This was not the post I was going to write this week. But after seeing this IG Post from Dave Ramsey, I kinda lost it! So whatever I was going to write about will just have to wait until next week. Today, we talk meat and bones, babies and bath water (you’ll get it soon enough.
Before we begin, A few words!
Dave Ramsey played a key role in me taking my finances as seriously as I do
Dave Ramsey’s Baby Steps are very influential in so many people’s lives. Mine included. It was how I paid off my debt
Just because I disagree with Dave Ramsey on investing, does not mean that everything he says is wrong. (More on this at the end)
But Let’s Begin
A while back, I made a podcast called “My 10 Money Rules” (You should listen. It was a great episode!). All 10 Rules are below:
Rule #8 is “Not All Advice is Good Advice and Not All Good Advice is Good For ME”
However, a key aspect of this rule is KNOWING YOURSELF. I have written about this before here. I will not rehash what I wrote in that post. This post by Dave is just the epitome of the idea I was trying to get across. The advice he gives on investing is relatively good. If we were back in the 1980s!
A key tenant of his entire investing framework is to invest through a Financial Advisor from his Endorsed Local Providers (ELP). Where the ELP can do all the hard investing work for you (for a nice high fee). Because information is so hard to come by and investing is so complicated.
Except, we live in 2021 and there is a little something called the INTERNET. Where we can literally spend 15 minutes to figure out How to Invest. Plus we have online providers like Vanguard, Fidelity, Charles Schwab, etc. To help us set up our investing accounts in literal minutes. Rather than the process of setting up multiple interviews with all kinds of people, who are all trying to sell you some kind of product that you probably do not need.
Combine that with his idea that Actively Managed Mutual Funds are The Way, The Truth, and The Light. And you shall never get better returns in your investments elsewhere. Except, when you do a little bit of research you realize that most (about 90%) active mutual fund managers regularly underperform the S&P 500 and basically any other index. Plus combine that with the fact that the fees these Mutual Funds charge, people are losing Hundreds of Thousands of DOLLARS when they invest in these products.
There are other things he is against that just simply make no sense like investing in ETFs or Fractional Shares (Micro-Investing). But that will make this post way too long, you can listen to me rant about it on the reaction video I made to the post here.
The main takeaway from his post was a reminder for me to continue to learn and grow. Once upon a time, I was a Dave Stan! Everything he said I agreed because he had helped me do something that I could not do. Which was to pay off my debt. He also helped me to understand the very basic concepts of finances.
However, his ideologies began to impede rather than help me grow. The very same ideas that had helped me to get out of debt were now impeding me from building wealth. From his 20% down payment on your first home to his insistence that everyone should have a Financial Advisor.
It was all leading me backwards not forwards.
It took me taking the time to do a bit of research, to understand all the options available to me. To see all the different paths that I could take. To see that ONE SIZE DOES NOT FIT ALL!
Dave’s advice is not wrong (but it is bad). It is just one way of doing things. It just is not my way and I believe should not be the way of anyone (especially if you around my age). But it comes down to each person and what they want.
A Financial Advisor is not bad. However, they are not your investing solution. Investing is very simple. Buy a low-cost index fund, set up an automatic investing plan. You are done. A Financial Advisor is to help you with all the specific situations that we may face as our financial situation gets more complicated.
Mutual Funds are not bad. High Expense Fees Mutual Funds ARE HORRIBLE!
Not everyone should invest in Single Stocks. Because it takes time and effort to do it properly. But some people can be great at doing and everyone should at least have one company, they care about and want to learn more about.
Cryptocurrency is not for everyone. But it is for some of us. I cannot listen to an old man about a new age technology. Just like listening to any adult about iPods or iPhones or Online Gaming or Facebook or Fill in the blank breaking edge technology that made no sense initially.
His take on ETFs and Fractional Shares is just HORRIBLE ADVICE
Point is, spend the time to learn and educate yourself. So you actually have an idea of what advice to accept and what advice to throw away. Like they say
Or my personal favorite
Thank you for reading.🙏🏾
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God bless Each and Everyone of y’all
✌🏾
-Kelechi