OT: Investing
- Thread starter CommonSenseDog
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Has any bubble in economic history ever sustained such a high risk-adjusted return for such a long period? To any economist who generally believes market signals this cries out for a fundamental explanation.https://t.co/bkrJ63MpxT pic.twitter.com/UJSjKadSqh— Nick Szabo 
(@NickSzabo4) August 29, 2019
(@NickSzabo4) August 29, 2019
Nope. The people who enter Ramsey's plan have no discipline. They learn it by following his steps and many fall off the plan because they didn't "buy in."
If someone was in massive debt then all of a sudden figured out how to be disciplined, they wouldn't call Ramsey and follow his awful plan that works for people who are ready to follow a discipline, albeit ill-advised, plan.
The plan keeps one from going into further debt. Building the wealth is a by product of living well under your means going by Ramsey's plan, but as he always says, "Paying off your home is the fastest way to build wealth," is total nonsense.
Most people move often, so your money goes much much further invested in the market or saving money by renting and investing as well.
Owning a home takes about 15-20yrs to realistically break even if you're doing the proper upkeep and using historical real estate returns. I know the market has been hot for years, but when real estate goes down, it can go down very hard and take a while to recover.
If someone was in massive debt then all of a sudden figured out how to be disciplined, they wouldn't call Ramsey and follow his awful plan that works for people who are ready to follow a discipline, albeit ill-advised, plan.
The plan keeps one from going into further debt. Building the wealth is a by product of living well under your means going by Ramsey's plan, but as he always says, "Paying off your home is the fastest way to build wealth," is total nonsense.
Most people move often, so your money goes much much further invested in the market or saving money by renting and investing as well.
Owning a home takes about 15-20yrs to realistically break even if you're doing the proper upkeep and using historical real estate returns. I know the market has been hot for years, but when real estate goes down, it can go down very hard and take a while to recover.
The old adage is save like Dave Ramsey, just don't invest like him.
It's borderline unethical to tell people they should invest only in certain asset classes that he likes, but not understanding the risk profile of the individual. He also tells people to buy A share mutual funds, which is silly. He actively preaches against fee based and fee only advisors, which is moronic. He routinely says to pick mutual funds based on the 5-10 year past performance, which is dimwitted. He says to stay away from ETFs because "they are not mutual funds." His financial advisor ELP's pay about $750 a month for his rubber stamp, but there is no oversight to insure that they do anything by the book once he shares the lead.
Dave is great for teaching basic simple savings strategies to build wealth, but his investment advice is weak. It will work for most, but over the long term you are going to be leaving hundreds of thousands of dollars on the table in most cases by paying off a mortgage early and buying 5.75% front load mutual funds.
http://www.daveramsey.com/media/pdf/daves_investment_philosophy.pdf
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I second the Bogleheads forum and wiki mentioned above.
Also, read this blog and understand this blog post: https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
When I came across this post (and accompanying graph), it all became clear for me.
You're so right on his "it's okay to pay a commission to my ELP" ********. I don't know how he's allowed to get away with it on the air waves.
Also, you can bet your *** he has a fee based adviser and he has permanent life insurance to pay for estate taxes. Likely in the form of an Irrevocable Life Insurance Trust.
Permanent life insurance most of the time is a waste of money though.
Also, you can bet your *** he has a fee based adviser and he has permanent life insurance to pay for estate taxes. Likely in the form of an Irrevocable Life Insurance Trust.
Permanent life insurance most of the time is a waste of money though.
Also don't listen to him on life insurance. ten times your income may be over insured or grossly insufficient. If you have young kids, it's probably virtually always insufficient.
Still, on net, he does much more good than harm. He understands the emotional part of money and has a program that is good at tapping into that.
ETA: reversed my harm and good earlier.
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I agree. He does more good than harm, which is why my original comment was he's going to help a lot of people who had money problems because they were completely immature and had zero discipline.
You'll get out of debt and build some wealth over time, it's just not the most efficient way to build wealth.
You'll get out of debt and build some wealth over time, it's just not the most efficient way to build wealth.
You need to very strongly consider investing in buy and hold real estate, probably large multi family properties in your case. Real estate by far out performs the stock market when you consider cash flow, asset appreciation, tax shelter, and equity growth via tenants paying down the debt. It’s not even close. You can consider some index fund investing to diversify, but I wouldn’t pay a CFP to do this for me. If you feel totally clueless in this space and want to seek advice from a CFP, make sure they are flat fee based so that they aren’t biased towards putting you into whatever investments they get kickbacks from.
I don't know that anything he says is unethical exactly, but he is pretty flippant about giving out advice without getting enough information to actually know the right advice to give, often on pretty impactful decisions to the people asking his advice. The worst thing he does is talk like 10% is a sustainable withdrawal rate from a stock portfolio. Often he does this talking to people who are retired or spending life insurance money. The worst thing I have ever heard him do was advise a lady to get out of a basically an investment giving a 6% fixed return b/c she could do better in the stock market. This was somebody that was going to be living out of the money immediately, not somebody holding on for the decade plus necessary to feel confident that the stock market would outperform a 6% guaranteed return.
First off, as has already been noted, paying off your house as fast as you can is not even what Ramsey advocates. It’s actually the last step before you are completely free and clear financially. Investing 15% for retirement comes way before that. And how long you stay in your home is also totally irrelevant to how quickly and efficiently you build equity in the home. If you make minimum payments on a 30-year note for 5 years compared to making minimum payments on a 15 year mortgage for those same 5 years, you are walking away with a lot more money when you sell if you get the 15-year mortgage, and you are paying a much higher percentage of your payments towards principal. That’s guaranteed increased money in your pocket, not dependent on the market.
Is it possible to make more money through other investment allocations and amounts than what DR recommends? Sure. But his method isn’t about getting as rich as possible. It’s about getting more than enough money to live the rest of your life comfortably while only assuming minimal risk, and building sound personal finance practices to serve as the foundation for doing that.
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If you want to get rich and retire early, what you’re doing is good. If you want to get richer and retire earlier, save 50% of your income and invest in rental properties sticking to the 1% rule.
A real estate downtown is going to hurt you whether you have a paid for house or a mortgaged house. It literally does not matter either way mathematically, but at least if you own it, you don't have to come up with the payment (assuming you got upside down).
Even if you move, you are still living somewhere. Better for it to be free.
People who aren't disciplined, don't do ANY plan. They STAY in debt.
Ramsey's plan helps people who have been brainwashed into doing certain things, like having the American dream with a 30-year mortgage, 2 cars and a yearly vacation simply because you can afford the payments each month.
Pretty much everything you said is either wrong or something that Ramsey does not teach. You certainly do not understand the behavioral aspect behind it.
Going to call BS on that, or either you aren't giving the details, like him saying she 'could' get up to 12% in "good growth stock mutual funds". Then recommending that she see an ELP advisor.
Devil is in the details.
The details were that he advised her that she should move into stocks because the 10-12% she'd get there would be better than the 6% she was going to get otherwise. It was bad. To the point that I felt like he must have gotten distracted and missed the details that he was responding to. He often is "optimistic" about returns and it maybe causes people to undersave or overspend or to underinsure, but this is one of the few times that I thought what he said was completely indefensible.
Anybody want to advise on getting into real estate investing, for someone who has zero time for maintenance work? Any good places to start other than residential rentals? I’m of the impression that one would be giving away a huge chunk of their proceeds to a mgt agency, if all they’re playing with is one or 2 properties.
If you don't want to fool with maintenance (I'm the same way) and want to scratch the real estate itch, I'd throw out Vanguard's Real Estate REIT ETF https://investor.vanguard.com/etf/profile/vnq .
Obviously you don't own actual real estate or receive monthly rents, and you don't get the tax deductions. But you also don't get calls from tenants at 2am "ayyyyyy man, the hot water heater is leakin' everywhere" and it's been Cadillac'ing at over 8% annual returns for the last 15 years, 14% over the last decade.
Obviously you don't own actual real estate or receive monthly rents, and you don't get the tax deductions. But you also don't get calls from tenants at 2am "ayyyyyy man, the hot water heater is leakin' everywhere" and it's been Cadillac'ing at over 8% annual returns for the last 15 years, 14% over the last decade.
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I've listened to Dave Ramsey for years. I've been in a financial advising role capacity for almost 10 years. I think I know what I'm talking about here.
I completely understand the behavior aspect of it. I'm shocked you think I don't based on what I said. You're literally just parroting what Dave says. I'll hear it on the car ride home today. I'm actually analyzing Ramsey's teachings and saying why his plan only works for completely undisciplined people and how his "fastest way to wealth" expressions are complete non sense. Only a blind follower would believe that. The math is on my side.
His followers aren't disciplined at first though, so they must follow his plan to a T so they don't get off track. Once they follow his rules religiously, they become brain washed and continue to invest and "build wealth" in a very inefficient manner.
The opportunity cost of following Dave's plan compared to actual wealth building techniques is massive. As someone else said, over the long term, one would lose out on potentially hundreds of thousands of dollars of invested assets following Dave Ramsey's plan to a T.
I completely understand the behavior aspect of it. I'm shocked you think I don't based on what I said. You're literally just parroting what Dave says. I'll hear it on the car ride home today. I'm actually analyzing Ramsey's teachings and saying why his plan only works for completely undisciplined people and how his "fastest way to wealth" expressions are complete non sense. Only a blind follower would believe that. The math is on my side.
His followers aren't disciplined at first though, so they must follow his plan to a T so they don't get off track. Once they follow his rules religiously, they become brain washed and continue to invest and "build wealth" in a very inefficient manner.
The opportunity cost of following Dave's plan compared to actual wealth building techniques is massive. As someone else said, over the long term, one would lose out on potentially hundreds of thousands of dollars of invested assets following Dave Ramsey's plan to a T.
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On a similar note, I played Junior PGA and high school golf in Memphis with about a hundred kids whose parent spent boatloads on their game. All were sure that their kid was the next US Amateur champ.
Fast forward a few years, and I think that about 3 got a college scholarship, and only one (David Gossett) ever sniffed the pros.
I get spending the money if you’ve got it to burn or if your kid loves the game, but anything other than that will typically turn out a pipe dream
Fast forward a few years, and I think that about 3 got a college scholarship, and only one (David Gossett) ever sniffed the pros.
I get spending the money if you’ve got it to burn or if your kid loves the game, but anything other than that will typically turn out a pipe dream
As someone who has been an advisor for over twenty year and works with clients on a fee basis, I would absolutely advise not taking any advice from a sports message board. Your own situation and goals should dictate your investment plan and set your needed expected rate of return. Investopedia.com is a great way to educate yourself on investment options. The hype for Vanguard and Fidelity is so over hyped. They are average at best with a few strong funds, much like all fund families. I’m all for someone who has the conviction to manage their own investments. Fidelity did a research report a few years ago that showed individual investors underperformed investment professional by 2-3%. You have to know when to take profits and sell losers, while not attempting to time markets. Interview 3-4 advisors and always ask these simple questions. What’s your investment process? What are we investing? What’s my expectations? How do we track my goals? Relative performance of investments? Always know the difference between time and money weighted rate of return when monitoring your accounts. Good Luck! Sorry for the long post.
Real Estate is a good long term investment. The key is to make money when you buy, in other words find the right deal. It’s a little tough to find good deals right now, but be patient. The time to buy is when the housing market is down, right now I would say save as much cash as you can and be ready to snap up property in the next down turn. I use the 1 percent rule with rentals also, easy way to do it.
It’s definitely worth having a management company deal with properties if you don’t have a lot of time. That way you don’t have to deal with 2 am phone calls or finding more renters.
It’s definitely worth having a management company deal with properties if you don’t have a lot of time. That way you don’t have to deal with 2 am phone calls or finding more renters.
If you don't want to mess with it, I suggest avoiding real estate. While it can be a great investment, you do have to take a hands on approach, at least until you learn the lay of the land and find management companies you trust, etc. No real way around that. Especially if you are going one at the time, which I would recommend.
Real estate investing is like anything else in the financial world, the rules are simple, but VERY difficult to execute when the pressure ramps up. Buy low, sell high. But are you willing to buy when everybody else is upside down trying to sell, and people are putting shotgun barrels in their mouth and the neighborhoods are filled with foreclosures? It's harder than you think.
The math technically is on your side, but again, that type of discipline exists in 1% of people, so giving advice based on that makes YOU the one who is wrong. And you are right, I am parroting Dave's plan, because it works, and he's got the results to back it up.