https://affordanything.com/329-challenging-your-confirmation-bias-with-economist-larry-
Spoiler Alert: In the middle of the interview he says that investing in the stock market is the same thing as gambling at a casino. You shouldn't invest in the stock market, until all debts are paid off, including a primary house with 2.5% interest rate.
Well you just saved me from having to listen to it through.
And threreby not challenging your confirmation bias? :-)
Your smiley denotes this was said in jest, but you do bring up a good point about confirmation bias. One should systematically question what they believe and why, but that doesn't mean giving equal footing to every contrarian opinion out there. I've read countless articles and taken a deep dive into equities to know that it isn't the same as gambling at a casino.
It's not unlike climate change - which i've spent the last decade closely studying in my professional life. It's great to consider where our current understanding is lacking, but at this point you can also safely disregard anyone who claims that there's "just no evidence that climate change is happening".
I also was "saved" from having to click and read. Yes, I jested, but you got the point I was making.
Those of us who have been on this forum or bogleheads forum have seen the data that destroys the active management/ trading benefits claims many times.
New people may not have see the data, and might get locked into a confirmation bias box and not know it.
I notice none of the above posts stated or linked to data, just referring to "statistics say".
I'd like a list of this studies, like the one RWD has for "reasons not to invest now". Maybe a sticky.
If you are locked into a confirmation bias box, this is the best one to be in.
I actually listened to the whole thing, in the spirit of challenging my confirmation bias, and there was nothing that even remotely challenged. I mean, I get what he is saying. As someone else mentioned, there are actually a lot of people who would better off paying off their mortgage and everything first. Particularly people who tend to sell at the bottom and then wait for it to come way back up before getting back in. There is some chart out there showing that the market averages x% but the average investor (not trader) gets y%. I don't remember the exact numbers, but y% was somewhere like 3-5%, and it's because of investor behavior. So if someone is likely to panic sell at the bottom, or even invest too conservatively in general, then maybe they should focus on the debt first. I've also seen a chart that discusses paying off your mortgage and it shows the allocation and at what rate your mortgage would be so that it would make sense paying it off vs investing. So if you are invested conservatively, you should pay off the mortgage if it is x%. If you are invested more aggressively, it makes sense to pay off debt if it is a higher rate. These are all things are common knowledge to most who post here, but not necessarily to the the average person.
All that to say, there was nothing in there that actually compelled me to challenge my confirmation bias, which is another reason I'm surprised she had him on the show. She could just have had Ramsey on instead.
My step-mom freaked out and sold at the bottom in March 2020. I think there is a really good chance that her returns are less than 3% over the last 10 years. If she represents the "typical investor", the economist might be correct. It's actually fairly reasonable to advise these people to pay off their student loans and mortgage first.
If you can match the stock market around 9% it doesn't make sense to pay off your students loans and/or mortgage. I think the MMM community is capable of matching the market, but not necessarily beating the the market.
I left grad school in August 2011 with 57K of student loan debt with an interest rate around 5.25%. I signed up for the lowest payment possible which was a 25-year graduate extended plan, with a payment of $333/month. Instead of paying off the debt, I focused on investing in real estate and the stock market, in that order.
Ten years later, I still have $24,000 in student loans and my payment is $160/month. However, with the recent bull market in real estate and the stock market over the past 12 months, we now have a net worth over 1 million.
If I was a "typical investor" and at the age of 42 still had $24,000 of student loans that would probably be considered a bad thing. However, based on the strategy to focus on net worth, the $24,000 in student loans is not a big deal.
Dave Ramsey does an excellent job of getting the average person out of debt. However, how does he get the average person to get 12% in the stock market?