee managers to obtain it, is abhorrent, and would be even if he didn't personally profit directly.

That would still be the case if he didn't claim to be divinely inspired to give the specific investing advice.

PJW

lakja
Posts: 81
Joined: Mon Nov 06, 2017 5:34 pm

Re: Dave Ramsey

Post by lakja » Sat Dec 29, 2018 5:50 pm

Nate79 wrote:
Sat Dec 29, 2018 5:00 pm

ER are always included in total return. Whether a load is paid or not depends on the account terms.
I agree ER are reflected in total returns, but it’s not clear to me the ER are reflecting total returns in these plots. Also, it’s clear the front load is not being accounted for here. Like I said a better comparison would be to start with 10k in the VFIAX and 9475 in the AIVSX.

Also, the AIVSX is actively managed and would result in higher tax drag than VFIAX if in a taxable account.

User avatar
Nate79
Posts: 5327
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Dave Ramsey

Post by Nate79 » Sat Dec 29, 2018 6:02 pm

lakja wrote:
Sat Dec 29, 2018 5:50 pm
Nate79 wrote:
Sat Dec 29, 2018 5:00 pm

ER are always included in total return. Whether a load is paid or not depends on the account terms.
I agree ER are reflected in total returns, but it’s not clear to me the ER are reflecting total returns in these plots. Also, it’s clear the front load is not being accounted for here. Like I said a better comparison would be to start with 10k in the VFIAX and 9475 in the AIVSX.

Also, the AIVSX is actively managed and would result in higher tax drag than VFIAX if in a taxable account.
Yes, ER is alresdy included in portfolio visualizer results (and every other plot because they are already removed before a fund reports a NAV). And as I mentioned not everyone pays a load on these funds - if you pay a load certainly you would need to account for that for the initial investments. But if you don't pay a load then it would be incorrect to include it in these plots.

lakja
Posts: 81
Joined: Mon Nov 06, 2017 5:34 pm

Re: Dave Ramsey

Post by lakja » Sat Dec 29, 2018 6:14 pm

Nate79 wrote:
Sat Dec 29, 2018 6:02 pm
Yes, ER is alresdy included in portfolio visualizer results (and every other plot because they are already removed before a fund reports a NAV). And as I mentioned not everyone pays a load on these funds - if you pay a load certainly you would need to account for that for the initial investments. But if you don't pay a load then it would be incorrect to include it in these plots.
Sure, if you’re investing over 1 million you’re not paying fees. However, those PV plots were not reflecting fees. Here’s a more representative comparison.

Image

Image

It’s clear lower-cost, passively managed, tax-efficient funds outperform these high-fee, actively managed American funds, especially with current management.

User avatar
Nate79
Posts: 5327
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Dave Ramsey

Post by Nate79 » Sat Dec 29, 2018 6:26 pm

lakja wrote:
Sat Dec 29, 2018 6:14 pm
Nate79 wrote:
Sat Dec 29, 2018 6:02 pm
Yes, ER is alresdy included in portfolio visualizer results (and every other plot because they are already removed before a fund reports a NAV). And as I mentioned not everyone pays a load on these funds - if you pay a load certainly you would need to account for that for the initial investments. But if you don't pay a load then it would be incorrect to include it in these plots.
Sure, if you’re investing over 1 million you’re not paying fees. However, those PV plots were not reflecting fees. Here’s a more representative comparison.

Image

Image

It’s clear lower-cost, passively managed, tax-efficient funds outperform these high-fee, actively managed American funds.
These funds can be available in plans like 401k and you don't pay the load and can have low ER. There are also no load share classes available for the normal person. You don't need millions to not pay the loads. I'm not saying these funds are better than index funds, just correcting inaccurate information.

In this case you could plot RICGX - 0.3 ER and no load - this is the class a 401k could have. In my case I have Europac fund RERGX, with an ER of 0.49 and no load.

Tax efficiency is only important outside retirement accounts of which no one recommends these funds outside tax advantage accounts (including Dacmve Ramsey).

User avatar
nisiprius
Advisory Board
Posts: 39777
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Dave Ramsey [“good growth mutual fund”]

Post by nisiprius » Sat Dec 29, 2018 7:09 pm

Standard performance tables and growth charts don't include the effect of a front-end load, possibly because you pay it only once, not annually, and therefore the effect on a long-term investment effect depends on how long you hold the fund for.* Anyway, a class A fund means a front-end load. If the load is 5.75% and you pay $10,000 to buy the fund, the day after you see $9,425 in your account.

If you deal in absolute dollars, the load takes away 5.75% from your return, final value, no matter how long you hold the fund. However, annualized, it is a smaller and smaller annual percentage. Here's how the math works out. If you hold the fund for less than five years, it is really quite awful; if you hold it for less than ten, the load for AIVSX is -0.66% per year, meaning it is a greater expense than the 0.58% expense ratio for the fund. But if you are seriously holding it for twenty years or more, the effect of the load starts to be fairly small.

In order to come out ahead on a load fund, it has to beat an otherwise-identical no-load fund, annualized, by the amount shown on the chart.

Image

*(Also, there is an alphabet soup of share classes and load structures, and I think the relation between the letter and the structure is just traditional).
Last edited by nisiprius on Sat Dec 29, 2018 7:20 pm, edited 1 time in total.
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.

Post Reply