Mutual Funds VS Market Index Funds
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- เผยแพร่เมื่อ 19 ม.ค. 2015
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I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.
@BrendaAskew That's actually quite impressive, I could use some Info on your FA, I am looking to make a change on my finances this year as well
@BrendaAskew I will give this a look, thanks a bunch for sharing.
Rather of relying on penny stocks, I wish to diversify my assets by investing in ETFs/index funds/mutual funds and stocks of corporations with stable cash flows. I received $400k from the selling of my property. What should I do?
Remember that investing in the market carries risks, and it’s important to do your own research and consult with a financial advisor before making any investment decisions.
With the help of an investment advisor, I was able to diversify my $800K portfolio across multiple markets, and in just a few months, I was able to earn over $950K in net profit from high dividend yielding stocks, ETFs, and mutual funds
Accurate asset allocation is crucial, and some individuals use hedging strategies or allocate part of their portfOlio to defensive assets for market downturns. Expert guidance is vital for achieving this. This approach has helped me stay finan-cially secure for over five years, yielding nearly $1 million in returns on invest-ments.
I've been looking to get one, but have been kind of relaxed about it. Could you recommend your advis0r? I'll be happy to use some help.
’Vivian Louise Dehoff’ is the licensed advisor I use. Just search the name. You’d find necessary details to work with to set up an appointment.
I started investing because I liked the extra money from stock dividends. The key, in my opinion, is to make enough money through both investing and dividends, so you can live off the dividends without selling anything. This way, you might pass on this financial advantage to your kids. I've put more than $600K into dividend stocks over the years, and I'm still buying more, planning to keep going until prices drop more.
I wholeheartedly concur, which is why I appreciate giving an investment coach the power of decision-making. Given their specialised expertise and education, as well as the fact that each and every one of their skills is centred on harnessing risk for its asymmetrical potential and controlling it as a buffer against certain unfavorable developments, it is practically impossible for them to underperform. I have made over 1.5 million dollars working with an investment coach for more than two years.
Fantastic! That sounds wonderful. How can I get in touch with your financial supervisor?
SONYA LEE MITCHELL is the manager I use. Just research the name. You'd find necessary details to set up an appointment.
thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
The only reason to distinguish between dividends and capital returns is for tax.
Tax aside, the total returns matter - you can create dividends by selling shares
Except index funds usually have no commission, the lowest fees, and 80% of managed funds underperform the market, even before taking into account the higher average fees. Dave is right in saying that savings rate is the most important factor in saving for retirement, but it provides no benefit to pay a 5.75% commission, and a higher average annual fee to boot. Virtually everyone would be better off with an index fund.
I am reading Common Sense Mutual Funds currently and just started A Walk Down Wallstreet. Both discuss this as a core value with investing for the longterm.
This might be the first comment thread in youtube history where everyone is on the same side
I’m not.
Fees are not a matter of liberal/conservative it’s a matter of cutting into your overall portfolio return.
Alexander very true. He rants too much for my liking against liberals
Yeah that was rather left field and unnecessary.
correct!! Dave is wrong on this, he spinned it... Fees are outrageously high still in 2020..
It doesn't matter, the point hes making is that you get zero return on zero dollars invested.
Just do something. The 401k is the easiest way for regular people to invest. Do it. After you are out of debt, THEN look at other ways to invest.
@@zachhawkins5005 sure do something but not all choices are the same index funds are clearly the better one
Follow Dave Ramsey's advice to get out of debt. Follow John Bogle's advice when you have money to invest.
Most financial planner like Dave's advice for getting out of debt is designed for the 'mental win' or crossing off a debt account. They say to ignore interest rates and focus on low balance.
Mathematically, you want to target high interest rates first, regardless of balance. Otherwise, you pay more in the long term. Which is bad advice, in my book.
Amen! RIP St. Jack!
@@tomwallen7271 mathematically you are correct and a disciplined person can pull this off; those following Ramsey's advice generally aren't the lost disciplined and the psychological win from completely eliminating one debt is valuable if not as cost effective.
Tom Wallen my wife and I paid off about 100k in total debt (mostly from school) In about 1.5 years or less after we got serious. We did the “avalanche” but have since determined that any difference would have been immaterial. My point is, if you do what he says there isn’t a “long term” to consider
@@tomwallen7271 the low interest rate and high dollar amount are generally correlated so in practice it normally doesnt matter (1K credit card will have higher interest than a 10K personal loan and the personal loan will have higher interest than the 100K mortgage).
Agree with you if someone for whatever reason owes more on their credit card than on their mortgage. And even then is debatable, since the credit card is bad debt while the mortgage allows you to build equity.
I am a big fan of index funds and I don't think Dave should downplay the importance of low fees.
Dave and his ELP friends profit from selling LOAD mutual funds.
Yep and there are lower fee mutual funds too that exist...kind of unjustified to pay 6% front loaded fee and 1-2% a year for average performance.
@@alrocky absolutely nailed it.
His point is people are so worried about the fees... Yet they're not puting any money into the account in the first place LOL.
It's like these young kids with 500 bucks in a robinhood account. Pretending to be hedge fund managers lol.
My index fund outperforms my managed accounts.
Listen to Dave for debt management. For all other investing advice, look elsewhere.
EXACTLY.💥
yup
he crossed his hands when Ramsey heard index, then soon into talking crossed his entire arms around his body. He's being defensive and protective of information on index funds. gate keeper
@@saavyfilms8994 in fairness he almost always has his arms crossed when talking to a caller.
Hes worth 200 Million...I'll listen to Dave
Simple put your money in an index fund and don't touch it. Over the long term it will out perform most actively managed funds. Plus the fees are minuscule compared to mutual funds.
Exactly. Index funds all the way. Dump your money in it and forget it until approaching retirement, then move it over to Target retirement; lower risk.
Absolutely agree however you will need to get more involved closer to the intended retirement and thus say 10 years before your first intended withdrawal, begin to move towards a balance of index funds (to maintain growth potential) and secure bonds or even an annuity if your risk appetite is low. But for the majority of your investment period, low fee etf is the best bet
Target retirement is lower risk than index fund?
what about for the short term? 5 years or less? Are index funds good for that as well?
No. Target retirement funds are simply asset balanced funds designed to evolve as you approach retirement.
For example, when you're young, you want to be almost entirety in equity, as that outperforms in the long run. But as you near retirement, you need to start taking money out, so you are much more risk averse, so you'll want to be more heavily invested in bonds and other lower risk investments.
Index funds are about as 'low risk' as you can get, but they do carry the risk of the market. Target Retirement accounts generally also invest in index funds, just with an evolving asset allocation as the fund nears your 'target date'.
10-20% of mutual funds typically outperform their respective index in any given year, but nearly 0% outperform consistently for many consecutive years.
Exactly. If you're retiring in 25+ years, stick to the index and reap the rewards. Being greedy about a few percentages won't matter if you don't contribute a lot of money to the funds anyways.
@@starmorpheus why are you trying to minimize the effect “a few percentages” has?
I listen to Tony Robbins, and Warren Buffett. Invest in only Index funds. Low fees.
100% agree man!
True - but keep away from the ones that are 2x time or 3x times. Danger.
Index funds all the way. Mutual funds are less profitable.
James Marquis He just recently changed his mind about “trying to beat” the S&P.
@James Marquis Yes, however he is one of the godfathers of value investing which not many have the know how or patience for. He said he would suggest the 500 Index
My godfather told me decades ago, for retirement funds, go with a low expense fee Vanguard index fund, add to it every month, don't ever touch it, forget about it until you get closer to retirement. Still true in 2018.
Has it helped you
Absolutely!
For getting out of debt, Dave offers solid advice. For Investing Warren Buffett advises Index funds. I think I will go with Warren.
*The fee is actually very important. If you start with a million dollars and get 10% a year. Over 60 years, at 0.04% fee, you'll have 298 million, with a 1% fee, you'll have 176 million, that's a 122 million dollar difference because of that 1% in fees.*
You have $1million to invest for 60 years? ... you were a millionaire at age 5? age 30?
zybard01 you’re missing the point.
@Jorel Boston liar
Why one would atribute a 1% for a 10% roi fund is insane. The most expensive funds in my firm are 0.8% max and the roi on those are 16-24% over 3-5 years. Higher risk, higher returns, better active managers and a higher fee.
@@gandhithewise359 sometimes they dont win
Are you serious? I don't understand how you dismiss every single academic study since the 30's. Every single expert (who is not a fund manager) agrees that index funds are simply better, including Warren Buffet.
+texas 27 Dave is well-versed. He just chooses to ignore certain facts--probably because it benefits him to do so.
No mutual fund is going to outperform the index on a risk adjusted basis net of fees. However, it can still make sense to invest in a 401k if your employer matches a portion of your contributions because that could balance the higher fees. Also, past performance of a mutual fund is a poor indication of how well it will perform in the future (mean reversion and fund managers changing companies).
I think that Dave Ramsey often takes positions that are economically unsound but might actually be more beneficial for psychological reasons. His snowball debt strategy isn't the best strategy for minimizing interest payments, but it gives people the motivation to keep paying down their debt. Same thing with a mutual fund. If it's set up through your work and you have defined contributions, then it might be easier for someone to invest than if they were to manage the funds themselves.
Just my 2 cents.
Wasn't this part of what he said? The number one reason people don't have retirement funds is they don't save. Fees and returns are a distant second and third. Even mediocre investing gets a better return than zero investing, over the course of decades. Therefore, anything to get them saving is better than nothing.
I agree. Index funds generally carry much lower fees compared to "managed" funds and, therefore, will almost always outperform managed funds with higher fees over time. I invest exclusively in Vanguard index funds in my Roth IRA and have done extremely well. My 403b, on the other hand, consists primarily of managed funds with high fees that sap my returns. This kind of nonsense is why I generally don't watch Ramsey's videos. His conservative, religious worldview ruins much of his advice.
Some of Tony Robbins' books are BS too.
As usual, roll the numbers and think for yourself.
It really made no sense to me when he said ''It doesn't matter whether I'm right or wrong, whether the market goes up and down. I'm good regardless''. People are really losing a sh*t ton of money out here. I personally have been buying stocks since the beginning of the year and yet nothing's changed, but I've been reading articles of people still in the same market pulling off over 350k in just a couple months. Its tough out here!
Sometimes, the strategies to stay on constant green in a downturn markets are quite rigorous for the regular-Joe. Matter of fact, they are most successfully carried out by experts who have had a great deal of skillset/knowledge of the market. Maybe you should hire one.
@@sherryie2 Agreed! I first contacted a Financial Analyst because these days, it's easy to buy into trending stocks, but the task is knowing when to sell or keep. That's where my manager comes in, to help me with entry and exit points in the industries I'm engaged in. I’m currently 60% up in profits just in 5months with my initial capital of $160k
@@kurttSchuster Please can you leave the info on how to reach your investment advisor here? I’m in dire need for one.
@@Aziz__0 Sure. NICOLE DESIREE SIMON, a well-known person in her field, is my advisor. I got to know her through my wife. It's my wife that has her number, but you could further investigate her credentials and contact her yourself.
@@kurttSchuster Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
Hey Dave, have Warren Buffet on your show and you be quiet and have him answer this question
I am trying to avoid making any new buys at this point in other not to get sucked into a bear market trap.It's tough making money in stocks when institutional investors are the driving force behind the selling.. although I read an article of people that grossed profits up to $150k during this crash, what are the best stocks to buy now or put on a watchlist?
You’re right! The current market might give opportunities to maximize profit within a short term, but in order to execute such strategy , you must be a skilled practitioner.
Yes. It is very easy to buy in on trending stocks but the problem is knowing when to sell or hold, which is why a coach is important. I've been in touch with one for about a year now and although I was initially skeptical about it, I will say I've made more progress within a year generating 6figure profit
How can one find a verifiable financial planner? I would not mind looking up the professional that helped you. I will be retiring in two years and I might need some management on my much larger portfolio. Don't want to take any chances.
Sonya Lee Mitchell is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment..
Thank you so much for your helpful tip! I was able to verify the person and book a call session with her. She seems very proficient and I'm really grateful for your pointers
Dave hosts a radio show, Bogle revolutionized an industry. I think I'll listen to him.
Funny thing is that he's gotten rich entirely from being a folksy celebrity with a radio show, as a salesman of products, etc., not because of any "financial" things he's done. His biggest accomplishment in doing "financial" stuff was to go bankrupt. Taking advice from Ramsey on how to invest is fundamentally no different from taking advice from, say, Tom Cruise or Cal Ripken, both of whom also happen to be rich celebrities. I.e., the advice may or may not turn out to be any good, but there's no reason to assume it will be just because a guy is good at selling stuff/ being a celebrity. Anyone have a guess as to whether Warren Buffett takes asset allocation advice from Dave Ramsey?
phillytiger warren buffet even admits that he has not been outperforming the S&P500 and recommends it for most investors.
Because investing in the Total US Stock Market Index Fund is not flashy advice.
If everyone did that, the financial advice industry would shrink by 80% overnight!
asterisk911 spot on!!
wise words
Dave did not answer the question like was said, side stepped the question.
Investing 500K with a average mutual fund with fees in a average life span of a 401k mutual fund will reduce your money by one third=350k.Invest in index funds i.e. compounding with few expectations they almost always beat the normal managed mutual funds because of fees over a long haul.
um... is he serious? fees does effect your return... wth is he talking about
Sure. 5% return with a 2% fee is the same as a 5% return with as 0.015% fee! Especially over 30 years!!!
Yup. I've only just begun doing my own investing outside of my 401K, and today I just opened up an account with 3 ETF's (using those because they are cheap to start with) I have expense ratio's of .04%, .08%, and .11% for the 3 ETF's I've started with. (total us stock market, total international market EX-us, and a nice high dividend ETF) All bought commission free in an account with no annual fee or maintenance expense. Bond FUNDS I think are junk though, I just buy treasuries and brokered CD's of various terms and HOLD them. (with either 0 or a $1 dollar commission) (EDIT I mean a 2nd account.......the other account I have I'm going to keep, but buying another companies ETF's or index funds will have commissions, so now I get a choice of ETF's/funds from 2 companies and always get to buy with no fee :)
DigitalHaze65536 Bond funds > treasures & definitely CDs
He is right that if a fund outperforms the market (by more the the fees) its worth the fees. His wrong assumption is that mutual funds can outperform the market. They can't over the long run.
This is not Dave'g best moment... FEES take away from your bottom line..
The majority of people are better off with an index fund. PERIOD. They perform better than most mutual funds and are a friendly-approach option to investing.
Dave is utterly wrong about downplaying the fees. Even a 2% fees adds up to millions over decades
Over 30 years, assuming a 7% adjusted for inflation return (similar to stocks over the long run), that 2% fee would erode approximately 2/3 of your investment returns, all while likely being in a fund that is more than 80% likely to underperform the S&P 500 index. I have seen the heartbreak this has caused family members and they wish they had known better during their investing years. Dave is so wealthy his returns don’t really affect his standard of living, but a middle class retiree will have real tears to shed over Dave’s asinine investing advice. I have seen this first hand and it is devastating.
Index funds have aged well. ETFs too.
Mutual Funds is the best way to make Fund Managers rich, not you. Index all day everyday!
Look at the fee's! Most mutual funds are 10-20x more expensive and they under perform over the long term against a index 500.
So true! My index fund's expense ratio is .18% all other mutual funds that are actively managed funds are like 1.2 and above! It's crazy it's been 8 months and i'm up 12 percent.
Index funds are good. But all of my mutual funds outperform index funds even after expenses/fees.
Can you invest in both ? I just want my money to sit and grow until I dont want to work anymore
@@queenred.6159 Of course you can! We can mix and match as much as we want and that's awesome. For instance I have 3 index funds; a large cap blend, a med cap blend and small cap blend that together cover the entire stock market. However there is 1 active "growth" not blend nor value fund that has crushed the sp500 for like 15 years. The fund has a .7 expense ratio which is fine for being such a high flier. So of course I put some money into that as well
best is individual stock picking, you can get anywhere from 15% - 25% per year if you know what you are doing (this is what all the best investors are doing, including Warren Buffett), second best is SP500 if you don't care about stocks or don't want to study the companies (just want the profits, although they are smaller) and I would never use mutual funds, those are ripoff
paying higher fees makes you conservative and not wanting to pay high fees makes you a liberal - where did that rant come from? The general ideas here are good (live below your means, avoid debt, invest money) the specific investment advice falls a bit short.
Roy Jones agreed. Makes no since
🕵️♀️kick backs. shhhh
He's got a point. People are more willing to accept a 2% annual fee that they don't notice rather than just pay up the bulk of the fees up front. This is the same logic that makes liberals praise taxes that conservatives deem theft.
Don't forget that Buffet is a Democrat and said rich people don't pay their part of taxes. I think that he knows what is spoken about.
yeah that made no sense... conservatives would prefer 0 taxes and 0 fees lol.
Dave is great getting out of debt not great at giving investment advice.
What was wrong with his advice?
his advice was accurate and I'm a financial analyst
@@HeyEveryoneHi "Finance analyst" LOL, specify what you agree with?
@@billvigus3719 because the 12% if fake AF. Just remember that he pushing mutual funds because he sells mutual funds or have contracts with people who sell mutual funds.
@@billvigus3719 go with low cost index funds
Biased, and avoiding the question because of the bias. Index funds are the best, cheapest, and safest way to invest for non-experts.
I would love to see uncle dave show us his mutual funds that he said out performed index funds.
@@cancel.lgbtq.6892 Well, actually there ARE such mutual funds (see Bridgewater etc.), but essentially unreachable for regular investors who don't have many, many millions to invest. So for the rest of us, index funds it is!
@@drsusannakemper are you doctor from Russia?
Where do i go to get an index fund?? I am totally new to all of this
I thought the same. 😉
That was a good questions. Too bad Dave didn’t answer it.
Typical Dave
He did. He said look at the managed mutual funds in your 401K plan, if you don't like the managed-fund options, do index funds. What didn't he answer?
Those fees compound in the same way your returned interest does. There are plenty of high performing index funds (above the average) that have fees around .04%. When you’re paying .80% or more you are getting crushed.
And who’s pockets does that 2/3 of your retirement go to? Yep, right to the top.
more worried about spewing his political bias unfortunately
Beats around the bush all the time
According to the intelligent investor (same book Warren Buffet used), these are red flags for any financial advisor:
"Focus on performance, not fee's"
"We can beat the market"
"Trust me"
Sound familiar? It should, especially since Dave Ramsey is paid to promote mutual funds.
@James Marquis he did a million dollar bet that mutual fund owners could not beat a index fund, and won
Does he? From who? He doesn't recommend specific mutual funds as far as I've seen.
paulsan2112 he’s so dumb he’s gotten tens of thousands of people out of debt and to millionaire status. Number one bit of advice I’ve learned is to not listen to broke people like you about money.
@@daytonwintle6051 your an idiot. Warren Buffet > Dave Ramsey.
Cbreezy if it’s so easy to be like warren buffet why doesn’t everybody do it? Dave has more than enough money to do just about anything he wants. Best part is, just about ANYBODY can get to be a millionaire with Dave’s plan.
He receives money from ELPs (endorsed local providers). He can't say that 80 percent of mutual funds under perform the indexes. If he did, he would lose a lot of $ in endorsements. He gives great advice in general. This is bad advice.
+amafid It's good advice for him. He's trying to sell ELPs.
Do you seriously think the dollars he gains from potential business gained by an ELP is worth tarnishing his image to his followers?
How about this: he has an opinion. It's different than yours. Take it, leave it, shove it where the sun don't shine. I don't think he cares what you do with it one way or the other. But he's built an entire empire on the trustworthiness of his opinions on financial matters. It's highly unlikely he's going to risk that just for a few coppers unguaranteed kickback from an ELP.
+D rB index funds beat 80 % of mutual funds. If he said that the ELPs would drop him like a hot potato.
Dave does good work ,he is stubborn ie EGO will not admit this part of his program he is just wrong .
@@thetravellingjanitor728 What about the remaining 20%?
Conflict of Interest. Old Dave earns a fee from his ELP’s. The ELP’s earn higher fees on managed funds and even more so on Load funds. No load, low fee index funds are the best way to go in long run.
Dave Ramsey's insights have been a game-changer for me! His practical approach to financial management has empowered me to take control of my money and work towards a debt-free life. The Total Money Makeover is my go-to guide, and I appreciate how he breaks down complex concepts into easy-to-follow steps.
I completely understand the impact of Dave Ramsey's wisdom on personal finance-it's transformative. While I've found success in investing, especially with the guidance of my advisor, *Jenny Pamogas Canaya,* I still appreciate the solid foundation Ramsey provides. His principles align with the core values of financial discipline. It's inspiring to see how various approaches, like Ramsey's and strategic investment planning with Jenny's expertise, can complement each other
She is highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. You can check her out online. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
Bots
Scam bots unite! ✊️
biased. index fund all day
rosepumpkin Not so much biased as incompetent. Several times the host clearly understand the question or answers a completely different one. He also clearly doesn’t understand the math and seems to mostly want to go on political rants. He is likely right about the behavioral potential for allowing more payroll deductions for retirement though, blind squirrel and all.
@@ericmcdermott2 his political rants throw me off. I just want financial advice.
@@shonalovely2143
You cannot separate the direction of politics and finances. You cannot make sound investment decision without having central philosophy.
@paulsan2112
Tell me would you have made a profit investing in the S&P 500 for the decade of the 1970s. Yes or no.
@@bighands69 Dumas
Suddenly Dave Ramsey knows more than Warren Buffett
Dave didn't mention the magic formula for selecting the mutual funds that will outperform the market. Many many many mutual funds I looked at under-perform the indexes and charge fees significantly higher(3% vs .18%). My investment strategy is to hold several different index funds (domestic stocks, international developed and emerging markets, and bonds) and some CDs.
Like Dave said - just get started and save/invest. Take the mystery and magic out of it and select index funds. Set it and forget it (don't try to buy low / sell high). I did that and woke up one day with $1.5 million.
yeah those fees over long period of time can make a huge difference. that 1% fee compounded over 30 years can make your end result 50% less than it could have been
How much money should I save to start investing?
@@BlackGoddess143 have a 3-6 month emergency fund first. $5,000-10,000? Maybe more depending what your expenses are.
Yeah, I’m 25 and just became debt free I’ve saved the $5k. $10k would be a better amount to save. I just feel like I kinda miss out not trying to invest now.
Just clunk out your calculator and take 5% per year off of that / or add and look at difference.
I like how Dave dodged the question for 5 minutes😂
Exactly, math doesn’t lie.
He has to. He makes a killing on referring people to his endorsed folks who charge the fees.
Caller: I have heard the fees are higher with what you recommend than with other funds.
Dave: *Something incoherent about liberals* and *keep buying my high-fee mutual funds*
Spot on!
100%! You can never trust any of these guys
Glad to see mot of the people in these comments realize that Dave is not looking out for our best interest regarding this topic. He is incentivized to send us toward mutual funds.
Which fund
At 7:00 Dave explains how his SVPs charge a 5.75% one-time fee with a 0.5% yearly expense ratio. Then says they'll earn 4% more per year. Really? I don't think so. I love that Dave helps people get out of debt, understand credit cards, car loans, leases, etc. I completely ignore him for investment advice. That makes me a little bit sad. It would be great if Dave were to teach what his friend a JL Collins teaches in "The Simple Path to Wealth".
They are not friends.
Exactly!
Folks please listen to JACK BOGLE !!! For the BEST ADVICE !!!
To be honest, Jack just pushes hard so you invest on his company, Vangaurd
@@matthewrozumialski8196 wrong
Index funds over mutual funds anyday my fees are less then 0.10 won't get that in a mutual fund
I would agree with Dave Ramsey about this, but then we would both be wrong.
Like others have commented, Dave is great at helping people with basic financial advice, especially getting out of debt and the importance of saving. I have noticed over time that he has somewhat changed his advise on index funds. A few years ago he sounded like he was dead set against index funds / passive investing. In more recent times he has started to say that they are "OK", and I found another recorded broadcast where he said he personally owns some index funds because he likes their stability. For the normal investor who does not have the time to study and compare mutual funds..... or does not want to pay fees or a financial advisor to do that form them.... Index funds are certainly the way to go.
How do you study and compare mutual funds? Unless you have a time machine, you can't.
If you read "On Persistence in Mutual Fund Performance", a study by Mark Carhart published in the journal of Finance, you'll read that virtually all mutual funds that overperform the market in a 5 year period go on to underperform the market in the next 5 year period. I mean, there's even plenty of mutual funds that have done great over a long period of time, only for that supposed skill to run out at a certain time.
You can pick mutual funds that have beaten the index in the past. But most likely, those funds will end up underperforming the index at some point in the future. You have a shot at outperforming, so if you feel like taking a gamble is something you want to do, by all means go ahead. You might get lucky and pick the one mutual fund that doesn't end up drastically underperforming the market. But you probably won't.
Index funds are not just for beginner investors. They're really the best way to invest for virtually all investors.
Dave is full of it! Fees matter a lot. He is looking out for his own interest. He wants everyone to invest in his selected firm's active managed funds so that he keeps receiving a cut. Plus I do not listen to him for his politics. I wish he would stop sharing them. Also, why didn't he repay the folks he flushed by declaring bankruptcy. He is very rich now. Why no repayment? After he filed for bankruptcy he now implies it's a sin for anyone else to do it.
I do wonder why he doesn’t recommend bankruptcy for some of these people who are in too deep and don’t make enough income to get out of debt in a reasonable amount of time. But he did pay back the personal debts he accrued in his bankruptcy, just not the bank debt. He’s mentioned that before.
I would never touch a mutual fund
The PBS special the caller Is talking about is called the retirement gamble. Episode is on TH-cam.
I am a huge fan of Dave. I am also confident in saying that Dave understands debt management and real estate better than most people. However, he clearly doesn't understand the stock market well enough to give advice and should lead people to Buffett or Lynch in that space.
Dave totally dodged the fees part of a question LOL
100 percent
Lost respect for this guy when he attempted to equate opposition to high fees as an attack on the capitalist way. There is extensive research that shows clearly that in the long run fund performance is inversely proportional to the fund expensive ratio. In other words the mutual fund industry is charging investors these high fees to essentially under perform the market i.e. deliver a sub-standard and mediocre product. They thrive on the financial ignorance of the average investor to get rich.
madan jampani exactly
madan jampani, what do you propose is a better investment instrument?
Tom Tom index funds are great
+Tom, NO LOAD mutual funds. Preferably low expense ratio 0.25% or lower. Broad base index funds like a Total US Stock Market Index fund or S&P 500 Index fund. Stay away from high expense ratios, sales loads and the like.
There is really no good reason for you to buy a LOAD mutual fund. There is a good reason for a SALESMAN to want you to buy a LOAD mutual fund.
Fire Panda Party Penguin thanks!
Dave be getting them sweet sweet kickbacks from Mutual fund manager.
Dave is simply incentivized to send listeners to his network of brokers that sell managed funds
Correct.
I’d say it’s also because the people Dave has helped likely need someone to help walk them through investing and keeping an eye on their portfolios
@@darkma1ice That's true but Dave made me question my whole investing strategy for a minute just because I trust him. If you are putting your money in a mutual fund it is much riskier than putting it in an index. Index funds just require you set and forget. I've put money in outperforming active funds only for them to backtrack years later and ultimately close down.
An index fund is just as easy to invest in via payroll deduction as a managed fund. Fidelity now has index funds that have 0 expenses. An actively managed fund is almost never going to consistently beat the index by more than its expense ratio over a long time period.
The vast majority of mutual funds do not outperform the market, but the high fees of the ones that do, erode most (if not all) of your advantage. Dave is great, but I never agreed with this particular stance.
The PBS show on mutual fund fees was exaggerated and used "worst case" examples of bad 401ks instead of average 401ks. However, Dave is also exaggerating. There's a big relationship between fees and rate of return. High fee funds typically get lower returns.
mysticaltyger2009 99% of low fee index funds beat the mutual fund industry over 30 years. It's not even debatable. Read john bogles books.
what foo? you work for a bank you foo?
The documentary that the caller is probably talking about is 'The Retirement Gamble'. It's recommended viewing. An important lesson is that investors really need to look carefully at the fees their paying in mutual funds or you risk getting ripped off.
Dave definitely knows enough to know everything wrong with this. High MERs hurt compounding, which is the entire power of investing. Seems to have a deliberate blind spot for mutual funds for some reason.
Yes. The reason Dave has a blind spot is because he gets paid by those active fund promoters.
Completely disagree with Dave Ramsey here. The fees do add up in mutual funds, and most ETFS outperform mutual funds with lower expense ratio fees. Dave Ramsey, you're being bias here. Index funds are ultimately better, not to mention they count as long-term capital gains. Mutual funds cost more, earn less, and aren't tax efficient.
Amen 🙏🏻
I think you mean index rather than ETF. ETF and mutual fund refer to how a fund is structured. An ETF and mutual fund tracking the same index are essentially identical for practical purposes.
@@alankoslowski9473 you’re right, but let’s be clear here, etfs are cheaper and do the same thing as mutual funds. And I emphasize cheaper because those expense ratios matter a lot. Also, Dave never talks about “indexes” he just throws out the term “mutual fund”. There are mutual funds that follow indexes but a lot don’t. And Dave doesn’t invest in index specific ones he chooses ones where Wall Street gurus chose the “best stocks”
I really respect Dave Ramsey and have benefited so much because of his teachings. However, when it comes to this topic, I can't help but wonder how unbiased given that he has a network of investing professionals he endorses.
letting politics blind his judgement
@@samsonizy yes he didn’t like the source ,PBS so he turned into politics
Sorry Dave Ramsey, but you are 100% totally wrong about this subject. You should only invest in low-cost index funds. Nobody can predict the future so I avoid actively managed funds like the plague.
And fees doesn't matter? Loaded funds okay? Crazy!
@@LaJon28 I didn't say loaded funds were okay. That's what Dave Ramsey recommends on his show all the time. I said I avoid them and only buy index funds
Demolition Dude I meant it is crazy for Dave Ramsay to say buying loaded funds is ‘okay’.
If no one can predict the future, then why do you think a low cost index fund is your saving grace? You do know that index funds can dip into the negative, right?
@@MikeThePike316 Dave is a hypocrite. He doesn't recommend people do day trading or by individual stocks yet these actively managed mutual funds that he recommends are doing exactly the same thing that he advises against. Actively managed mutual fund pick and chooses which companies they think are going to perform good in the long run. They are trying to predict the future by doing that. You do not try to beat the market. You just try to go along with it, which is why everyone should just invest in index funds. Only 4% of actively managed mutual funds are able to beat the index within any ten year time frame.
I would love to see Dave debate his positions with someone other than an uninformed caller that he cuts off in themiddle of the call and goes on a rant.
This is just deceptive.
+1
Dave knows better then to take the call
He is a scared puppet.
That was a bad explanation between mutual fund and index fund investing.
Not really. I'm not sure what many of you are reading, however Dave gave sound information.
No, he didn't give sound information, unfortunately. He deliberately omits the effect that fees and expenses have on the TRUE returns an investor would gain at the end of the day (I'd love to see how many of his "beats the market" mutual funds actually net you better gains when you factor in fee/expenses. My guess is not many...if any). I like Dave on many issues, but he just seems a bit disingenuous on this issue. It stinks of bias.
Agreed. Even according to Standard & Poor's, more than 90% of large, mid, and small cap mutual funds will fail to beat the S&P 500. Warren Buffet, who Ramsey loves to quote, has stated that the best investment for the average American is an S&P 500 index. Obviously as retirement nears the mix of bonds will have to be reallocated to reduce market risk, but when you're young and looking to build wealth over a 20 or 30 year time horizon, it's hard to find a better deal. With Vanguard Admiral shares in an S&P 500 index, the expense ratio is .04%. That's $40 a year on a $100K investment and the trades are free. Pretty tough to beat that one.
no, that's an entirely accurate description of index funds.
you don't seem to understand that index funds ARE a type of mutual fund.
He can’t because his genius brain can’t beat index fund and Instead dances around the topic and picks a bad mutual fund, his ideas work for poor who want to get out of debt but not who understands passive indexing
Warren Buffet's best investment advice is to buy Index Funds like Vanguards because they beat 80% of actively managed mutual funds and have the lowest fees. He even said after his passing his Berkshire fund will be invested mostly in the S&P 500 fund like Vanguards and some bond index funds..
Dave trying to make an argument for his smartvester pros. Index funds are far better than mutual funds.
Agree! At first I was confused by his answer since my research shows Index funds to be so much better. Now I get it
@@evenbiggeral5089 Mutual funds have like 300x larger fees. Over time, that is the difference in tens of thousands of dollars.
Index funds are a type of mutual fund, they just have less active management, more passive
@@RobVI yes
The issue with mutual funds is that you are paying fees regardless of the fund’s performance. Also, just because it may have outperformed, does not mean it will continue to
Warren buffet says index funds. Sorry Dave! I’m gonna go with warrens advice every time.
Dave is not saying don't do index funds.
Dave pretended the question was "Are fees what stop people from investing". 😂😂😂
anyone notice he never clearly answers the question?
yep.
Yes, he gave a lot of information and threw in some ideological opining, but that is not the same as simply answering the caller's question.
Well, he did say there are plenty that out perform. But that also makes it sound like most mutual funds don't.
Just past the 6 min mark he says compare against the index. Odds are the index wins. Otherwise he was ducking and dodging.
@@seanfatzinger Well he flat out said most mutual funds do not outperform the S&P 500 as a whole but some do
I'm still investing hard into FSKAX. Dave's got good info, but, there's nothing wrong with investing in Index Funds.
Dave Ramsay is great at behavior problems financially. I don't think he's very good at in depth investment questions like this.
He taught and gave great general advice on this question. What did he miss? He explained what an index fund is. He explained what a managed fund is. He talked about all the fees. He explained what a fund manger is trying to do and what an index fund is trying to do. What more do you want him to do? Pick the guy's funds for him? He told him to look at the managed mutual funds within his 401K, if they are good funds, go with them. If they aren't, go with index funds. All solid advice.
Correct. Nice high level info which is useful but he didn't even mention importance of diversification nor asymmetrical risks taking.
Agreed. I'm following the Baby Steps except I'm going to invest in index funds.
Thank you, you explained the calculation for expense ratio and return very well
He pulled some magical return number out of his ass and subtracted two numbers. And you're falling for this?
Only 4% of the mutual funds are outperforming the market [index funds].. Back to you Dave..
Ps. Past performance does not guarantee the future
I love the comments in this thread as they are 100 % correct. 86% of active fund managers fail to beat the market. Furthermore, mutual funds do not have to quote net rate of return but instead quote the gross rate of return. The net rates of return rarely beat the market. However, dave is 100 percent right that lack of contributions is the main reason why people fail.
Mutual fund published returns do not include load fees, but all published returns account for expense ratios. No?
95% of actively managed mutual funds underperform the S&P 500 index (Vanguard is a cost efficient). Also, they have low turnover of 3% vs. 30-100% for actively managed funds which means lower taxes. You also get automatic diversification.
Very true!
"95% of actively managed mutual funds underperform the S&P 500 index"
How many of those funds were designed to beat the S&P 500? I wouldn't expect bond funds or blended funds like target date funds to beat an index composed of 100%.
That seems like a deceptive statistic.
*Awesome!!! your potential seems limitless.* I have always been fascinated by investing, but without any knowledge on what’s best to invest in, I find it difficult to begin. *I ask politely, what’s the best sector to invest in?*
I will suggest you get a financial advisor who will help you build strategic plans that will meet your financial goals in a short period of time. I got help and also built a passive income working with a Financial Planner (Hamilton Phoebe Zoe). I’m happy with this decision, as it was the best for my finances.
@@winifredmorris8507 I’m interested and need to start now. If you don't mind how can I get in touch with your consultant?
@@rudriguezbauer7520 I work with an Investment Analyst *(Hamilton Phoebe Zoe).* Quickly do an internet research with her full names as mentioned where you can easily get in touch and as well write her.
It’s best to start early to plan your future by making important financial decisions which can help you build passive income and make you live comfortably. I realized that the secret to becoming rich isn’t having multiple jobs but multiple sources of income.
@@winifredmorris8507 Thanks, Got it 👍
I love investing, watching my money work for me makes me hungrier. I always talk to my co-workers of all ages about maximizing their 401K.
This is where he gets lost and doesn't know what he is talking about. It's math that fees hurt not a liberal or political statement. Duhhhhhh
Less than 10% of actively managed funds beat the index fund. Good luck finding the winners.
I have to disagree..I am also so surprised how he makes fees a liberal thing
Nice to see that he is more interested in protecting his elps rather than his listeners who need to learn a thing or two.
And he calls himself a consumer advocate 😂😂
What is 'elps?'
@@hardassteel endorsed local provider.
I like Dave, but he is flat out wrong here. He's either ignorant of the facts (there is a MOUNTAIN of research proving that index funds outperform mutual funds), or he's intentionally lying for some reason.
Either way, it's disappointing.
Dave says that NO ONE should have credit cards because 96% of people do not pay on time and are subject to fees and interest expenses.......however, you should invest with his ELP buddies who WILL NOT outperform the market 96% of the time and you will lose money due to fees and expenses. I say don't lose money to credit card companies OR ELPs looking to make a profit off you. Dave in not an investor, he's a marketer that has made money off products he sells to the most vulnerable people. He is a businessman, not an investor. Ray Dalio, Warren Buffet, listen to people like this when it comes to investing.
In the end, Dave Ramsey is right: ACTUALLY saving and investing, consistently, year after year, throughout your earning years, is the MOST important factor in success and wealth. If you are not investing at all, or not investing much (as a percentage of your income), and/or not saving and investing consistently, it does not matter what the fees are. Everything else is secondary and tertiary to the PRIMARY purpose.
Agreed with its better to save and invest managed or index, but the question was “index or managed?” And he didn’t answer it
That being said if person A and person B have the same income and they both save and one invest in mutual funds and the other in index funds, the index fund investor will most likely make substantially more money.
@@Vinnymanvinny1 PROBABLY NOT, IF THEY FOLLOW DAVE RAMSEY'S RECOMMENDED MUTUAL FUNDS (e.g., growth, aggressive growth, international), WHICH CONSISTENTLY outperform THE MARKET-INDEX. A better long-term rate of return is much more important than fees.
This.
yes but to those of us that are investing consistently and with enough money, he should then explain that index funds are the cheapest way to go. He won't because he makes money from the agents.
"The last thing I look at is expenses." Smh!
Yeah, the logic is idiotic. Look at historic returns only...smh. Dave must go to the racetrack and bet on the horse numbers that won *yesterday*
Does anybody know the actual tickers of the 4 funds Dave Ramsey recommends? He always mentions Growth, Growth and Income, Aggressive Growth and International. But what are the funds' names or tickers?
They are basically, large, medium, small cap and international. Dave is using morning stars terminology for these.
@@dynamicwellness33 there are dozens of "small cap" funds in morningstar. I'm looking for specific individual fund tickers that he (or his EPL's) would recommend in each category
this guy usually makes sense, expect here where he ignores evidence probably to gain a kick back from his mutual fund endorsers. this is the video that caused me to unsubscribe and stop recommending him
Me too. I stopped promoting him for the very same reason. Advocating active mutual funds is not in the actual best interest of Dave’s customers / listeners.
I am all for Index investing. Was gonna type a comment disagreeing with Dave Ramsey. But his reply is just pure magic. You have to invest first before you analyze the Return and Fees. Thats wisdom right there.
So why didn’t Dave Ramsey bet against Warren Buffett?
Dave needs to read John Bogle's books from Vanguard and you can see he is not confidant talking about the stock market. He is not only weak but this advice is absolutely wrong. Love Dave but this is not his forte
He has 100% read it. He just has his own agenda to promote.
He’s someone’s pony at some mutual fund office. Indexes are far better. Vanguard, Vanguard, Vanguard!!! Buy the index and let it ride long term. You will be happy.
Not to mention no stress and no tyranny of compounding cost.
Thank you for the lesson.
@@hthought exactly right, spot on
What? No serious person in his right mind would give this as an advise. I started to binge-watch his channel recently, but this ends with this video.
Nounooon LoL
It's sound advice up until the investment part
Great Question. Thanks for the info Dave.
I’m debating between opening a Schwab index or Vanguard index. Schwab has lower fees, but is there anything else other than fees that should contribute to my decision making process?
He is selling snake oil. Dave had biased the answer to favor loaded funds. There are plenty of no load funds out there under 0.5%. who in the world buys 2% fee funds. No one!
Dave that was an outright lie by deseption.
he lied to this caller and decided him. disgusting.
Why would he lie about it? What does he gain personally from misleading people? It's not like he's selling your fund. You go buy it yourself wherever and from whomever you choose. He doesn't even favor loaded funds as you say. He simply stated that YOU need to do the math and understand that a loaded fund is NOT always more expensive than an unloaded one.
+D rB He does sell loaded funds. Ever hear him talk about those investment professionals that he endorses? Guess what they sell, loaded funds with commissions. He is selling books and get out of debt programs that are cookie cutter and does not cater to the individual. His all growth stock invest plan is behind the times, yet he refuses to change his model, there are much better ways to invest than all growth mutual funds.
What Dave and his affiliates suffer from is a refusal to change their methods and update for fear of criticism. Cookie cutter is an awful way to help people manage their investments.
He refuses to give specifics of his investments and funds when he is asked numerous times, put your money where your mouth is.
Perfect example is, his stand on gold. He continues to refuse it's value. Historically it is not a great investment, but today it is one of the best investments available.
I have made thousands of dollars using cash back credit cards. I have never paid a balance, yet he refuses to use them as a tool.
He is stubborn and his ego discredits the intelligence of the individual to make better decisions. He doesn't have to agree with me, but he doesn't have to skew the facts to make it sound favorable to his argument either, this is the deception I am speaking about. He simply can't admit when he is wrong, Pride is his weakness.
+D rB You have drank the cool aid my friend. Everything you have said is straight from the mouth of Ramsey and excuses, you have called into the trap and can't look beyond what he is telling you.
I have made my point, it is up to others to make their own decision. it is useless to argue with someone with such a closed mind.
+D rb: -- Generally speaking there is really no good reason for many or most of us to even consider "investing" in a LOADed mutual fund. You lose ~5.75 percent of your money right off the top and that money goes into the salesman's pocket. Thus your investment is already in the hole that ~5.75 percent. Also you are not buying any extra expertise because you surrendered that ~5.75 percent. LOAD mutual funds usually have 12b-1 fees and or high expense ratio to boot. LOAD are more often not losers right off the bat as well as in the long run.
The party who benefits most from the SALE of a LOAD mutual fund is the SALESMAN.
Getting a LOAD mutual fund is like going to a junk yard to look for a car for your teenage daughter.
So, why not B-shares (deferred sales charge)? You don't pay the commission up front, so the entire invested amount is immediately put to work. The expense ratio is adjusted to compensate, but still remains well below the no-load ratio for the same fund.
Let me guess, this guy makes money on the side by selling mutual funds through an 'acolyte network' of some sort.
Your suspicions are correct. That's his Endorsed Local Provider program.
Your typical load mutual fund will typically have a higher expense ratio than your typical no load fund. There may be exceptions, but not too many.
Rate of return is hugely impacted by fees. 401k fees or 2% and up per year. Index is best from my research.
Buffett recommends index funds. Not sure why Dave against them. Maybe because of his agent network.
Just look at the top holding in the best mutual funds and then manually create a portfolio of stocks and ETFs that mirror these holdings. Now you have the same positions with reduced cost.
A $1000.00 invested over 10 years at 1.5% fee is $150.00 with no growth. Do the math! That means that if you have 1 million to invest that would be 150,000.00 with no growth over 10 years. So if you go out say 20,30,40,or even longer that 1 million over 30 years would be $450,000.00 with no growth. Fees will eat your total return alive! Look for fees under .05-.5%: Vanguard is the leader, followed by Black Rock and Scwabb.
So I got into the 401k game about 3 years ago as my only retirement investment at this point since I have a lot of student loans. Putting 5% + 4% employer match = 9% of income in a target date fund. The expense ratio is 0.74%. I see vanguard index funds also offered through my company at expense ratio ranges in 0.04% to 0.11%. Wondering if it makes sense to mix up 401k with a couple of index funds and still keeping target date fund, but lower allocation? Thanks.
8.40min to 8.50min, Dave says managed funds costs 1% but outperform by 4% lol
lies
He's crazy