Dave Ramsey is Wrong

Dave Ramsay thinks we should keep investing. He has hope for the near future and does not agree with the talking heads on all the media outlets preaching doom and gloom. He has a free report titled, “The Wisdom of Great Investors” available for download, along with a video commentary. The report illustrates how to make the most of your money in a slow market. It has plenty of charts and graphs showing how media forecasts were wrong 67% of the time. The report says that those who stick with their investments over the long run, often see the highest returns. You get the picture.

While the doom and gloom are all over the media right now, it’s warranted. It really does suck for a whole lot of people. It’s not psychology, it’s real. In my humble opinion, there’s no upside in the equity markets until at least late 2010. There’s no quick fix, no surprise news that will stop the bleeding, let alone trigger a bull market. The economy has no choice but to heal slowly. Invest now, Dave Ramsey? Not me.

All my retirement funds are now parked in CDs and money market accounts. I’m actually getting positive returns in my 401(k) and IRA. Yippee! I changed my future contributions to $0 beginning April 1, so I can maximize cash to get rid of my debt as fast as possible, which is like earning a positive return. The only things I’m trading right now are SPY options, GLD, and USO on the up and down swings. That’s all there is right now…crazy ups and downs, but overall flat or lower for the year.

The report smells like it was written by investment advisers who miss collecting your fees. Sure market timing is extremely difficult, but it is possible. They spin the charts and data in favor of “set it and forget it” investing method. Hey, if you don’t have the emotional control and mental focus to time the market, then by all means, keep it on auto-pilot and worry about other things. They keep pushing the metric of average market return of xx%. Carl at BehaviorGap has a great slide show on this myth of average market returns. ”Recognize that short-term under performance is inevitable”. What?!? Just accept it? Not me. If you are comfortable watching your portfolio value shrink while your advisers still collect their fees, then go ahead and follow Dave’s recommendation. I will keep paying down my debt and waiting for my indicators to tell me it’s OK to enter back into long-term equity mode.