Deep Dive on Dave Ramsey's Investment Advice! (Financial Advisors React)

[@jean-philipdeslauriers9700]

Thanks to Dave Ramsey I finished paying off my student loans last friday!!

[@johnappleseed203]

You did that yourself friend! Congrats

[@redsamurai5861]

He changed my life as well. Forever grateful. Just finished baby step 3! I’m taking these guys’ advice on baby step 4 tho. It just makes mathematical sense. All the best y’all’s. 🍻✌️

[@DrJack144]

He’s great for debt advice & strategy. Not so good for investment advice. His advice is outdated

[@marygem]

Now...no more debt! Emergency funding your retirement! You'll need it!

[@juneaustin8444]

@@johnappleseed203 1²121¹1¹

[@chrisblom9]

Agree with Brian, Bo & all of the comments below. Massive respect to Dave Ramsey. He has helped millions develop the right mindset. But it is not fully optimized advice.

[@jarrettpierce5626]

This is one of the few things I haven’t done that dave says, I’ve always done index funds

[@jvm-tv]

Smart! Investing is the only bit that's off about his approach otherwise he's great.

[@tamwilfred]

Dave should just stay in his lane with helping people out of debt. Or he's just trying to cash in on his audience by sending them referrals to advisors which he gets a commission. I could be wrong about the commission but he's getting paid some how. I think I might have heard they have to pay Ramsey to be cerifitied or screen to be promoted on his "trusted pros" section.

[@ajcap]

Ramsey got me out of debt, and set me on the right track. I’m not into all his religious stuff, but I appreciated his advice. For me, it worked and worked great

[@atorres11720]

Same here.

[@benhayden5685]

Ramsey is like the trainer at the gym, some people just dont have any discipline without someone saying good job, your doing great. Dave is a salesman he doesnt provide any real solid investment advice. Dave got you out of debt..lol..sure by telling you what every 14 yr old should already know.

[@ajcap]

@@benhayden5685 trust me, he was instrumental in getting me out. lmao hate all you want. I’m loving life now

[@travis1240]

You've graduated. Now stop listening to Dave. He doesn't have anything to offer past the "get out of debt" phase.

[@ajcap]

@@travis1240 I actually agree with you.

[@JimboJamesShow]

I follow Dave’s Plan have been for a few years now. paid off $30,000 of debt. Have 12k in saving. And my wife and I are investing 15% in 401k and we are killing it.

[@dandahl5964]

If you got into 401k in the last 3 months, youre doing great. Mine is up nearly 20%. Dont get used to these return on a regular basis, though.

[@brianbudd6101]

Nicely done! Now that you’ve done that it’s time to start following Jack Bogle to maximize your investment returns.

[@vanguardvaluist2614]

@@brianbudd6101 Pick up JL Collins " The Simple Path to Wealth". Great read. Jack Bogle is Yoda and JL Collins is Obi Wan Kenobi.

[@TheJRE313]

Regardless of what you believe in, GOD SPEED😉

[@colin1818]

@@brianbudd6101 - I was introduced to Dave Ramsey and Jack Bogle at nearly the same time. I've found they're very complimentary approaches as long as you index instead of not taking Ramsey's specific advice but do basically everything else

[@averyrobbins68]

I’m surprised that you guys don’t have more subscribers by now because your content is such high quality! I have been a big fan for a while. I will promote you, but make sure to promote yourselves! Haha

[@cjp302]

43 min videos are too long

[@averyrobbins68]

I disagree

[@timelston4260]

My guess is their subscriber base would be larger if they offered cheap (i.e., free but not tailored), off-the-cuff advice in a call-in segment. That's what Dave Ramsey does, then he siphons people off to commission based brokers from whom he collects fees. His business model also includes merchandising and advertising revenue. But The Money Guy Show business model is different. They have fiduciary obligations to act in the best interests of their clients, and that service can't be offered in a five-minute phone call. Their ethical standards prevent them from being the Dear Abby of investing, and that will probably always result in a smaller subscriber base. Respect to them for their professional integrity.

[@CaseyPlexy1]

Well I just got recommended. So probably an explosion in subs soon.

[@MountainGirl420]

Christopher Paul I disagree. I like how thorough they are. But I do think some shorter Financial Facts, a review of the week’s markets on Friday at 4 or 4:30pm. Some types of shorter vids would be cool, too!

[@adamp6320]

Dave is great for getting people to change their behaviors and out of debt. Once they've got the debt cleared, emergency fund saved, time to listen to someone else. Still, any investing is better than leaving things in a savings account earning no interest.

[@bi0lizard1]

Largely thanks to Daves show, I’ve have zero debt, a paid off house and over 1 million in retirement. Looking back, what I would indeed change is the investment part of the equation. After I amassed around 100k, I should have gotten a financial advisor!!!!. I made some WHOOPING mistakes! You really need someone to save you from YOURSELF at a certain point! I would have made SO much more money had I not made some SERIOUS damaging mistakes along the way. Mistakes that could’ve easily been avoided under the guidance of a personal financial advisor.

[@calebmelton5989]

No need for an advisor. Go to bogleheads and reach everything.

[@patmclaughlin107]

This is one of the most outstanding shows I have seen. Great clarity of thought, and completely objective. Thanks so much guys for your great content. I am in complete agreement with you on your views. While Dave’s advice is great for getting the basics right, his investment advice is simply suboptimal.

[@rossfoy3541]

This is a great video and is spot on with everything. Like most of you, I’m a big Dave Ramsey fan, the amount of people he has helped can’t be over looked. But his investing advice is just so hard to get on board with, this video brilliantly explains why.

[@jvm-tv]

Actively managed funds vs index funds is a settled debate. Dave's completely off in that regard.

[@isaiahayers1550]

Dave is also a dude, smug, condescending asshole.

[@jamesnewport4752]

Dave keeps his messaging simple so people will actually start investing. He does recommend constantly to work with a financial advisor, approved by him. I interviewed 6 of his endorsed advisors and they all made recommendations based off my risk profile. What I'm saying is that even endorsed advisors by Dave don't follow his portfolio recommendation to the T.

[@yomynameismit]

whats more simple then just buying the SP500 to start with?

[@nathanhedglin931]

@@yomynameismit yup usually funds that take 5% fee for every purchase and have high expense ratios. But “return 12%”

[@SG-zh5xd]

@@yomynameismit Nothing try VOO a Vanguard SP 500 index fund low fees and the full growth of the SP 500

[@m0600194]

Great information guys! Although this is Dave's quick note advice, he does generally say to get with a financial advisor to help in depth. As you both said, giving credit to Dave, his largest credit is getting the average person in a better financial spot than they were before they started the program. Based off a prior show of yours(ages/401k), it proves that most people are no where near where they need to be. I would imagine, despite the possible lower returns/higher risk, if people only listened to Dave they would still be in better financial shape than they would be continuing the path they were on prior.

[@jroysdon]

My issue with that is that Dave could just teach some basic Index Fund basics and such and tell folks they're probably good to go until they get within 10-15 years of retirement while following his Baby Steps (although the FOO is more optimized). This is assuming the tax-advantaged accounts priorities are followed, which is the same as what everyone teaches days. But that wouldn't generate revenue for Dave - he gets revenue from his SmartVestorPro and ELP endorsements which pay him for referrals.

[@gthree0239]

@@jroysdon and everyone who listens to Dave for a little while will start to realize why he doesn’t say this. One fake word…smartvestor!

[@oatmealtruck7811]

A lot of this is over my head, to be honest. I’ve listened to Dave for the past year or so. My husband and I are now 100% debt free, we have a 6m emergency fund, we’ve increased our retirement contributions, and we set aside even more money for a down payment on a home for when we’re ready to buy. I’d like to optimize our financial situation, but I think we’re still part of that 80% who just need the basics. I still like your show because I hope to graduate to the next level at some point. You two are great!

[@vanguardvaluist2614]

Great timing on content guys! I literally just finished converting my Roth IRA holdings today out of mutual funds into two indexed ETF's. More specifically Vanguard S&P 500 --VOO --.o3 exp ratio & Schwab Lg Cap --SCHX----.o3 exp ratio. I have ZERO desire to actively trade and love the flexibility ETF's offer. Thank you for educating the masses! Also thanks to Warren Buffet, Jack Bogle and JL Collins (author of The Simple Path to Wealth) and Dave Ramsey. He got me fired up to get debt free in the first place!

[@MansterBear]

I just rolled over my 401k from my previous employers to IRAs. I only had $500 in Roth, but $23k in traditional. I couldn’t invest in mutual funds with my Roth bc the $3k minimums but found etfs with better 1, 5, and 10 year numbers than most funds, and 0.03% fee. It was MGK fwiw. I went ahead and got the ETFs in my Roth account but I’m not sure what to do with the traditional account. With the traditional, I can do mutual funds bc I have enough for the minimums but the etfs seem better bc they seem to perform as well, but with less fees. I feel like there has to be a catch but I’m not sure what it is. Was hoping they’d address them on this show

[@me-myself-i787]

You could invest into an active ETF such as Berkshire Hathaway. These get better returns with lower volatility, and are just as flexible, and the fund managers do all the work so you don't have to do anything.

[@steverowe2943]

Excellent presentation and video. Risk/reward perspectives change considerably when you are living the dream instead of preparing for it. It would be awesome if you guys would address the other side of the wealth building equation and address planning for drawing the wealth down during retirement.

[@kmot92]

Multiple sites say anything over .5% is expensive. The reason - things change. Dave has never changed in 30 years. Including the 1k Emergency Fund which is really biting people right now. 1k in 1990 is a lot different then 1k in 2020. He has been amazing for us during baby step 2, but I'm glad I learned more when investing.

[@marcrose23]

I agree with your general views here. I do think that it is hard to compare a “Dave Ramsey portfolio” to anything when we don’t know exactly which funds he selects within those 4 categories - the ones you chose may be wildly different than the ones he would have chosen. But I think the point that index investing is likely better than actively managed funds is a great one, especially when you take into account fees.

[@devonpeters9458]

I haven’t watched the full video, but want to say I appreciate you starting the conversation out with listing his accomplishments/accolades. That’s an honorable way to start a deep dive

[@TalkToMe2Day]

I love that you guys acknowledge that even if Dave's strategy isn't optimized, it is still a successful strategy to set up the average person for financial success! I'm part of the 20%, but a lot of my family members are that 80% so I've seen how each strategy works better for certain people. Thank you guys!

[@antdel2087]

i definitely have to thank Dave and Chris for getting my mind right and debt paid off as fast as possible and monitor my spending. as far as investing i lean more toward John Bogles philosophy of low cost Index and I personally stay away from anything International. much love to Dave Ramsey though.

[@missireason8998]

AntDel I agree. DR has done well with the debt free thing. Getting out of debt can be one-size-fits all, but not investing. People may not realize DRs wealth is primarily from real estate, both commerical and residential, so his investing strategy is subpar. I think it is a bit dated, because his justification for active managed mutual funds comes from the 90s. It seems DRs plan for investors needs updated. DR can be egocentric at times, so admitting his strategy is outdated would be a big deal for him. Plus, his show show is moving towards multiple personalities, so his attention to investing has been on the back burner. DR does use the disclaimer that SmartVestor Pros should be consulted over investing.

[@amorylovin2137]

I appreciate that you all don't want to insult Dave R; I also appreciate that on your videos you have never insulted my personal political beliefs. The one and only time I tried to watch a Dave R video within 15 minutes he insulted about 53% of the population and it really upset me. It made he seem small, petty and uninformed to me. Thanks for being balanced even if in your personal life you follow a similar mantra as Dave. Keep up the great advice!

[@chase4116]

"it really upset me".......get some thicker skin snowflake. I listen to people with different political beliefs if they have something of importance to say even if I disagree with their politics.

[@Mexicobeanpole]

I agree. Dave needs to keep politics out of it. If it was a political channel, I’d know what I was in for. But when I’m watching an investment/money channel, it has no place. Makes him look petty.

[@Mexicobeanpole]

Chase She can voice her opinion. And the “snowflake” term is sooo overused. You also seem petty.

[@chase4116]

@@Mexicobeanpole She can absolutely voice her opinion. And I can voice mine at how sad and thin skinned it is to be that upset about someone voicing their political opinion. I hope she never goes outside or reads the internet she might really freak.

[@amorylovin2137]

@@chase4116 How was that thinned skinned? How was I "that" upset? Everything is not zero or one hundred...it seems you just want to go around attempting to insult people and I guess if it keeps you from picking on a weaker soul go ahead and bash me all you want cause I can take it! I a not weak.

[@leesanders2901]

Thanks Money Guy Show! Enjoy the videos, help to keep me focus and motivated.

[@brettreynolds3158]

Hey Guys! I appreciate your deep dive into this subject. No doubt Dave has helped millions (including myself) realize how dumb debt is. However, if you actually listen to him on how well his investment performs, he states that he consistently averages 12% or more per year. I have been using actively managed funds for the past ten years and I have seen as high as 23% and even a low of 8% a year, so it is entirely possible he’s telling the truth. I do agree with you guys that Index funds are a great value and thank you for continually providing excellent content and high quality videos! Keep up the great work and I hope you hit 100k subscribers this year!!

[@candacellaneras9307]

Out of curiosity, what is the breakdown of your AMF? Do you know? Right now we have a Roth and 401(k), and trying to figure out if I need to change anything in there. I have amerifunds for my Roth. The 401(k) is just a general target year account.

[@jacobawojtowicz]

I've been using passively managed funds for 10 years and have seen as high as 23% and as low as 8%.

[@mannycarrasquillo6910]

I love Dave Ramsey! That said, Jack Bogle and Burt Malkiel have taught me well.

[@seriousfaith]

I love Dave. His book "Total Money Makeover" completely changed my life 15 years ago. But...his investment advice scares the crap out of me. High fees, high risk, high volatility...it's a recipe for all the wrong things that are going to happen. Not having any money is bad...only slightly worse is having it gobbled up by poor asset allocation.

[@BassPlayer60134]

I didn’t realize you guys were in Franklin. I did my debt free scream at Dave’s last month I would have loved to stop by and see you guys. I like your show as well as Dave’s. I think there is a lot of room for respectful disagreement in the fine details.

[@MoneyGuyShow]

We completely agree 👍

[@leeklinglesmith3427]

Please do a episode on cash management plans! I've heard you mention them, but I'm not sure what exactly it is.

[@knowen87]

This is essentially a budget that you have mastered and internalized. Instead of tracking every penny, you have trained yourself to be good at spending your money. Often times this means bigger categories and a simpiler system for accounting. It is less about every dollar an more about the overall plan.

[@YanilleCastillo]

Yes that is a great topic for a Video for us to learn please yes Do a video on that if lead 🙏

[@craigholland2274]

Agree with money guy show on most everything. Good job.

[@JourneyToAUnknownPlace]

ive actually been waiting all week for this

[@latuman]

Just found the channel and I cannot believe the almighty algorithm hasn't recommended this before.

[@Lolatyou332]

This video is perfect on risk and return, definitely good to supplement with Dave's advice to get a contrasting perspective.

[@davidk2158]

Oooh this is gonna rile up some folks!

[@elmateo77]

Yeah Dave always gets salty when people say he's the debt guy and doesn't understand investing :P

[@MountainGirl420]

I like Dave Ramsey, but he doesn’t know very much about investing at all! The one-size-fits-all approach is absolutely ridiculous. Love y’all!

I mention this in his videos and get swarmed with "You're so dumb! Stay in debt then dummy!"

[@colin1818]

I wouldn't say that he "doesn't know very much." I think he knows a LOT. But the reality is that his program is absolutely one-size-fits-all and that's just not ideal for investing. Your AA is very personal and based on your needs and risk tolerance.

[@MountainGirl420]

Colin Precisely! I mean, Dave Ramsey has a nice stock & property portfolio himself yet still gives poor investment advice. I think he just doesn’t want to be an “investment guy”. But the one-size-fits-all approach is a no-go for most ALL of us. I’m only 33. I need to be far more aggressive than his model shows. My mom needs to be more into index funds, Blue Chips w/dividends, bonds, a bit of various Precious Metals, etc.

[@colin1818]

@@MountainGirl420 - It's very easy to become an "investment guy" and be known for that only. I think it's pretty clear that Dave's passion has always been with getting people out of debt and he never wanted to teach investing methodology. Debt reduction is what he's known for and that's always been his emphasis. But to give you a holistic vision of financial planning though, investing is a VERY important topic. So it's good that he touches on it. It just feels like he mails it in. I love Dave, but it always felt like he was just pushing people off to advisers and saying, "These guys will help you with that piece, I'll help you with everything else." So to then take his simplistic one-size-fits-all investing advice as gospel seems silly. I've done Dave's program with just a few modifications. And not following his investing advice is definitely the biggest. I've always been an indexer.

[@chrisespinoza5012]

I remember he would promote someone else once you were done with paying off debt.

[@ianatkinson-baker6278]

I've been a big Dave fan for years. I recently started watching you guys and am finding that I'm hoping I can be one of the 20% of people you guys talk about! Thanks for the valuable information.

[@SG-zh5xd]

Good info, I make this point all the time .Part 1 ,I would say use Dave Ramsey to get out of debt ,Part 2 ,when ready to invest use index funds based on your age and risk tolerance what index funds to use .

[@tvuser5557]

Dave's advice is more focused on changing financial behaviors, it's not always easy to satisfy everyone's needs.

[@tboland728]

Agreed. I think nearly every person who follows what Dave says are better off than they were. I know his concepts aren't perfect but he's helped a ton of people live (and give) in a way they never would've without him.

[@tboland728]

@vincentrich - Banned But Not Forgotten yea and they're nerds like us. The average person isn't watching personal finance videos on KZbin lmao

[@gthree0239]

I did FPU in 2017. It was the best tool for getting me in the right financial track. However, once we were out of debt and looking to start seriously investing I was lost. Dave held my hand through BS 1,2, and 3 but left me hanging at 4 and 5. I had to do a lot of reading, you tube watching, and just tinkering in the market to even remotely begin to understand what he expected of me. Luckily, my employer has a pretty good 401k and they guided me, unbeknownst to me, into index funds with ridiculously low expense ratios. I am also seriously thinking about dropping the international fund. It seems to be the giant turd of the few funds I have. I even heard Dave on his radio show contemplating revamping his investment advice and excluding the international funds from his mix. One problem with Dave in my opinion is that he has so much money if he’s up 5 % or 8% he can’t tell the difference. But most people really need that 8% in order to be able to comfortably retire.

[@missireason8998]

gthree0239 I agree, DR most likely doesn't realize how little the Int fund performs in comparison to the other funds. Also, DR has a majority of his wealth in residential and commerical real estate, much larger than his mutual funds.

[@17h127]

I found this video very helpful. A lot of the concepts I had learned from previous videos, but wasn't exactly sure how to implement them or what everything meant. This video helped those ideas become more concrete. Thank you for putting it together.

[@swimmindesi9268]

You are totally correct that index investing produces better returns than actively managed funds. However, I have a few issues with your analysis: 1. Comparing Dave's portfolio (using indexes as a proxy) to the SP500 over the last 10 years to prove that point is not fair. 10 years is a very short period of time in investing. U.S. large caps have performed unusually well in the last 10 years compared to international, midcap and small cap stocks. In the 2000-2010 period, US large caps did worse than midcap, small cap, and international funds. 2. There is an important diversifying benefit to having midcap, small, and international funds in addition to US large cap. 3. Another issue with Dave's advice is that he suggests people pay off debt before getting employer match on 401K. That seems like bad advice even on high interest consumer debt, at least for the rational wealth builder who is not at risk at going bankrupt on their debt.

[@caseyrichards3212]

You don't see rational wealth builder and high interest consumer debt in the same sentence much. If you move jobs before your vested you don't get that money anyway so it's worth paying down the debt first imo.

[@jroysdon]

Thanks to Dave, limited our spending to our needs with about 50% margin to deal with a few wants, those "oops" and investing. This enabled us to save up our 6 mos FFEF in 8 months and then start maxing our work retirement and Roth IRAs last year. Never did buy his allocation strategy with actively managed funds and went 100% index funds. Almost at a point where we need to grow beyond that, start dealing with non-tax advantaged investing, and are glad to have found the MoneyGuy show.

[@Spudy-]

Here in Canada, we pay the highest mutual fund fees in the world, on average 2.5-2.7% last I checked

[@MBarberfan4life]

Holy moly, that's high

[@Spudy-]

@@MBarberfan4life yep and the vast majority of Canadians invest in mutual funds, but is slowly trending towards index funds more and more every year, but still slower then seen stateside

[@MBarberfan4life]

Spudy, that’s great. The only mutual funds I’ve thought about investing in are international funds (non-u.s.) that beat their indexes. The reason is because international index funds are pretty bad when compared to the S&P 500.

[@GarrettJohnson1986]

Needed this advice guys! I kept seeing 25% international and looking at international RoR and thinking it seems risky and low reward thanks for the confirmation.

[@vanguardvaluist2614]

When you are investing in an a large cap index like the S&P 500 you are doing business internationally as the large companies have a big footprint outside the U.S. already. I got this idea from JL Collins. Excellent book called The Simple Path to Wealth. Well written and the title says it all!

[@apartment909]

I was hesitant to watch this video because I love Dave Ramsey. I was super relieved when you said that this video wasn't a trash on dave lol

[@InvestToLive]

That was the perfect intro!

[@joeblackwell1216]

Great video and great information. You've given me some things to think about. Keep up the great work!

[@joshuascott3081]

As a long time Dave listener, you guys knew I’d be all over this one. GREAT advice! Couldn’t agree more. I love how you guys take it beyond.....common sense for your dollars and cents. 🙌🏼 Does anyone else notice how Brian always turns to Bo right after the intro? Lol He always delivers the teaser but then immediately turns to Bo after as if to receive affirmation. Haha. Love you Brian! Just a modest observation on my part. 😊😊😊😊

[@MoneyGuyShow]

I am definitely a people pleaser 👍

[@DrJack144]

Great job guys. Thanks for having the guts to present this. People are afraid to disagree with Dave (especially his own employees), but there are better ways to do some things in my opinion. Investment allocations are one of those things.

[@krisj99]

Awesome perspective. Love the expertise mixed with humility.

[@patmclaughlin107]

Absolutely. Very well balanced and objective.

[@InstrumentPlayer]

Really hope everyone takes the time to learn the difference between Personel Financial Planning and Investment Strategies. Dave excels at providing a simple fool proof Personel Financial Plan but has much to be desired in his investment strategies. The ONLY thing I appreciate about his investment advice is that he gets people invested at all. Better to get invested as soon as possible then not at all.

[@bradcassell9804]

Like always I agree with what you had to say. Keep the good stuff coming.

[@antiquatedandroid7952]

Would you say that active management will swing back into popularity once the market shifts more towards a passive market. Looking at the efficient market hypothesis, that is, the active managers could have an advantage if the markets become overtly passive?

[@corynewby]

Fantastic content, gentlemen! I particularly appreciate the analysis of the index vs. managed funds and your proper focus on fees, the fallacy of beating the market and index investing.

[@johnristheanswer]

One problem with DR advice is expecting past performance to be repeated in the future. He often says " jusst find good funds ". It's not that easy for Joe Public. That's the flip side of just doing the indexes which are so cheap.

[@tvuser5557]

Everything is measured relative to the past, example standard deviation, diversification (how reits and international stocks perform relative to domestic) all are measured using data from the past. Assuming everything is equal (fund structure and selection criteria), then the past can be a predictive basis for future performance.

[@tvuser5557]

@@wjennin1 Dave never reveals the name of the funds he invest in, the only thing he references to on his show is the S&P 500 without revealing exactly the fund name. Dave never mention Mid-Cap or Small-Cap. so the example in video is subjective. There are plenty of growth funds that beat the S&P 500, unless Dave revealed the funds he invest in, it is hard to prove him wrong or right.

[@johnristheanswer]

@@tvuser5557 I take your point however - when do you think bonds will recover using that theory ? 100 year bonds now paying ~ 0.5%. The past bond rates of 6/8% are long gone so they , for example , are not a good predictor of looking at the past to predict the future. It's accepted gemerally that oil/companies will struggle to ever get back to the ' mean '. Many more changes to come.

[@tvuser5557]

@@johnristheanswer When financial experts talk about asset allocation, diversification, ... etc, they use things like efficient frontier, standard deviation, ... all of these theories are base on data from the past. Although it's hard to predict the future, one can look at the past for some direction, the point is not to beat the market, rather to build wealth. Who would have thought of bonds going negative, it's happening now. Can we now say that bonds are not safe anymore?

[@brentgindelberger8851]

I have actually heard Dave recommend to a caller to "park" his money in an S&P index fund for short to medium periods, such as a house down payment.

[@elmateo77]

@@wjennin1 I mean at the lowest it was down about 25%, and now less than 6 months later the S&P500 is already back to within 1% of its all-time high. Even at the lowest point anybody who had put in money 5 years ago would still be better off than if they'd put the same money in a savings account.

[@colin1818]

Yes, for periods of greater than 5 years. That's perfectly good advice. Especially if you realize that you're investing and it could just as easily drop as it could go up. And I've heard similar calls where he hasn't said "invest ALL of it." He usually says to invest a portion - the portion that they're comfortable if it goes down.

[@colin1818]

@@wjennin1 - If you're actively shopping for a home and ready to make a purchase then you cash it out. You're not literally investing until the day of the home purchase. Let's use some common sense here. This strategy makes sense when you're parking money for 5+ years. But when you're negotiating a loan and making offers on properties it's time to know the exact amount that you have to put down. So you cash it out. Seriously - not hard to follow.

[@twilde3754]

So glad you guys covered the Target Date Funds -- it helped me to better understand my retirement portfolio about 5 years from retirement. Regarding outside help for understanding investing -- use a fee-for-service investment pro. Better to pay someone $600-$1000 a year to go over your portfolio then pay (overpay) someone monthly from your investment gains. If it weren't for Dave Ramsey's strategy, I'd still be using credit cards to pay for groceries! So, like you Money Guys, I'm grateful for DR's words of wisdom.

[@leonabaffour9211]

Agree with comments below- as you become financially more literate foo is better, but baby steps is a useful strategy to tackle debt and for those less disciplined.

[@CrappyProducts]

You guys pretty much touched upon the 3 main problemas with Dave Ramsey. He's great in getting people out of debt, but unfortunately mutual fund fees will chew away the profit for a low cost index fund

[@clayhealey8428]

I pay .78% for my mutual fund but the return is 6% higher return than a sp index for 10+ yrs.. to me its worth the .78%.. am I missing something?

[@Mehwhatevr]

which mutual fund? maybe you're not missing anything. maybe you are one of the lucky ones. but since you asked, and just in case you are, is your mutual fund benchmarking by the sp500? It may be beating the sp500, but the types of holdings in your mutual fund may be better compared to a different benchmark.

[@nathanhedglin931]

Yes, Google “regression to the mean”. It means those funds just got lucky and will likely underperform in the future. Fee are guaranteed, returns aren’t.

[@CMB111]

I love how you used the efficient frontier. However, that is data for only 5 years. That was when large tech was outperforming.

[@Adam_Bileckyj]

I think you could do better than comparing Dave's portfolio to the sp500 over just 3 years. The SP500 has killed everything for the last 10 years HOWEVER it gets smoked by small and mid-cap historically. Foreign is also nice as seen from 2000-2009 when the SP500 was actually negative and the foreign slice would have added a nice balance. Now, I don't like his weightings but there is good reason to have foreign, mid, and small in a portfolio.

[@ethannaka1822]

Except all of those have been killed in 2020. But yes generally agree haha

[@anilpant71]

Agree with you guys. It would be cool if you guys also have a section where you take calls/emails from viewers and provide your opinions to real life situations.

[@jonnewbury3482]

People don’t have money for retirement because of their rate of return. It’s because they don’t put money in their investment accounts. -Dave Ramsey He also said if you don’t like your employer K plan invest in index funds. Dave’s audience mainly want to keep it simple. Informative vid though, it’s got me looking at index funds.

[@Pandorash8]

Great breakdown. I’d like more specific advice on your allocation tenant. I’ll go searching on your channel today 🌞

[@Manofsteel519]

I have heard this last 10 years in the s&p 500 has had better returns than like 99% of any other 10 year period. The returns are very unlikely to be duplicated. When comparing the s&p 500 to the more diversified portfolio did you go longer than 10 years?

[@johnadams3418]

The real question is what about the funds that have 15 year track records of beating the index? It would be useful to explain why an actively managed fund with a 20 year record of say 13% is still less preferable than and index fund at 10% over the same time period. Even if they underperform the market more often than not, what is the average out performance? Example: if the average under performance year of the index is 2%, but the average out performance year is 15%, then the actively managed fund only needs to bear the market once every 7-8 years to have a long term rate if return better than the index.

[@nathanhedglin931]

1. Regression to the mean: funds outperform from luck and will eventually underperform overall. Many companies will remove old funds to show their (current) funds have beaten the market. 2. Sequence of returns risk. Underperforming in retirement when you’re drawing on the money is really bad. You can’t just underperform for 7 years and make up for it after you’ve already sold when it was lower. 3. Those funds have higher fees. IF you want to beat the market easily then just tilt to small cap value. small cap value has average 12% over the last 100 years vs 10% of the total market.

[@FloEvans]

If you are going to pick a mutual fund you might as well just pick a stock. Another thing that sucks about active funds is they are never 100% invested. This fund I was in when I first started had a 5% cash reserve. You really want every dollar working hard when just starting out.

[@Carlosconga]

I interpreted his asset classes differently. QQQ as the growth ARKW as the aggressive growth VIG as the growth and income VEA as international Check the performance. It's definitely more aggressive but it doesn't always underperform the S&P.

[@bricehatcher8391]

The CFA curriculum actually mentions that a simple 1/n investment strategy actually produces results not that much different that an optimized portfolio. So if you have 4 mutual funds you like and you contribute 25% to each one, it's not sexy but it's not as bad as it sounds.

[@metalsquid]

So like the way Dave attacks debt by snowballing things, is there a similar snowballing method to start investing once you're debt free? Should you diversify early on and spread things out, or work on getting a certain class of assets up to a certain level first, then work on the next one, etc.?

[@jarrettnicely7723]

No. Buy the SP 500 index with whatever brokerage you use until you have 500K. Then call The Money Guy to help manage from there.

[@zachrolf1454]

Thank you for your well thought out ideas regarding Daves investment strategy. One thing thing that I would appreciate is you all going a bit deeper into actual asset allocation by age. There are a ton of people opinions out there and it be great for you two to backup what you think is right compared to daves 100% stock portfolio

[@zachrolf1454]

I would also add not only a dive into asset allocation of stocks and bonds but also a more detailed on the types of stock (large, mid, small, international) and bonds (short, long) for each age group

[@elmateo77]

@@zachrolf1454 I think they've gone over that in some of their other videos. Ben Felix also has some good videos about it.

[@alexvoorhees6868]

This is a great video. I thought the section of how one size doesn’t fit all was particularly useful. I did notice is the risk/return section you only used 10 and 5 year periods. Do you think a longer time period should be used - perhaps 1928-2020 since there tends to be decades where performance various and we just happen to be in a 10 year period where large caps (S&P 500) has?

[@channelJSC]

I hadn’t really looked at expense ratios for my 401k funds until you brought it up in this episode. Looks like all of mine are under 1% but I do have one (Virtus Small Cap) that’s 1.11%. However, the 10 year rate of return on it is over 21%. You guys didn’t touch on whether to factor in rate of return when considering expense ratios so just wondering if you think that’s an acceptable trade off? Thanks!

[@SG-zh5xd]

Look at turnover rate it represents the percentage of the mutual fund's holdings that changed over the past year. ... The higher the turnover rate, the greater the turnover. Higher turnover rates mean increased fund expenses, which can reduce the fund's overall performance.

[@jonebravo12]

Love the content. Is it recommended that this be the source for those that don’t hit your company’s threshold? I called in your office to see about setting up a meeting and didn’t quite hit your minimum requirements. Thanks for putting out useful content!

[@davidmorris2283]

In a retirement account, tax from turnover ratio is a mute point. You didnt make this distinction.

[@smileyspoon1]

No it is not a moot point. The institutions still pay tax. If you sell one index fund for another in 401k YOU don't get taxed. There's two different types of entities you are comparing.

[@brianmcg321]

One thing I have found through investing forums etc. is that everyone that has followed Dave Ramsey’s personal finance, debt snowball etc, all were index investors. There are a ton of Ramsey fans on Bogelheads, but they all say to go to Jack Bogle for investing advice.

[@santoniop5618]

I agree with everything Dave teaches outside of investing for 1 simple reason. Dave nor any of his Ramsey personalities got rich or are getting rich that way. They are all getting rich from real estate, selling books and speaking engagements. Sure they may make money in their 401ks and stuff but it’s not the main driver for how any of them are getting rich.

[@chriscardoso]

Very excited to watch this one.

[@atorres11720]

Man I really need to educate myself because I have no clue what they’re talking about. At least I’m debt free now thanks to Dave. Any suggestions on where to begin learning about this stuff? Thanks.

[@jasonhobbs2405]

Amazing video Money guy team! This is my favorite of your videos and the one that helped me most. Thanks for all the education!

[@JamesHazelrig]

Your portfolio comparison of a mixed portfolio only covers 2010-2020, one of the best decades of large caps (S&P) ever following a decade of negative returns for the same index. If you take it out 20 years, the story flips.

[@mace8704]

The story doesn’t flip unless one did a lump sum investment immediately before the dot com bubble burst from January to March of 2000. Not sure if you’re doing this intentionally James, but I’d always be aware of the bias introduced when extending an equity performance chart out to immediately before a major recession especially when the easily available data extends far beyond that window. It could potentially mislead you in the future. I’d strongly consider backing that graph out even farther, and dollar cost averaging strategies over lump sum investments.

[@velicient]

@@mace8704 Backing up to 1977 starting with $1 invested and DCA $500 monthly, an equally weighted portfolio beats the cap-weighted S&P 500.

[@DrJack144]

One question I have even after watching this a second time is if this strategy changes for different account types. I do actively managed funds for my Roth IRA because I only care about total returns & don’t care about taxes at all. For a traditional brokerage account, I’d opt for index due to the tax considerations. Are you saying even for an IRA & tax advantaged accounts that you prefer index? I’m not clear if you’re discussing returns on an after tax basis when comparing these. If index > actively managed even before tax considerations, that answers that, but I get the impression you’re not ignoring taxes when comparing the returns

[@chemquests]

They are specifically demonstrating that you can get similar returns with less cost.

[@DrJack144]

@@chemquests there is no cost in an IRA or 401k though. The growth is tax-free. Yearly distributions aren’t taxable whether you have index or actively managed, so you should always go for the highest returns. They say active managers don’t consistently beat index funds, but it can happen. FOCPX is a good example from Fidelity. Its returns are higher than the equivalent index fund, so I keep FOCPX in my Roth IRA rather than the equivalent index fund. Fidelity’s actively managed target retirement funds also beat their index target retirement funds consistently. Only go index in a taxable account. Otherwise, get the highest returns.

[@chemquests]

@@DrJack144 401k’s are known for their costs, & their primary advantages are in tax deferral (earnings are taxed upon withdrawal) & employer match. Of course only a Roth grows tax free, but there can be fees for the underlying investments. I do have some Fidelity ETF’s at no cost but there are mutual funds that charge a load regardless of whether it’s offered within an IRA or otherwise. Certainly agree it’s possible to do invest cost free, but it’s not a given for all investments. They’re advising to do choose with an eye on fees.

[@chemquests]

@@DrJack144 for more direct information on your 401(k) costs, you have to check their Form 404(a)(5) DOL.

[@DrJack144]

@@chemquests mutual funds always have returns net of fees on their info sheets. All I’m saying is a mutual fund which averages 15% returns despite having 1% annual fees is better than an index fund which gets 13% and has 0.03% fees. Total returns are the thing. Distributions (capital gains & interest) are 100% irrelevant in any 401k or IRA because they’re not taxed anyway. Does not matter if actively managed is higher turnover or whatever else because of the “tax implications”. Only matters in a brokerage account.

[@CapitalWorksPro]

Dave Ramsey's investment advice is so incredibly dumb. "I just look at the prospectus and see if their fund line on the chart is above the S&P500 return." "Oh yeah, I pay fees. But my mutual funds beat the market." (But then he also has an advisor on top of that, whom he presumably pays fees to) The guy has no clue when it comes to investing, and anyone who really has a passion for investing, knows exactly why I say this.

[@robertandersen4164]

Agreed. Dave is amazing for getting out of debt, but after that is achieved, there's a lot that you can just ignore. I like going to different folks for different elements of my financial situation.

[@buscapee]

Facts

[@Chap999z]

Sensational presentation over Dave's plan and investing strategies. Can you do this on Robert Kiyosaki?

[@rinadownie7100]

What's the difference between growth and aggresive growth funds? And what are downside of aggressive funds? Does age have anything to do with it?

[@joeshatzel9725]

But the tax efficiency of an index fund does not really matter if the money is in a tax advantaged account.

[@MoneyGuyShow]

True, but you are still left with awesome low fees and likely performance > 80% active managers 👍

[@MrAngrybaldguy]

Yup even Buffet said he would buy the s&p 500 in a second.

[@iliketoflystuff9354]

Yet he doesn’t

[@ariefraiser140]

@@iliketoflystuff9354 Because you really need to read all of what he says. The problem with most people is they take a little snippet of what they've heard and think they've een the entire movie. From the articles I've read about Buffett he says for the unsophisticated investor, one who doesn't have the time or inclination to study different securities conistently and continually buying the S&P 500 provides a superior return. For professionals who are willing to put in the time and effort required to study the market and identify inefficiencies in the markets they can obtain a higher rate of return.

[@iliketoflystuff9354]

Arie Fraiser That’s true, but his fund has underperformed the S&P over the last decade so I guess he’s right just buy the S&P.

[@ariefraiser140]

@@iliketoflystuff9354 I guess it depends what time horizon you want to look at because over his career or even a shorter time frame...a typical 30 year work period it has out performed the market. There has been a lot of volatility and instances in which outside market forces came in to prop up the markets when they should have tanked such as during 2008 and most of the past 2 years. No one knows for sure what impact all this artificial forces on the market will have in the future. But we will see. If there is a big downfall value investors like Buffet will come out huge like they have in the past. Right now there really aren't any value stocks yet stock prices keep going higher and haven't sustained a prolonged downturn.

[@iliketoflystuff9354]

Arie Fraiser Yes and he has a massive cash position as well, I guess only time can tell.

[@bishamuesmus301]

Hey guys, off topic question from a fellow CPA to be. Has the CFP been a useful certification to utilize? Keep it up with the info and charts - fun stuff!

[@amythinks]

Dave hates index funds? That's news to me. I've read a lot of Dave and I watch a lot of Dave and I know he recommends working with a financial advisor. He did used to use the term "good growth stock mutual funds" a lot, but I think a lot of that is because most of his investment life was before the advent of index funds. The main thrust of his argument is to get with a financial advisor who "has the heart of a teacher." I don't think he'd have a problem with said advisor investing your money in index funds if they are in those four buckets. I have never heard him say "I don't like index funds."

[@pozloadescobar]

Where did you get the charts comparing risk/reward on those funds? Very useful graphic!

[@mace8704]

I’ve always struggled with this topic. With all the data available, it’s extremely difficult for me to be able to easily identify the top performing mutual funds over a decade +, and choose the index alternative. I’m always filled with doubt regarding the difficulty of identifying mutual funds in the top 5%. I understand that the overwhelming vast majority, ~80%, of mutual funds underperform the index, but it’s so easy in 2020 with the wealth of immediately available online resources to identify funds in the top 5% over the past decade +. I always wonder if we chose broadly diversified mutual funds to a specific cap, not sector, in a Roth accounted from the top 5% of funds, could I out consistently outperform the index. Clearly, you’d have to re-evaluate when the fund manager changes, but the thought hits me often.

[@kaythegardener]

Have you tried this to test your hypothesis? Grab 5-10 years of past market Morningstar reports & watch which funds move around in the quintiles (20%). Look at their ranks every quarter, not just every year. That should give you 20-40 data points for each fund. Due to fund changes that render them unable to compare over the whole time range, you might have to pick 15-25 funds in each quintile... Enter this data on a spreadsheet & then run picture graphs & ask the graph to predict 5 years into the future from the resulting trend line... Repeat this exercise with different historical decades, until your fingers drop off & your eyes become permanently blurred -- if you are a nerd with an incredible amount of perseverance!!/s

[@ericranta5835]

Nice deep dive. I just subscribed!!

[@brianbaker6398]

One of the focusses was on risk adjusted performance of each investment strategy (s&p vs ramsey) over set periods of time. Does risk equal volatility? And did the performance figures provided factor in growth through dollar cost averaging into the investment strategies? If the ramsey method is more risky and/or volatile, would DCA make up for some of the shortcomings of the strategy?

[@duneme]

My Dave issue is personal! Just because my Wife and I are weird! We use a credit card but, Pay it off every month! Only debt we have is Investment Debt! We own our House, some Rental Houses but, we owe on a Commercial Building we are partnered on but, that’s it! Pay more than $5000/mo to pay it off early! So we owe on debt yes, I know Dave would have me save my cash for my Investment but, that would mean $1600/mo in Rent I would NOT be getting! That’s $19,200/yr I wouldn’t get! Yes, the debt costs me a little but, even if it where $15,000/yr, would I really want to say no, I only buy cash! Bottom line, there are weirdos like us that will not only pay it off but, aggressively pay it off! Bottom line, I’m Daveish on Debt! So, I’m back on BS2!

[@DRE_vid]

I listened to this in the podcast version, and I was shocked when you said that Dave Ramsey recommends investing in front-load funds (7:32 in this video). I was so shocked that I had to do my own research, but it is absolutely true. He recommends load funds because they come with "advice" to the investor. I do not think that a financial fiduciary should recommend a load fund, because there is zero advantage to the investor. The only advantage goes to the person selling the fund, and I have to figure that's the key: Ramsey has relationships with "trusted advisors" and they gain from the load fee, which is hefty, and the funds are probably sub-par. The investor does not gain. If the investor wants advice, there are many ways to get that, at much lower cost. I love Dave Ramsey's advice on debt and I encourage people to follow it. But this investing advice is right out of the 1970s, high cost and highly inefficient.

[@DrJack144]

David Enna also speaks to how outdated Dave’s advice is. “Loads” aren’t even a thing anymore. Neither are commissions or trading fees. RobinHood changed the industry. I like Fidelity & use them for my Roth IRA. I’ve never paid a single transaction cost, never paid a load fee, never had a minimum investment in any Fidelity fund I’ve invested in lately. Fidelity ZERO funds are even starting now which have 0.0% fees

[@DrJack144]

Bryan J maybe technically, but there’s not really any reason to invest in funds w loads anymore. Transaction fees for trades also aren’t 100% gone, but there’s also no good reason to pay those anymore. So many great options exist without loads or excessive fees that they’re not really a factor anymore imo. In 1995, they couldn’t be easily avoided like in 2020.

[@brentjtalbert]

i don’t think dave hates index investing. ive heard him say a few times that he puts his money in an index fund until he has enough to buy real estate(so it is good for him just not what he recommends for you. )so, dave does use index funds personally. but if he told everyone to use index funds he doesn’t get thousands of commission checks from the financial advisors he refers people to(elp’s).

[@kennethwers]

Dave is good at getting people out of debt. BUT his investment advice is from the 70's when investment cost was a lot higher.

[@calcs001]

As always, great content

[@onedirectionlover317]

I know you two have talked ad nauseam about index investing, but can you talk about the Magic Formula Investing concept by Joel Greenblatt? His approach seems to make sense intuitively, and some of the studies seem to indicate that it'd beat the market even on 3-year timelines.

[@knowen87]

This is not as applicable but I just realized that HSAs are not just triple tax advantaged. They are quadruple tax advantaged. Unlike a 401k or IRA ,HSA do not pay FICA taxes and never do. This makes it better than an IRA because the IRA still requires FICA. That is a 15% savings that, unlike federal and state taxes, doesn't have to be paid later

[@reaalitykinggs]

Nate Owen GREAT point, also, no FICA on employer match and non elective contributions. The 15% figure includes the employer portion too so really it’s half of that, I think. Nonetheless solid point and the first time I have seen anybody mention HSA income contribution shielded from FICA.

[@QueenPcontrolstheuniverse]

dave hates whatever doesn't bring him a comission. He refers his callers to his "network" of advisors and he gets comissions on that. that's why he hates etfs.

[@bi0lizard1]

I like Daves take on paying off and avoiding debt. His budgeting advice is good. As is his recommendation for a solid emergency fund. Those things ALONE will stop most people from getting wrecked. I do, however, disagree vehemently with his investing strategy advice! Overall it’s pretty terrible advice. Do yourself a favor, after you amass over 100k get a professional financial advisor.

[@Lolatyou332]

I definitely like Dave Ramsey, but I do agree with your perspectives. He focuses more on the psychological aspect more so than the mathematical perspective using his data on 10,000 millionaires. The difference between very savvy financial people and Dave's main audience, is that we are able to get through the emotional and psychological perspective and look at things calmly from a mathematical perspective. Mortgage's are OK to have if you can get a larger return in investments, it's OK to invest more than 15% of your income. He tends to not indulge in other peoples perspectives on investment strategies. I actually plan on not contributing to my retirement at a certain point once my normal investments would be 1/6th of the growth of my money. This will result in about 10% less in retirement, but 15-25 years with an additional 25%+ disposable income based on my personal simulations. The more money you save short-term in the early years, means the less money you would need to save long-term in your later working years. Most of my money is being saved external of my tax-advantaged accounts. The resulting numbers between a taxed and tax-advantaged account actually aren't significantly different if you are strategic with the stock lots that you sell in a taxable account. You can ignore up to 40k of taxes on capital gains assuming you have no additional income. You have more freedom with that money and can easily start throwing any W2 income into a 401k in your ending working years and then realize some of your post tax gains. Just so much that you can do that Dave R. never goes into depth about because it would confuse his general audience.