Dave Ramsey Success Story: Debunking the Myth of 12% Returns

As a financial professional, I've had my fair share of interesting conversations with potential clients. But one encounter that stands out was when someone asked me about getting started in investing and mentioned listening to Dave Ramsey, who claims to know how to pick mutual funds that offer a 12% return. At first, I thought this was an urban legend, but after digging deeper, I realized it's actually a common claim made by the financial guru.

The conversation took an interesting turn when my potential client asked me what return he should expect from such a portfolio. As someone who advocates for low-cost index funds, I was taken aback by the question. In hindsight, I realize that I should have been prepared to address the myth of 12% returns head-on.

In a previous article, I debunked the myth of the 8% return, which is often cited as a benchmark for investment success. However, Dave Ramsey takes it a step further by promoting 12% returns, without providing any justifiable evidence or explanation. His approach is not only unrealistic but also potentially harmful to his listeners.

The issue with Dave Ramsey's advice is that he recommends loaded mutual funds to his listeners, which can lead to significant fees and commissions. This is in stark contrast to the low-cost index fund approach that I advocate for, which has been shown to be more effective and sustainable over the long term.

It's not just the investment strategy that raises concerns; it's also Dave Ramsey's condescending attitude towards financial planners who challenge his methods. In response to criticism, he lashed out at fiduciary planners, claiming that they are snobs who don't help regular people. This kind of rhetoric only serves to further erode trust in the financial services industry.

In conclusion, while Dave Ramsey may have built a successful business by promoting unrealistic investment returns, his approach is not based on sound financial principles. As financial professionals, it's our responsibility to educate ourselves and our clients about the importance of evidence-based investing and the dangers of get-rich-quick schemes. By doing so, we can help our clients achieve long-term financial success and avoid falling prey to the myth of 12% returns.

Dave ramsey success story