Dave Ramsey unrealistic investment expectations

[rob in cal]

   I support much of what DR says and believe he is helpful to many people.  However, I don't like his assumptions that it is easy to find mutual funds that will outperform basic index funds.  He basically says that its pretty easy to find these funds with some basic research, and I would argue that one would have about as much likelihood to find funds that will underperform as overperform going forward.  The very nature of index funds is their averageness, so non-index funds will have some above average and some below average performers, and I don't believe its that easy to figure out which ones will be which in the future.

[Marus]

   I support much of what DR says and believe he is helpful to many people.  However, I don't like his assumptions that it is easy to find mutual funds that will outperform basic index funds.  He basically says that its pretty easy to find these funds with some basic research, and I would argue that one would have about as much likelihood to find funds that will underperform as overperform going forward.  The very nature of index funds is their averageness, so non-index funds will have some above average and some below average performers, and I don't believe its that easy to figure out which ones will be which in the future.

Isn't he endorsed by some of these mutual funds?  If so, talk about a conflict of interest...

[celticmyst08]

Yeah, DR's investment advice is widely regarded in MMM circles to be mostly garbage. I mean, it's good that he tells people to invest, but his whole 12% annual return schtick is just absurd IMO. He also recommends front load funds and is partnered with a lot of financial advisors. I'd say there's a conflict of interest.

I say this as someone who got into personal finance because of Dave Ramsey. I think the guy does a ton of good, but I wish people would do their own research and try to corroborate some of his claims.

[2buttons]

Use a screener and put your or DR criteria in. I use Schwab and when I research funds it compares it to the benchmarks.

Not saying that I am getting a 12+% return, but it is possible to beat index funds. 

TIA - I have a mix of both DR and Index/other picks.

[iamlindoro]

Yeah, DR's investment advice is widely regarded in MMM circles to be mostly garbage. I mean, it's good that he tells people to invest, but his whole 12% annual return schtick is just absurd IMO. He also recommends front load funds and is partnered with a lot of financial advisors. I'd say there's a conflict of interest.

Absolutely.  Worse still, I believe Dave collects both coming and going-- the ELPs pay him a kickback for the referrals from his network, and he's paid a commission on the front-load funds, too.

I say this as someone who got into personal finance because of Dave Ramsey. I think the guy does a ton of good, but I wish people would do their own research and try to corroborate some of his claims.

It's basically impossible to believe that he's not well aware of the destructive nature of his advice at this point-- whenever he's challenged on it, he goes on the offensive and starts attacking the individual as a "hater" rather than the argument.  I come down on the side which believes that Dave is just aggressively defending his revenue stream at the expense of his listeners and readers... and that's ethically very troubling.

[Luck12]

   I would argue that one would have about as much likelihood to find funds that will underperform as overperform going forward.  The very nature of index funds is their averageness, so non-index funds will have some above average and some below average performers, and I don't believe its that easy to figure out which ones will be which in the future.

You're actually understating how difficult it is to find an active fund that outperforms comparable/benchmark index.    It's something like 75-80% underperform over 10, 20, 30 year periods and that's not even including the effects of survivorship bias. 

There's so much conflict of interests, kickbacks, bad investment advice, etc with respect to DR.  That's why he's so vehemently against the more stringent fiduciary rule.   

[ulrichw]

Use a screener and put your or DR criteria in. I use Schwab and when I research funds it compares it to the benchmarks.

Not saying that I am getting a 12+% return, but it is possible to beat index funds. 

TIA - I have a mix of both DR and Index/other picks.

The screener will help you find funds that have outperformed, not necessarily funds that will outperform.

The problem is that while there are many funds that outperform indexes over short periods of time, most do not do so in the long run. Picking the ones that do is tough, and if you're using simplistic picking mechanisms like screeners you're quite likely to pick future losers as well as winners.

When you add in the "headwinds" of high expense ratio is and loads, you're quite likely to be better off if you pick the index funds instead, IMHO.

[2buttons]

The screener will help you find funds that have outperformed, not necessarily funds that will outperform.

The problem is that while there are many funds that outperform indexes over short periods of time, most do not do so in the long run. Picking the ones that do is tough, and if you're using simplistic picking mechanisms like screeners you're quite likely to pick future losers as well as winners.

When you add in the "headwinds" of high expense ratio is and loads, you're quite likely to be better off if you pick the index funds instead, IMHO.

Agree on the former for sure - e.g. past performance etc.  Schwab defaults on a 10 year time horizon.  Admittedly, I have not looked into longer time horizons. 

I generally avoid loads, and schwab does a decent job of showing expense ratios, which I have gravitated toward.   

I also had to look up "survivorship bias," which is entirely new to me.  I am definitely learning a lot more about investing being on here. 

Has anyone found a solid screener that can show a 20 or 30 year track record? Again, I know that "past performance...."

I also recognize that investing isn't an exact science, since there are so many variables, and that there is clear safety in index funds, and chasing unicorn single stocks is way outside my comfort zone, but I do wonder about having a mix in chasing some of that 10-20% higher return funds. 

Admittedly, DR got me out of debt.  I also met with one of his ELP's for investing and was not impressed at all.  So I am a mixed bag with respect to bias.

[PARedbeard]

My parents have been DR lovers for some time. For them, he was wonderful. The facts that he intersperses his financial teachings with Christian underpinnings helped my parents a great deal. As a result, they were able to get out of debt and start saving. His advice on credit cards can also be exceptionally useful for people who need help with self-control.

However, I think that he ignores an awful lot, and I agree that his investment expectations are unrealistic. Additionally, and this is pretty nit-picky, I think that because his message is bathed with Christianity, many evangelicals believe him based on his personal beliefs instead of his straight numbers. Generally, there is nothing wrong with that--and DR is much better than some other financial pundits. I do just get the feeling that he pulls the wool over peoples' eyes, however, and it can make them lose a bunch of money on front-load fees. People will believe and follow Dave because he is a Christian without doing personal research regarding their unique situation. That can be dangerous in financial terms.

[Bertram]

@2buttons: Please, I really recommend that you read John Allen Paulos' "A Mathematician Plays The Stock Market". It#s going to answer all the questions you may have.

Here is one story to make a bit of appetite:

Someone claiming to be the publisher of a stock newsletter rents a mailbox in a fancy neighborhood, has expensive stationery made up, and sends out letters to potential subscribers boasting of his sophisticated stock- picking software, financial acumen, and Wall Street connections. He writes also of his amazing track record, but notes that the recipients of his letters needn't take his word for it.

Assume you are one of these recipients and for the next six weeks you receive correct predictions about a certain common stock index. Would you subscribe to the newsletter? What if you received ten consecutive correct predictions?

Here's the scam. The newsletter publisher sends out 64,000 letters to potential subscribers. (Using email would save post- age, but might appear to be a "spam scam" and hence be less credible.) To 32,000 of the recipients, he predicts the index in question will rise the following week and to the other 32,000, he predicts it will decline. No matter what happens to the in- dex the next week, he will have made a correct prediction to 32,000 people. To 16,000 of them he sends another letter predicting a rise in the index for the following week, and to the other 16,000 he predicts a decline. Again, no matter what happens to the index the next week, he will have made correct predictions for two consecutive weeks to 16,000 people. To 8,000 of them he sends a third letter predicting a rise for the third week and to the other 8,000 he predicts a decline.

Focusing at each stage on the people to whom he's made only correct predictions and winnowing out the rest, he iterates this procedure a few more times until there are 1,000 people left to whom he's made six straight correct "predic- tions." To these he sends a different sort of follow-up letter, pointing out his successes and saying that they can continue to receive these oracular pronouncements if they pay the $1,000 subscription price to the newsletter. If they all pay, that's a mil- lion dollars for someone who need know nothing about stock, indices, trends, or dividends. If this is done knowingly, it is il- legal. But what if it's done unknowingly by earnest, confident, and ignorant newsletter publishers? (Compare the faithhealer who takes credit for any accidental improvements.)

[Bracken_Joy]

I'll just leave this here as relevant material:



(from XKCD)

[onlykelsey]

hahahahhahaah

[Bertram]

If that comic was in response to my recommendation of Paulos, I have to disappoint you, Paulos comes to the topic of stocks from the opposite end. Looking at behavioral finance/investment psychology and trying to explain why people behave the way they do, and how easily we are influenced in our decisions by irrelevant aspects. How our innate ability to look for and find patterns, even leads us to find plausible patterns and rules in true random data and so forth.

I recommend it to people that are convinced that if only they make the right picks they will have consistenly better than average results - not because it enforces that view, but because it deconstructs it.

[2buttons]

Thanks for the book recommendation. I will give it a read. 

[Bracken_Joy]

If that comic was in response to my recommendation of Paulos, I have to disappoint you, Paulos comes to the topic of stocks from the opposite end. Looking at behavioral finance/investment psychology and trying to explain why people behave the way they do, and how easily we are influenced in our decisions by irrelevant aspects. How our innate ability to look for and find patterns, even leads us to find plausible patterns and rules in true random data and so forth.

I recommend it to people that are convinced that if only they make the right picks they will have consistenly better than average results - not because it enforces that view, but because it deconstructs it.

?? I don't see how you thought that was somehow against Paulos. The comic was for 2buttons. And specifically the view you mention- that if you can find the right picks, you can consistently beat the average. It highlights the folly of "outwitting" the market.

[2buttons]

Warren Buffet has outsmarted index funds for decades, and suggested that if you spend the time doing the research its entirely possible.  He also basically goes on to say that for the average investor that does not spend the time on the research go with index funds. 

Point being, it is possible if you invest the time, and its sort of absurd to suggest something is impossible, that has been done by a number of folks for years.

[MidWestLove]

"Warren Buffet has outsmarted index funds for decades, and suggested that if you spend the time doing the research its entirely possible"

sorry, both parts of the sentence are essentially false
- Warren Buffet takes companies over, not passively invests in them , by either buying significant amount of equity to give him direct influence (seat on the board) to implement policies he wants (share buyback in particular) or buying them outright.  This is NOT what you do when you invest unless you have direct access and control over billions of dollars of "float" as Warren calls it in his each annual report.  he is not a passive investor, he is a leveraged buyout entrepreneur who when picks and choses management and is very directly involved in the investments in a way 'normal' person will never be able to.
- Warren said repeatedly to stick to index funds if you want to capture investment returns passively.

[2buttons]

"Warren Buffet has outsmarted index funds for decades, and suggested that if you spend the time doing the research its entirely possible"

sorry, both parts of the sentence are essentially false
- Warren Buffet takes companies over, not passively invests in them , by either buying significant amount of equity to give him direct influence (seat on the board) to implement policies he wants (share buyback in particular) or buying them outright.  This is NOT what you do when you invest unless you have direct access and control over billions of dollars of "float" as Warren calls it in his each annual report.  he is not a passive investor, he is a leveraged buyout entrepreneur who when picks and choses management and is very directly involved in the investments in a way 'normal' person will never be able to.
- Warren said repeatedly to stick to index funds if you want to capture investment returns passively.

Ummm. No. Warren Buffet is not Carl Icahn, and he has 12 tenets to investing based on his mentor Benjamin Graham.

[Bertram]

@Bracken_Joy: Sorry, my bad, I misunderstood the "good with numbers" reference.


Paulos specifically discusses Buffet, too.

The thing is if you let every human on planet earth  flip a coin everyday in his life, you will invariable end up with people that have flipped a series of heads 1000 times in a row. Does that make it a skill, though?

Another not well understood fact:

if there have been 1,000 coin flips, then it's considerably more probable that Henry (or Tommy) has been ahead more than, say, 96 percent of the time than that either one has been ahead between 48 percent and 52 percent of the time. People find this result hard to believe. Many subscribe to the "gambler's fallacy" and believe that the coin's deviations from a 50-50 split between heads and tails are governed by a probabilistic rubber band: the greater the deviation, the greater the equalizing push toward an even split. But even if Henry were way ahead, with 525 heads to Tommy's 475 tails, his lead would be as likely to grow as to shrink.
...
Given the relative rarity with which Henry and Tommy overtake one another in their penny-flipping contest, it
wouldn't be surprising if one of them came to be known as a "winner" and the other a "loser" despite their complete lack
of control over the penny. If one professional stock picker outperformed another by a margin of 525 to 475, he might
even be interviewed on Moneyline or profiled in Fortune magazine. Yet he might, like Henry or Tommy, owe his success
to nothing more than getting "stuck" by chance on the up side of a 50-50 split.
But what about such stellar "value investors" as Warren Buffet?...

Well, I am not going to spoil the book. It's an easy to digest read. Even if you go on to pick stocks, I am sure there are some valuable lessons to take away.

[2buttons]

http://www.marketwatch.com/story/index-funds-beat-active-90-of-the-time-really-2014-08-01

This seems like a reasonable study.

[Jack]

Ummm. No. Warren Buffet is not Carl Icahn, and he has 12 tenets to investing based on his mentor Benjamin Graham.

Does he have "one weird trick" too?

[Dicey]

Use a screener and put your or DR criteria in. I use Schwab and when I research funds it compares it to the benchmarks.

The screener will help you find funds that HAVE outperformed, not necessarily funds that WILL outperform.

The problem is that while there are many funds that outperform indexes over short periods of time, most do not do so in the long run. Picking the ones that do is tough, and if you're using simplistic picking mechanisms like screeners you're quite likely to pick future losers as well as winners.

When you add in the "headwinds" of high expense ratio is and loads, you're quite likely to be better off if you pick the index funds instead, IMHO.

This whole comment is spot-on, especially the part now in bold and caps. A screener is only a rearview mirror, not a predictor of the future.

I think that because his message is bathed with Christianity, many evangelicals believe him based on his personal beliefs instead of his straight numbers... People will believe and follow Dave because he is a Christian without doing personal research regarding their unique situation. That can be dangerous in financial terms.

100% brilliant observation.

And b_joy, I loved the cartoon's message and easily understood your intent.

[onlykelsey]

http://www.marketwatch.com/story/index-funds-beat-active-90-of-the-time-really-2014-08-01

This seems like a reasonable study.

Not to me.  You have to go to their for-profit website and "request" the "free" study in order to look at it.  I wouldn't trust it to be impartial.

[infogoon]

Ummm. No. Warren Buffet is not Carl Icahn, and he has 12 tenets to investing based on his mentor Benjamin Graham.

Does he have "one weird trick" too?

Only for LOSING BELLY FAT FAST.

[soupcxan]

Warren Buffet has outsmarted index funds for decades, and suggested that if you spend the time doing the research its entirely possible.  He also basically goes on to say that for the average investor that does not spend the time on the research go with index funds. 

Point being, it is possible if you invest the time, and its sort of absurd to suggest something is impossible, that has been done by a number of folks for years.

What are the odds that you can identify that person (out of hundreds of thousands of potential money managers) and invest with them before they get a reputation like WB?

[JZinCO]

Warren Buffet has outsmarted index funds for decades, and suggested that if you spend the time doing the research its entirely possible. 

Just want to make sure you are aware of the exception fallacy before we continue.
The mere acknowledgement that we all collectively know Warren Buffet's name (and know so few other folks that have had similar track records) attests to the fact that he is an exception and considering the number of experienced stock pickers, it is very, very rare for someone to have a track record like Warren Buffet. It would be fallacious to assume that the exception defines any group of generalized investors even if that generalized group includes all highly experienced stock pickers.

[HPstache]

Yes, his 12% number is lofty, but as he would say... "what if I'm half wrong?  You'll still be a millionaire by 65".  The key is that he has to get people who are not necessarily money/math savvy to understand why investing early is extremely import.  I give him a little slack he had to pick a number to use for his teachings a very long time ago and probably just looked to the overall market averages since the beginning... he has since stuck with his guns, but his underlings use more thoughtful numbers in their books such as 10% in "Retire Inspired" by Chris Hogan.  I think Dave's teachings are great, and he uses the K.I.S.S. method when it comes to investing which could be a little dumb for folks around here, but is it really THAT bad to have have a simple investment stategy?

[2buttons]

Let's try this another way - Compare VTSMX and VQNPX. Both vanguard (Vanguard chosen due to darlings of this community) - one index and one actively managed same fund category, same family.   VQNPX seems to outperform in all areas, save for 10 year, but since inception outperformed, 3 year 5 year and 1 year as well.

https://personal.vanguard.com/us/funds/vanguard/compare?navigatingFrom=5

Again, I have index funds are part of my portfolio.  I also have purchased some mutual funds that are actively managed, which, if you believe is nuts, chalk it up to taking a risk, but one could argue that index funds performance worse in bear markets - per study I posted, and seems to be reflective in the YTD category on these funds.     

My point is that its not impossible, and per the study I posted there are plusses and minuses to both.

[JZinCO]

I give him a little slack he had to pick a number to use for his teachings a very long time ago and probably just looked to the overall market averages since the beginning

I give him no slack because there is no 70 year old mutual fun returning 12% as he claims. Remember he is not talking about average market returns over any period. He is quoting the result of some unnamed 70 year old mutual fund. It's an outright lie.

Nothing wrong with KISS either. I'm a little tired of hearing apologists of his (It's funny that a man can have so many apologists, almost like a cult.) say "yes but he is getting people to invest". What are the ramifications of setting expectations so high though? DR doesn't provide any evidence so once people start getting returns on par with the market they have little to hold on to and might press the eject button or they might overexpose themselves on equities in general or in too few individual stocks. It's dangerous to set folks up for failure chasing crazy returns.
For the sake of this argument, I don't care if he helps people with other aspects of personal finance. Just because he does this does not mean his piss poor investment advice is excusable and there is nothing wrong with holding two truths concurrently. DR is good on debt advice and bad on investment advice. period.

[Luck12]

Let's try this another way - Compare VTSMX and VQNPX. Both vanguard (Vanguard chosen due to darlings of this community) - one index and one actively managed same fund category, same family.   VQNPX seems to outperform in all areas, save for 10 year, but since inception outperformed, 3 year 5 year and 1 year as well.

https://personal.vanguard.com/us/funds/vanguard/compare?navigatingFrom=5

Again, I have index funds are part of my portfolio.  I also have purchased some mutual funds that are actively managed, which, if you believe is nuts, chalk it up to taking a risk, but one could argue that index funds performance worse in bear markets - per study I posted, and seems to be reflective in the YTD category on these funds.     

My point is that its not impossible, and per the study I posted there are plusses and minuses to both.

Sorry but that's just flat out false.    Also, nobody is saying it's not possible to pick active funds that will outperform a comparable index, just that the odds are not high even if you screen out funds with high expense ratios.   There's also the problem of active funds changing managers.   

http://awealthofcommonsense.com/2015/03/which-active-funds-outperform-during-bear-markets/

[2buttons]

C'mon. Look at that time horizon. 2 years?  Really?  The study I posted was a longer time horizon and compared two bear markets.

[Jack]

Yes, his 12% number is lofty, but as he would say... "what if I'm half wrong?  You'll still be a millionaire by 65".

That does not make sense. Projecting higher returns lowers the amount people think they need to invest. In other words, somebody who invests the minimum to become a millionaire at 65 based on an assumption of 12% returns would only be a hundred-thousand-aire or so if Ramsey were half wrong.

Selling people on 12% returns when they'll really only get 6% is a good way to screw them over.

[Luck12]

C'mon. Look at that time horizon. 2 years?  Really?  The study I posted was a longer time horizon and compared two bear markets.

That's how long the last 2 bear markets have lasted, no cherry picking going on.  What more do you want?  You active advocates always claim you do better in bear markets and then bam the numbers show otherwise.  At least on an unconditional probability viewpoint, it is game, set match as far as I'm concerned.     

And as someone earlier said "You have to go to their for-profit website and "request" the "free" study in order to look at it.  I wouldn't trust it to be impartial."

God damn it, seriously, this shouldn't even be a debate.  All the numbers make it clear index funds are better. 

[neil]

Compare VTSMX and VQNPX

http://tinyurl.com/zp3j8pb

For the extra cost of $20/yr (and increasing with size) on an investment of $10K, VTSMX outperformed VQNPX by a grand total of $200 since 1992 - 26 years.  Total return matters and VTSMX has higher yield.  There are some periods where you can see one outperformed the other, but in all fairness you just bought a glorified total market tracker at higher cost. 

It's really hard for any large fund to escape the gravity of the market they choose to invest in.

[JZinCO]

C'mon. Look at that time horizon. 2 years?  Really?  The study I posted was a longer time horizon and compared two bear markets.

Let's say, you are correct. Then to take advantage of that information one needs to know when to switch between active and passive funds. So there we add in the poor performance of investors with regards to market timing.
Ah but you won't time you say? You'll hold both active and passive funds as a hedge against bear markets. Well then you are betting on doing better only when bear markets occur which are less frequent than bull markets. That means you are decidedly choosing to let active funds drag down your portfolio averaged over bear and bull markets.

[2buttons]

I've been gone all day, but in between meetings I have been doing additional research, and what was most compelling to me was morningstars passive vs active barometer report. As much as I hate to say it, I think I am wrong. 

That said, Bogle himself invests 24% of his portfolio in actively managed funds. 

Now what? Sell off everything and go full on VTSMX? others?

[Jack]

Now what? Sell off everything and go full on VTSMX? others?

Works for me (VTSAX instead though), although I've also been diversifying into VTIAX (which has been underperforming lately, but that's irrelevant since I'm investing for the long run and the fundamentals are sound).

[2buttons]

Thanks. Do you go to vanguard directly? Schwab charges an absurd fee to buy vanguard funds, although they do have some comparable funds. Seems like fidelity and others want to get some market share.

[dandarc]

Do you go to vanguard directly?

Yes.  Unless you're talking about an Individual 401K - then shop around.

[mizzourah2006]

Also, who cares what the average return is. I want to know what the annualized return is.

[Jack]

Thanks. Do you go to vanguard directly?

For my IRA, yes. For my HSA, I buy VTSAX through the bank/broker my employer chose. For my 401K, I buy some high-expense, non-Vanguard S&P 500 fund because I don't really get a better choice. Once I've got a little more seniority in this job I'll start needling them to pick a less shitty 401k provider.

[neil]

Now what? Sell off everything and go full on VTSMX? others?

In all fairness, I would not take our word for it either.  It's pretty important that you understand for yourself why the way you invest is good for you.  If you have your money in some less-than-ideal investments, it is not going to hurt to leave it where it is while you figure out what you want to do going forward.

Schwab funds are great.  My SO wanted to open her IRA through them because that is what her peers at work have done.  I am happy enough for her to buy their commission-free ETFs and I am not going to fret over .02% between VTSAX and SCHB.

http://tinyurl.com/h9jw6ce

Vanguard is great for me because I don't care about any frills and I would rather just save on the expense ratios.  However, their interfaces are the bare minimum required and other brokerages have better websites. 

[desertadapted]

Vanguard fan.  But would look at a variety of (index) funds, evaluating expense ratios and what they're in.  I am personally spread out among a age-based, small cap, mid cap and large cap funds, as well as international and bond.  Part of this is controlled by what my various retirement funds include in their portfolio.  If you're looking into Bogle, you might also read the Bogleheads' Guide to Investing as a nice primer.  I went all in on the indexes first after reading about their historical out-performance of active funds, and a recognition that I'm not smart enough to pick the right actively managed fund. With that said, I do have a piece of a Pimco fund, mixing it with a total bond index.

[dandarc]

There is a great explanation of "why Vanguard" here:

http://jlcollinsnh.com/2012/09/07/stocks-part-x-what-if-vanguard-gets-nuked/

[rockstache]

As much as I hate to say it, I think I am wrong. 

I have no skin in this conversation but I just wanted to say, this is really big of you, an a great reason why I love this community so much. I haven't found anything quite like it anywhere else on the internet.

[DJStrong]

I really do like Dave, his book kick started me on my journey to FI

His investment advice is unfortunate but I will say in a fleeting defense he does recommend S&P 500 no load funds (or other such low turnover funds) in taxable accounts and I have heard him recommend indexes if your 401k has lousy options.  There has been a lot written about how his 4 fund strategy can under-perform and not be diversified enough.

Lately I hear him stressing savings rate more and more (he still writes 15% but the tenor of a lot of calls seems to imply more).  I suspect we will see a shift soon, or not, it is his product.  I will honestly say I was ready to look for the four types of funds, but you get blasted with so much info I discovered places like MMM, Bogleheads, etc.  Even my father, who turned me on to Dave, told me he doesn't use those funds for his 401(k), he is in a target date fund.  So I would be curious to see how many people follow through on it     

[2buttons]

As much as I hate to say it, I think I am wrong. 

I have no skin in this conversation but I just wanted to say, this is really big of you, an a great reason why I love this community so much. I haven't found anything quite like it anywhere else on the internet.

Thanks, I tried everything in my power to justify that I was correct, but frankly it just wasn't in the cards.  I literally exhausted every avenue. 

[Dezrah]

I like to stream DR's show when I work. Over time, DR has gotten more and more and more defensive about his investment advice. I suspect he sees the popularity of sites like Bogleheads and MMM as a direct threat. He regularly rattles on about how you should listen to him and his ELPs instead of some "goober on the internet".

He finally disclosed to his audience that his personal investments minus his fees have out performed the market over a 10 year period... by 1%. And it's nowhere near the 12% average return he continues to use. Good for him and his money, but his real world results are so drastically different from his fantastical claims that I'm surprised he shared anything at all.

I think his audience has actually wised up to this though.  Honestly, if you followed everything he suggested, you'd be fine, not ER great but good enough.

I just wish he'd acknowledge that risk/reward of active versus index investing make the later much more appropriate for most of his audience.  That and start using 7% long term projections instead of 12%.

[PharmaStache]

There was a funny call last week (I think) where the caller had gone to an ELP and the ELP recommended a bond fund.  Dave basically didn't answer the guy's question at all, just told Kelly to get the ELP's info because they aren't supposed to be recommending bonds.  Dave seemed like he wanted the call to end stat!

[jms493]

DR doesn't get paid by any mutual fund companies.  His ELPs pay him to be in his network...DR doesn't get any kickbacks on what the client buys from the ELP.

DR's advice is simply to start investing...the Rate of Return is irrelevant.  90% of the people who need DR never even consider investing...investing is like a foreign language.  Dave constantly tells people to learn for them self and not to do it because he says so.  He tries to get people to wake up and plan for the future. 

I personally follow his plan but my wife does the bogelhead Vanguard 3-Fund Index Portfolio and I do Large, Mid, Small and an institutional index of Vanguard funds.

His get out of debt advice is spot on and it works.   I followed it to a tee and paid off 288K in 19 months. (sold a rental and a car)

People need to remember he is a radio show host (entertainer).  He is not a CFP and doesn't hold any financial licenses.  His advice is just that...advice.  You dont need to follow it.