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. 🍻✌️
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
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.
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!
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.
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.
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.
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.
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.
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.
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.
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!
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
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.
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.
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.
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.
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.
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.
@@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
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.
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.
@@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.
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.
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.
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.
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.
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.
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.
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.
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!!
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.
He is making millions by referring people to the ELP. He is recommending to people a loaded mutual funds with a commission’s brokerage firms. He is recommending the same portfolio for everyone with a 0% bonds. His 12% returns is not realistic. Follow John Bogle investment strategy to succeed in your investment.
It's always a good idea to "follow the money." Dave clearly has a vested interest in recommending his paid advisors. Those advisers make money by selling managed funds with fat commissions, not by selling Vanguard Index funds.
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.
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.
Ramsay is a one trick pony but his one trick of debt reduction is pretty clever. His investment advice is slightly better than burying your cash in a coffee can in the backyard.
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.
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.
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!
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
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.
@@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
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.
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.
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.
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.
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.
@@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.
@@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.
@@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?
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?
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.
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.
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.
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!
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.
@@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 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.
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.
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.
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.
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!
"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.
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 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.
@@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.
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.
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.
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.?
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!
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?
The difference between you and Dave Ramsey is you have grown and he has not. I know you won't like me saying that, because you wannt to be diplomatic. But Ramsey strikes me as someone who likes to be right more than he likes to grow. Growing requires admitting you were wrong, and some people are too proud for that. We all are, to varying degrees, but someone who has been in front of a camera for a quarter century telling people to invest like that is simply too proud.
Agreed. While he does a noble thing with trying to advocate people getting out of debt his investing knowledge seems relegated to stubbornness in the face of actual statistical and real world data. I take his advice in that regard with a grain of salt. My impression as well is that he comes across as someone unwilling to admit his mistakes. He says he has outperformed the market, but fails to go into further details exactly how he is doing this. He basically negates and brushes off any questions as to how he accomplishes doing so exactly. Interesting to watch how tactful they managed to be while reviewing his approach.
@@peterkozlowski4377 The Money Guy folks are southern gentlemen. I'm from the northwest, so it comes across to me as a bit syrupy, but I agree and have to appreciate the tact and diplomacy they intend.
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?
On Dave's podcast, a caller challenged him on the index funds, mentioning the 80% under-performance on mutual funds. His response was that he was getting better returns than the index. I think this is terrible advice when you look at the data. If 80% of people lose, why assume all of your followers will be in the 20%?
I question that he's actually beating the index. When pressed, he'll talk about how one of his funds has returned 12% since inception. If he owns one that does better, I'm sure he'd let everybody know. If his top performer is getting 12% CAGR, the other 3 types of funds only bring it down from there... especially International. Combine that with advice to people that they can take an 8% to 10% pull from their accounts in retirement and never have to touch the nest egg and it's pretty cringe-worthy. I feel sorry for people who calculate their "number" based on a 12% return and an 8% withdrawal rate only to discover the mistake when it's way too late to fix.
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.
Dave's investing recommendations for older people is scary. He wants them to work 2 jobs and put money in risky investments. They could be 70+ and this would be his strategy.
Uhh... are we really not going to talk about foreign tax credits? They get wasted inside of a Roth. In other words, don't invest in international unless you've maxed out your IRA/401k.
@@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.
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.
@@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.
Dave Ramsey doesn't like front-load funds because they perform well; he likes them because he makes money endorsing people who sell them or recommend them. You don't need a 43-minute video to explain that.
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."
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
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.
I can respect Dave Ramsey as a salesman, I can respect his legitimite good way at explaining things in a way that will get people to do it. However, he is often purely wrong based on math, and his reach is almost always emotional, which is why people are going to dislike this comment, even though it is just factual. He also uses religion to push his financial advice and I personally despise anyone using religion against those in the religion or to profit from them. (Not doubting his faith, simply stating he uses it to sell his brand)
I watch Dave's show regularly. It's entertaining and informative but I always zone out when he starts talking about investing in his mutual funds. He's totally off on that. If you want to risk that much just buy small caps index fund otherwise just a broad market index is your friend.
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.
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.
@@dandahl5964 Hey Dan, I fully understand that concept and for a while, I bought into it and perhaps years back that was true. However, as the world has gotten smaller and smaller and the global economy continues to grow with the U.S. being the main driving force it seems to me that Intl cannot be relied upon as a hedge anymore. Intl market relly heavily on the U.S. consumer and economy as a whole. Additionally, what with how global the economy is I do not believe the idea of going out and buying global exposure means you need to buy a company that is based somewhere outside the states. the large majority of American companies obtain a majority of their sales from international regions and therefore are you not gaining the international exposure that way while also gaining the benefit of investing in a business that is housed in a country here government (for now) has less role in regards to how the company will or will not have to conduct itself?
Justin Flint Thank you for proving my point Justin. This fund, and all other international funds have dramatically underperformed the Dow and S&P 500 over 1 year, 3 year, 5 year and 10 year marks. But by all means, keep “diversifying” for the sake of diversifying. I on the other hand am more interested in quality and solid returns.
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.
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!
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 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.
@@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 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.
I don’t think it’s fair to say that Dave hates index funds. I’ve heard him say that he uses index funds to save for real estate purchases. I agree though Dave’s investing advice is really too simplistic. He himself, if we take him at his word, is diversifying between real estate and equity. Not to mention he is a business owner.
If your are going to critique Dave's investment advice, you should actually look at his WHOLE investment advice. Dave does NOT recommend his investment mix for non-tax protected accounts. In that instance he recommends index funds. Inside a tax-protected account, like an IRA, the tax argument does not apply at all.
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!
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.
Dave has said that he invests in the S&P 500 in his taxable account because it has low turnover, but this might not be in his book or in FPU. So I wouldn't say he hates index funds.
Yeah i agree hate is a bit strong. He pushes contacting his ELP's that do not work for him but do pay a fee to be on that list and they are supposed to follow his principles.
Dave is for the 80% that need help with basic discipline- we are comfortable serving the 20-25% Financial Mutant space that are looking to maximize their wealth 👍
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.
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
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.
Hey guys I am watching this video and so far it's awesome. I do have to give Dave a point though. I agree with what you guys are saying. However I do watch Dave a lot as well and once in a while I have heard him mention in some situations even he will use some snp 500 funds and has. I forgot what situations those are though. I wish I could name the situation he uses that for in some investments. I love my index funds in my Roth and taxable though. I really wish in my ABLE account though that I had a good amount of options in my ABLE account I only have a few investments available in my ABLE account you guys inspired me to make when I heard about ABLE from you guys. I have DFQTX in that account even though the fees are super high on there and ABLE itself charges me a big fee as well. But it's better than not having ABLE.
He says only to use then in taxable accounts after maxing retirement. Usually where you're looking to put money for a moderate amount of time while saving up enough to buy real estate. He's vehemently against them for retirement.
@@ArchStanton9 Thanks yeah that makes sense. I don't make that much money right now but I will look for like 2 jobs or something or get 70 hours a week at one and my goal would be to max a Roth put 5k in ABLE, max a HSA if I qualifed for one but I don't and I won't for several years, and I want to put at lesat $1100 in a 401k and at least $1640 a month in a taxable account so around 48 I could stop working if I wanted to and let all of the other accusations grow. I would want the abilty to live off of only the taxable with 1.8% a year of dividends or so. If I know that's not fully maxing everything out but I would be impresssed if I could even make enough to do that much. And I would use the taxable like that so that I could live off of it early if I choose to. Also sense for the first 52k a year you take out of a taxable account on qualifed distributions and dvidiens the tax rate is 0% but for like VTI the not qualified distributions is 30% of what you take out so effecily I would end up paying taxes on 30% of the money I take out sense I would take out 52k a year or less form that account if that makes sense. If I can increasing my income enough to be able to max everything while putting at least $1640 in the taxable account then I would of course love to do that. Do you know what I mean by that plan now? Also if I lived on 1.8% or less when I get there the account would still be able to grow forevor still being invested for the long term sense I would only need 1.8% or less from that single account, and all of the other accounts could keep growing forever if that makes sense. I really want to max everything if I can but at the same time I don't think I will be able to make enough to live off of and max everything and put $1640 in a taxable account on top of all of that. I see what you mean though and how mathematically it would be smarter to max out all of the tax advantage accounts before even touching a taxable account. I just got offered a job that I would be making $23,330 a year after taxes around or so which is a lot more than I was making from my old job sense I only made like $18293 a year after taxes from my old job. And I plan on picking up another job to work more and to save and invest more. I hope in the long term I can incrase my income to be able to do that stuff while doing $1640 in the taxable account and someday maybe get my income to be enough to max out the accounts while still doing that as well.
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
Invest 20% of your income in a Roth IRA and 401k once the Roth is maxed (or first up to amount of employer match if you have one). Until you reach age 40 put it all in an S&P500 index fund with low/no fees. Once you reach 40, each year swap 3% of your equity value to bonds (assuming you're planning to retire at normal age 60-65). Investing doesn't have to be that complicated.
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Thanks to Dave Ramsey I finished paying off my student loans last friday!!
You did that yourself friend! Congrats
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. 🍻✌️
He’s great for debt advice & strategy. Not so good for investment advice. His advice is outdated
Now...no more debt! Emergency funding your retirement! You'll need it!
@@johnappleseed203 1²121¹1¹
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
43 min videos are too long
I disagree
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.
Well I just got recommended. So probably an explosion in subs soon.
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!
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.
This is one of the few things I haven’t done that dave says, I’ve always done index funds
Smart! Investing is the only bit that's off about his approach otherwise he's great.
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.
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.
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.
Facts
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.
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.
@@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!
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.
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!
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
Same here.
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.
@@benhayden5685 trust me, he was instrumental in getting me out. lmao hate all you want. I’m loving life now
You've graduated. Now stop listening to Dave. He doesn't have anything to offer past the "get out of debt" phase.
@@travis1240 I actually agree with you.
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.
Except all of those have been killed in 2020. But yes generally agree haha
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.
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.
Actively managed funds vs index funds is a settled debate. Dave's completely off in that regard.
Dave is also a dude, smug, condescending asshole.
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.
whats more simple then just buying the SP500 to start with?
@@yomynameismit yup usually funds that take 5% fee for every purchase and have high expense ratios. But “return 12%”
@@yomynameismit Nothing try VOO a Vanguard SP 500 index fund low fees and the full growth of the SP 500
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.
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.
Nicely done! Now that you’ve done that it’s time to start following Jack Bogle to maximize your investment returns.
@@brianbudd6101 Pick up JL Collins " The Simple Path to Wealth". Great read. Jack Bogle is Yoda and JL Collins is Obi Wan Kenobi.
Regardless of what you believe in, GOD SPEED😉
@@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
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!"
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.
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.
@@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.
I remember he would promote someone else once you were done with paying off debt.
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?
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.
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.
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.
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.
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.
No need for an advisor. Go to bogleheads and reach everything.
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.
Oooh this is gonna rile up some folks!
Yeah Dave always gets salty when people say he's the debt guy and doesn't understand investing :P
Please do a episode on cash management plans! I've heard you mention them, but I'm not sure what exactly it is.
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.
Yes that is a great topic for a
Video for us to learn please yes
Do a video on that if lead 🙏
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!!
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.
I've been using passively managed funds for 10 years and have seen as high as 23% and as low as 8%.
I like Dave. But I think he’s wrong on index investing. Just my two cents.
He is making millions by referring people to the ELP. He is recommending to people a loaded mutual funds with a commission’s brokerage firms. He is recommending the same portfolio for everyone with a 0% bonds. His 12% returns is not realistic. Follow John Bogle investment strategy to succeed in your investment.
Massi Aggur nailed it!
It's always a good idea to "follow the money." Dave clearly has a vested interest in recommending his paid advisors. Those advisers make money by selling managed funds with fat commissions, not by selling Vanguard Index funds.
Follow Dave's advice to get out of debt and conquer the guy in the mirror... Follow Jack Bogle to build wealth.
Dave Ramsey gives one set of advice and does something completely opposite himself
No he doesn't
In a retirement account, tax from turnover ratio is a mute point. You didnt make this distinction.
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.
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.
Ramsay is a one trick pony but his one trick of debt reduction is pretty clever. His investment advice is slightly better than burying your cash in a coffee can in the backyard.
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.
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.
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!
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
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.
Here in Canada, we pay the highest mutual fund fees in the world, on average 2.5-2.7% last I checked
Holy moly, that's high
@@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
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.
Dave's advice is more focused on changing financial behaviors, it's not always easy to satisfy everyone's needs.
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.
@vincentrich - Banned But Not Forgotten yea and they're nerds like us. The average person isn't watching personal finance videos on RUclips lmao
I love Dave Ramsey! That said, Jack Bogle and Burt Malkiel have taught me well.
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.
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.
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.
@@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.
@@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.
@@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?
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.
Just found the channel and I cannot believe the almighty algorithm hasn't recommended this before.
Dave just enjoys yelling at poor people
Ravens Moon McDonald of sleat lol
😂😂😂😂
ive actually been waiting all week for this
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?
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.
This should be good!
Thanks Money Guy Show! Enjoy the videos, help to keep me focus and motivated.
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.
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.
@@mace8704 Backing up to 1977 starting with $1 invested and DCA $500 monthly, an equally weighted portfolio beats the cap-weighted S&P 500.
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!
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.
Yup even Buffet said he would buy the s&p 500 in a second.
Yet he doesn’t
@@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.
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.
@@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.
Arie Fraiser Yes and he has a massive cash position as well, I guess only time can tell.
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.
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.
The home country and the recency bias are strong with these ones
Please explain?
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.
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!
"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.
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.
Chase She can voice her opinion. And the “snowflake” term is sooo overused. You also seem petty.
@@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.
@@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.
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.
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.
We completely agree 👍
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.?
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.
Dave’s overall financial advice is absolutely fantastic but this is the one area where I think he is a little out dated.
But the tax efficiency of an index fund does not really matter if the money is in a tax advantaged account.
True, but you are still left with awesome low fees and likely performance > 80% active managers 👍
Agree with money guy show on most everything. Good job.
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!
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?
The difference between you and Dave Ramsey is you have grown and he has not. I know you won't like me saying that, because you wannt to be diplomatic. But Ramsey strikes me as someone who likes to be right more than he likes to grow. Growing requires admitting you were wrong, and some people are too proud for that. We all are, to varying degrees, but someone who has been in front of a camera for a quarter century telling people to invest like that is simply too proud.
Agreed. While he does a noble thing with trying to advocate people getting out of debt his investing knowledge seems relegated to stubbornness in the face of actual statistical and real world data. I take his advice in that regard with a grain of salt. My impression as well is that he comes across as someone unwilling to admit his mistakes. He says he has outperformed the market, but fails to go into further details exactly how he is doing this. He basically negates and brushes off any questions as to how he accomplishes doing so exactly. Interesting to watch how tactful they managed to be while reviewing his approach.
@@peterkozlowski4377 The Money Guy folks are southern gentlemen. I'm from the northwest, so it comes across to me as a bit syrupy, but I agree and have to appreciate the tact and diplomacy they intend.
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?
On Dave's podcast, a caller challenged him on the index funds, mentioning the 80% under-performance on mutual funds. His response was that he was getting better returns than the index. I think this is terrible advice when you look at the data. If 80% of people lose, why assume all of your followers will be in the 20%?
I question that he's actually beating the index. When pressed, he'll talk about how one of his funds has returned 12% since inception. If he owns one that does better, I'm sure he'd let everybody know. If his top performer is getting 12% CAGR, the other 3 types of funds only bring it down from there... especially International. Combine that with advice to people that they can take an 8% to 10% pull from their accounts in retirement and never have to touch the nest egg and it's pretty cringe-worthy. I feel sorry for people who calculate their "number" based on a 12% return and an 8% withdrawal rate only to discover the mistake when it's way too late to fix.
Maybe he has an interest in promoting his “endorsed local providers”.
briandadude Agreed! He provides a simple formula for investing, but recommends you work with an investment professional. Seems conflicting...
@@ArchStanton9 Yeah notice how he never says any of the specific funds so he's impossible to fact-check.
All of the time frames were too short.
Sarcasm?
So you’re saying there is a chance ....🙌🙌🙌🙌🙌🙌🙌🙌🙌🙌🙌
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.
Dave's investing recommendations for older people is scary. He wants them to work 2 jobs and put money in risky investments. They could be 70+ and this would be his strategy.
Uhh... are we really not going to talk about foreign tax credits? They get wasted inside of a Roth. In other words, don't invest in international unless you've maxed out your IRA/401k.
How do you know when you've won the game?
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.
@@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.
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.
@@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.
Dave Ramsey doesn't like front-load funds because they perform well; he likes them because he makes money endorsing people who sell them or recommend them. You don't need a 43-minute video to explain that.
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."
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
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.
I can respect Dave Ramsey as a salesman, I can respect his legitimite good way at explaining things in a way that will get people to do it. However, he is often purely wrong based on math, and his reach is almost always emotional, which is why people are going to dislike this comment, even though it is just factual.
He also uses religion to push his financial advice and I personally despise anyone using religion against those in the religion or to profit from them. (Not doubting his faith, simply stating he uses it to sell his brand)
I watch Dave's show regularly. It's entertaining and informative but I always zone out when he starts talking about investing in his mutual funds. He's totally off on that. If you want to risk that much just buy small caps index fund otherwise just a broad market index is your friend.
TLDR: We’re doing this video under slight duress because we don’t want an angry mob outside our building.
Does the tax efficiency even relevant for those of us who invest in Roth IRAS/Roth 401ks?
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.
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.
I have been investing for years and I am DONE with international investing. Over the long term, it ALWAYS underperforms.
In down times locally, intl is "less" down. Thats the theory. Its hedging. Thats why its a small portion of overall investment portfoloio
@@dandahl5964 Hey Dan, I fully understand that concept and for a while, I bought into it and perhaps years back that was true. However, as the world has gotten smaller and smaller and the global economy continues to grow with the U.S. being the main driving force it seems to me that Intl cannot be relied upon as a hedge anymore. Intl market relly heavily on the U.S. consumer and economy as a whole. Additionally, what with how global the economy is I do not believe the idea of going out and buying global exposure means you need to buy a company that is based somewhere outside the states. the large majority of American companies obtain a majority of their sales from international regions and therefore are you not gaining the international exposure that way while also gaining the benefit of investing in a business that is housed in a country here government (for now) has less role in regards to how the company will or will not have to conduct itself?
International is too much risk for me. I have a small part in a international fund. I have never agreed with the 25% rec from Ramsey for international
Isaac N look at VTIAX smh...
Justin Flint Thank you for proving my point Justin. This fund, and all other international funds have dramatically underperformed the Dow and S&P 500 over 1 year, 3 year, 5 year and 10 year marks. But by all means, keep “diversifying” for the sake of diversifying. I on the other hand am more interested in quality and solid returns.
So is your recommendation to just got 100% in an S&P500 ETF?
isnt most of daves money in real estate though?
This video is perfect on risk and return, definitely good to supplement with Dave's advice to get a contrasting perspective.
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
That was the perfect intro!
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.
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!
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
They are specifically demonstrating that you can get similar returns with less cost.
@@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.
@@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.
@@DrJack144 for more direct information on your 401(k) costs, you have to check their Form 404(a)(5) DOL.
@@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.
I don’t think it’s fair to say that Dave hates index funds. I’ve heard him say that he uses index funds to save for real estate purchases. I agree though Dave’s investing advice is really too simplistic. He himself, if we take him at his word, is diversifying between real estate and equity. Not to mention he is a business owner.
If your are going to critique Dave's investment advice, you should actually look at his WHOLE investment advice. Dave does NOT recommend his investment mix for non-tax protected accounts. In that instance he recommends index funds. Inside a tax-protected account, like an IRA, the tax argument does not apply at all.
Dave and index funds is new... your welcome! 😉👍
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!
Great video and great information. You've given me some things to think about. Keep up the great work!
One word to describe Ramsey? Rich.
Like always I agree with what you had to say. Keep the good stuff coming.
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.
Dave has said that he invests in the S&P 500 in his taxable account because it has low turnover, but this might not be in his book or in FPU. So I wouldn't say he hates index funds.
Yeah i agree hate is a bit strong. He pushes contacting his ELP's that do not work for him but do pay a fee to be on that list and they are supposed to follow his principles.
His ELPs have to sell mutual funds with fat commission because they are required to take small accounts.
Dave's employee count is now well over 1000
Dave Ramsy is a fool and doesn’t give a good financial advice
Dave didn't become rich by saving
I follow you and dave ...dave always says keep it simple stupid ...you guys get too complicated thats why you gavent got enough followers
Dave is for the 80% that need help with basic discipline- we are comfortable serving the 20-25% Financial Mutant space that are looking to maximize their wealth 👍
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.
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
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.
Hey guys I am watching this video and so far it's awesome. I do have to give Dave a point though. I agree with what you guys are saying. However I do watch Dave a lot as well and once in a while I have heard him mention in some situations even he will use some snp 500 funds and has. I forgot what situations those are though. I wish I could name the situation he uses that for in some investments. I love my index funds in my Roth and taxable though. I really wish in my ABLE account though that I had a good amount of options in my ABLE account I only have a few investments available in my ABLE account you guys inspired me to make when I heard about ABLE from you guys. I have DFQTX in that account even though the fees are super high on there and ABLE itself charges me a big fee as well. But it's better than not having ABLE.
He says only to use then in taxable accounts after maxing retirement. Usually where you're looking to put money for a moderate amount of time while saving up enough to buy real estate. He's vehemently against them for retirement.
@@ArchStanton9 Thanks yeah that makes sense. I don't make that much money right now but I will look for like 2 jobs or something or get 70 hours a week at one and my goal would be to max a Roth put 5k in ABLE, max a HSA if I qualifed for one but I don't and I won't for several years, and I want to put at lesat $1100 in a 401k and at least $1640 a month in a taxable account so around 48 I could stop working if I wanted to and let all of the other accusations grow. I would want the abilty to live off of only the taxable with 1.8% a year of dividends or so. If I know that's not fully maxing everything out but I would be impresssed if I could even make enough to do that much. And I would use the taxable like that so that I could live off of it early if I choose to. Also sense for the first 52k a year you take out of a taxable account on qualifed distributions and dvidiens the tax rate is 0% but for like VTI the not qualified distributions is 30% of what you take out so effecily I would end up paying taxes on 30% of the money I take out sense I would take out 52k a year or less form that account if that makes sense. If I can increasing my income enough to be able to max everything while putting at least $1640 in the taxable account then I would of course love to do that. Do you know what I mean by that plan now? Also if I lived on 1.8% or less when I get there the account would still be able to grow forevor still being invested for the long term sense I would only need 1.8% or less from that single account, and all of the other accounts could keep growing forever if that makes sense. I really want to max everything if I can but at the same time I don't think I will be able to make enough to live off of and max everything and put $1640 in a taxable account on top of all of that. I see what you mean though and how mathematically it would be smarter to max out all of the tax advantage accounts before even touching a taxable account. I just got offered a job that I would be making $23,330 a year after taxes around or so which is a lot more than I was making from my old job sense I only made like $18293 a year after taxes from my old job. And I plan on picking up another job to work more and to save and invest more. I hope in the long term I can incrase my income to be able to do that stuff while doing $1640 in the taxable account and someday maybe get my income to be enough to max out the accounts while still doing that as well.
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
Invest 20% of your income in a Roth IRA and 401k once the Roth is maxed (or first up to amount of employer match if you have one). Until you reach age 40 put it all in an S&P500 index fund with low/no fees. Once you reach 40, each year swap 3% of your equity value to bonds (assuming you're planning to retire at normal age 60-65). Investing doesn't have to be that complicated.