Ramsey exposed

[feh]

Article that echoes what is often stated here: if you want to get out of debt, Ramsey's advice is useful. Go elsewhere for investing advice.

http://money.cnn.com/2013/10/01/pf/dave-ramsey.moneymag/index.html?iid=HP_LN

[bjl584]

It's fairly common knowledge (at least here on the forum) that his advice for getting out of debt gets an "A" while his advice for investing gets a "D" or a "C-" at best.

I wonder how much his average listener understands that though? How many of his 7million plus listeners are blindly ready and willing to follow his advice to the letter? That's a scary thought.

[MatthewC]

Yeah, I didn't agree with his numbers on investing either. In his book, Total Money Makeover, he is quoting some number like 11.8% or something around there for the S&P's return over the previous 80 years. However, this is the arithmetic return (adding up all the returns and then dividing them by the years), not the geometric return (calculated as one would calculate compound interest). As a result, the reality of the S&P is actually 9.78% approximately, for those years listed, a whole 2% drop from his claim on investing returns.

Dave Ramsey is good for debt and I recommend him for people who want to get out of debt.

But he's not good at investing, although the 12% he told investors out is easily, easily doable if you have a good system for stocks (which I do). But you're not going to get a long-term return of near 12% investing in the S&P 500.

[JoeP]

Every time I hear Dave Ramsey say "growth stock mutual fund" I cringe.

[TheKayla]

Yeah, and Dave Ramsey's advice for debt I wouldn't call an A. It's an A for those in dire straights, but for those who have plenty to put towards their debt, it's very backwards. I would hope that he would clarify on his site that his debt snowball is not the right choice for everyone, but the perfect choice for some.

[MatthewC]

The debt snowball is only not for those who are more logical. Most people, not being that logical, need the emotional boost that comes from seeing that they have a lower number of debts to be paid off. People who are able to keep track of the actual debt level and be motivated by that would be better served by paying off the highest % APR debt first.

[jIM_Ohio]

Yeah, I didn't agree with his numbers on investing either. In his book, Total Money Makeover, he is quoting some number like 11.8% or something around there for the S&P's return over the previous 80 years. However, this is the arithmetic return (adding up all the returns and then dividing them by the years), not the geometric return (calculated as one would calculate compound interest). As a result, the reality of the S&P is actually 9.78% approximately, for those years listed, a whole 2% drop from his claim on investing returns.

Dave Ramsey is good for debt and I recommend him for people who want to get out of debt.

But he's not good at investing, although the 12% he told investors out is easily, easily doable if you have a good system for stocks (which I do). But you're not going to get a long-term return of near 12% investing in the S&P 500.

Regardless of either return number, any discussion of returns with discussion of the volatility needed to accept those returns is misguided advice.

In response to another poster, my experience is people will listen to a trusted person out of loyalty even if the advice is bad.

That is why doing business with family and friends is difficult.