Finance guru Dave Ramsey gets heated argument with caller about actively managed mutual funds

Williamson wrote:

applied economics wrote:

Is this an indirect way for you to start a debate: mutual funds v. indices?

For the sake of the nation and other large nations, good thing wealthy individuals for the most part purchase mutual funds or buy equity shares of companies. If everyone who participates in financial markets bought indices, the entire system would collapse. The large investment firms, many are partners with the large commercial banks have analysts going over details of all companies in S & P 1500 plus many more companies. S & P reads & reviews research done by analysts at big banks/large investment firms, S & P pick the winners after large investment firms do all the work. Large investment firms need individuals to purchase their mutual funds. How else do we expect large investment firms to keep the lights on?

If everyone put money into index funds, market inefficiencies and arbitrage opportunities would increase, causing some of people to become active investors again. The system wouldn't collapse unless people were forced to keep all their money into index funds; it is self-correcting.

Thus if a person thinks that the point in time has come whereby there is too much money in index funds, then they should start actively investing and they will make more money that way. If they don't, they should put their money in an index fund and save on fees (and likely taxes) and let other people who think they can beat the market try to do it.

applied economics wrote:

Williamson wrote:

If everyone put money into index funds, market inefficiencies and arbitrage opportunities would increase, causing some of people to become active investors again. The system wouldn't collapse unless people were forced to keep all their money into index funds; it is self-correcting.

Thus if a person thinks that the point in time has come whereby there is too much money in index funds, then they should start actively investing and they will make more money that way. If they don't, they should put their money in an index fund and save on fees (and likely taxes) and let other people who think they can beat the market try to do it.

I have mentioned Initial Public Offerings more than once on this thread. You are responding to my statements but ignoring I.P.O.s. If you do not feel like sitting through accounting or finance courses and learning about I.P.O.s, at least go watch 1987 film, Wall Street. I.P.O.s are mentioned briefly. If everyone purchased indices, transferred 100% of their assets to Vanguard, N.Y.S.E. firms would go out of business. As I asked the poster last night trying to debate me, WHO OR WHAT ORGANIZATION WOULD DO INITIAL PUBLIC OFFERS? Please. None of you need to bother debating me without discussing who would hire the thousands of investment analysts and who will assume the risk of bringing private corporations public if everyone bought Vanguard investments or bought other S&P 500 of S&P 1500 indices?

Real Obvi wrote:

applied economics wrote:

I have mentioned Initial Public Offerings more than once on this thread. You are responding to my statements but ignoring I.P.O.s. If you do not feel like sitting through accounting or finance courses and learning about I.P.O.s, at least go watch 1987 film, Wall Street. I.P.O.s are mentioned briefly. If everyone purchased indices, transferred 100% of their assets to Vanguard, N.Y.S.E. firms would go out of business. As I asked the poster last night trying to debate me, WHO OR WHAT ORGANIZATION WOULD DO INITIAL PUBLIC OFFERS? Please. None of you need to bother debating me without discussing who would hire the thousands of investment analysts and who will assume the risk of bringing private corporations public if everyone bought Vanguard investments or bought other S&P 500 of S&P 1500 indices?

Seems like a silly thing to waste your time on. There is no chance of 100% of individuals and institutions going 100% indexed. So, just a silly straw man.

That said, the best advice for nearly everyone is to go 100% indexed.

applied economics wrote:

Tastes Like Chicken wrote:

"Does it make sense?" is the wrong question. Of course it will make sense. To become the Broker of the Day, you have to be really good at telling stories that make sense. The right question is: "Is that story true? Will it help you make me money?" Sadly, the answer to these questions is "No, managed funds don't work." Over any reasonable time period, managed funds underform index funds.

PS As the NYTimes points out, the evidence shows that some index funds do work!

https://www.businessinsider.com/personal-finance/investment-pros-cant-beat-the-stock-market-2020-7https://www.nytimes.com/2020/07/31/business/mutual-fund-winners-stocks-bonds.htmlhttps://www.nber.org/papers/w26707

Do you have over $100,000 so Broker of the Day doesn't give you The Heisman? If you don't, walk in with your siblings, all with bank statements, investment states and tax returns over the past few years. Hopefully, you all can be bundled under one mailing address to count as over $100,000 household. Proprietary mutual funds are the backbone of N.Y.S.E. firms but there are other services. [For the record, upper management do not hold a pistol to the head of financial advisors demanding advisors load up client portfolios with proprietary mutual funds.] There is a reason N.Y.S.E. firms are considered full-service. With Vanguard's toll free number, do they take care of your entire life? Vanguard and discount brokers have the majority of those with less than $100,000. Most people with over 1/2 a million are at full-service firms, not necessarily N.Y.S.E. firms. Do people necessarily get less intelligent because they have greater than 1/2 million dollars? Of course not! What did Biggie Smalls say, " More Money More Problems." The greater one's net worth, most often the more complex life issues thus the need for full service firms.

hedge fund manager wrote:

Flagpole wrote:

1) Dave Ramsey is no guru. He provides common sense investing and get-out-of-debt strategies for people who are in debt and have no good idea about how to get out of debt and take control of their money.

2) Ramsey THINKS he is a guru. He has some good ideas, some nutso hangups (not using credit cards for example), and he's a bit of a tool and a religious nut who fires people for having pre marital sex.

3) That caller is a jerk. There's no reason at all to call his show and complain about actively managed funds vs. index funds.

4) Props to Ramsey for staying calm, and actually I'm surprised that this caller got through the call screener and that Ramsey didn't hang up on him right away. Name calling right off that bat should have been reason to disconnect the call right there.

I liked the part where Dave Ramsey said it was easy to study mutual funds and pick the ones that will outperform. Ha.

danube steak wrote:

applied economics wrote:

Do you have over $100,000 so Broker of the Day doesn't give you The Heisman? If you don't, walk in with your siblings, all with bank statements, investment states and tax returns over the past few years. Hopefully, you all can be bundled under one mailing address to count as over $100,000 household. Proprietary mutual funds are the backbone of N.Y.S.E. firms but there are other services. [For the record, upper management do not hold a pistol to the head of financial advisors demanding advisors load up client portfolios with proprietary mutual funds.] There is a reason N.Y.S.E. firms are considered full-service. With Vanguard's toll free number, do they take care of your entire life? Vanguard and discount brokers have the majority of those with less than $100,000. Most people with over 1/2 a million are at full-service firms, not necessarily N.Y.S.E. firms. Do people necessarily get less intelligent because they have greater than 1/2 million dollars? Of course not! What did Biggie Smalls say, " More Money More Problems." The greater one's net worth, most often the more complex life issues thus the need for full service firms.

I have well over a $1 million and would never use a full-service firm. "Full-service" means out the kazoo expenses. Please list out the advantages that a full-service provides over being a self-investor? I used to do all kinds of research in trying to find the very best actively managed funds but after a number of years learned that a widely diverse portfolio of index funds with a smattering of individual stocks is the way to go. All of my trades are free and I generally only get Vanguard or Fidelity funds. The average annual fee on Vanguard funds is 0.09%. On actively managed funds it is closer to 1.00%. Index funds easily beat, on average, the majority of actively managed funds. Again, please tell me specific things I am missing out on not being "guided" by a full-service firm.

applied economics wrote:

danube steak wrote:

I have well over a $1 million and would never use a full-service firm. "Full-service" means out the kazoo expenses. Please list out the advantages that a full-service provides over being a self-investor? I used to do all kinds of research in trying to find the very best actively managed funds but after a number of years learned that a widely diverse portfolio of index funds with a smattering of individual stocks is the way to go. All of my trades are free and I generally only get Vanguard or Fidelity funds. The average annual fee on Vanguard funds is 0.09%. On actively managed funds it is closer to 1.00%. Index funds easily beat, on average, the majority of actively managed funds. Again, please tell me specific things I am missing out on not being "guided" by a full-service firm.

When you say over a million, do you mean over one million net worth or over a million at Vanguard &/or discount brokerage firms? If you have over one million at Vanguard &/or discount brokerage firms, it is actually foolish that you have not called and made an appointment at a full service firm or walked in with bank statements, investment statements and tax returns and asked to speak to Broker of the Day. I am not going to list all possible products and services because all full service N.Y.S.E. firms are not the same, just three. For one, I have mentioned Initial Public Offers on this thread. At full service N.Y.S.E. firms, management needs to be convinced someone is a good client. Only The Best Clients get access to Initial Public Offerings. Usually to spread the risk, firms only get so many shares of I.P.O. as a firm overall and each office only gets a fraction and branch manager decides from there. Two, bonds. Not bond mutual funds or a bond index. Many discount brokerage firms partner with a bond trading company. You will be guaranteed awful service if you attempt to purchase bonds through discount broker and discount brokerage commission chart does not apply to bond trades. Third. Life insurance. Many individuals obtain property & casualty and life insurance from same company. That is okay. It is also okay to have life insurance bundled at investment firm. Full service advisors are also life insurance men & women. You need to walk in to a full service firm and talk to someone.

danube steak wrote:

applied economics wrote:

When you say over a million, do you mean over one million net worth or over a million at Vanguard &/or discount brokerage firms? If you have over one million at Vanguard &/or discount brokerage firms, it is actually foolish that you have not called and made an appointment at a full service firm or walked in with bank statements, investment statements and tax returns and asked to speak to Broker of the Day. I am not going to list all possible products and services because all full service N.Y.S.E. firms are not the same, just three. For one, I have mentioned Initial Public Offers on this thread. At full service N.Y.S.E. firms, management needs to be convinced someone is a good client. Only The Best Clients get access to Initial Public Offerings. Usually to spread the risk, firms only get so many shares of I.P.O. as a firm overall and each office only gets a fraction and branch manager decides from there. Two, bonds. Not bond mutual funds or a bond index. Many discount brokerage firms partner with a bond trading company. You will be guaranteed awful service if you attempt to purchase bonds through discount broker and discount brokerage commission chart does not apply to bond trades. Third. Life insurance. Many individuals obtain property & casualty and life insurance from same company. That is okay. It is also okay to have life insurance bundled at investment firm. Full service advisors are also life insurance men & women. You need to walk in to a full service firm and talk to someone.

You are reading a spiel that you have before you. I asked what specific advantages I have using a full-service firm. Put down your notes and tell me directly. It is laughable what you have said.

applied economics wrote:

Real Obvi wrote:

Seems like a silly thing to waste your time on. There is no chance of 100% of individuals and institutions going 100% indexed. So, just a silly straw man.

That said, the best advice for nearly everyone is to go 100% indexed.

As I stated to the poster last night, walk into a N.Y.S.E. firm with recent bank statements, investment statements and tax returns for the past view years, personal and business. Ask for Broker of the Day and see if it makes sense for you. If a person or organization have never worked for a N.Y.S.E. firm or have never been a client at a N.Y.S.E. firm, you have no idea if it is or is not better for you as an individual or your organization to be a client at a N.Y.S.E. firm. You are very uninformed to state nearly everyone should buy indices.