Is Dave Crazy?

Dave Ramsey is a great personal money management expert. He is not, however, in any way, shape or form, a qualified investment professional.

My students often say to me, “Dave Ramsey only takes us so far. He has helped us get out of debt and get our financial house in order, but we don’t know where to go from there.” They want to go beyond his advice of, “buying a good mutual fund,” whatever that means.

I’ve read all of Dave’s books, listened to his radio show, taught his Financial Peace University course and spent a fair amount of time on his website. I have come to the conclusion that his investment advice is lacking.

For starters, he suggests that every visitor to his website invest in stock mutual funds. How can he recommend that every American invest their hard-earned money in stock funds? What about suitability? What about investor goals, risk tolerance and time horizons? Prescribing without proper diagnosis is malpractice. A cookie cutter, one-size-fits-all investment strategy is indeed malpractice.

Get this ― Dave doesn’t recommend investing in individual stocks, but instead, he wants you to put all of your investable assets in stock funds. Make any sense to you? Me either.

Berkshire Hathaway, run by Warren Buffet, is larger and more successful than just about every mutual fund on the planet. But because it’s an individual stock, you shouldn’t buy it, according to Dave. I’m still scratching my head on that weird advice.

Instead, Mr. Ramsey says you should buy a front-end loaded mutual fund with a 4 - 5% sales charge that is offered through his “endorsed local providers,” which, by the way, have to pay Dave $549 per month to be endorsed by him. To say that is a giant conflict of interest would be a gross understatement.

That’s not all. Dave doesn’t recommend that you buy bonds, real estate investment trusts or annuities. How in the world does he know what is and what isn’t appropriate for you?

I could go on and on, but I won’t. To learn more about Dave Ramsey’s inappropriate investment philosophy, you’ll need to read Chapter 10, “Ramsey vs. Reality,”  of my new book, How to Be a Great Investor. It is available on GreatInvestor.org.

After reading my critique on Dave’s investment advice, you will be convinced he is not qualified to give such advice.

Be careful to whom you listen.

Thanks, and Blessings!

Richard