High growth mutual funds that Dave Ramsey recommends (invest, market, rich)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I'm simply saying that I should be able to substitute being debt free for having bonds, and come out ahead. Put another way, I'll lend money to myself and get a better rate on both ends...
SURE CAN . if I buy that co-op next year I will be paying cash out of our bond money
A 10% swing to the downside might cost you 200k, but a 10% swing to the upside that you aren't in would also cost you 200k. My point is time horizon is an important factor. ....
Time-horizon is of course a factor, but psychologically foregoing a potential $200K gain hurts vastly less than sustaining a $200K loss. Money not-made simply means not grabbing a potential windfall. Money lost feels like being a victim of crime.
Another factor is ratio of assets to income. Consider two investors, both with $2M portfolios. Suppose that a downturn comes, costing both $200K. One earns $300K annually, but the other earns only $100K. For the one with $300K annual income, that $200K loss "feels" less onerous. For the one with only $100K annual income, the loss is emotionally far more substantial.
Dave Ramsey recommends load funds by American Funds so he can line his pockets. I don't think the expense ratio for AIVSX is high. The "A" share class only charges .59%. That's well below average. And some people can get even cheaper share classes of this fund in their 401ks. The R5 share class charges .35% and the R6 share class charges only .30%. The sales load is what makes me gag. Practically no one should ever pay one. But if you can get either the R5 or R6 share classes of this fund in your 401k, it would be a reasonable choice.
I stand by my opinion that there is not one good reason to buy AIVSX and pay a 5.75% load. There are thousands of funds that perform equal or better without a load.
Time-horizon is of course a factor, but psychologically foregoing a potential $200K gain hurts vastly less than sustaining a $200K loss. Money not-made simply means not grabbing a potential windfall. Money lost feels like being a victim of crime.
Another factor is ratio of assets to income. Consider two investors, both with $2M portfolios. Suppose that a downturn comes, costing both $200K. One earns $300K annually, but the other earns only $100K. For the one with $300K annual income, that $200K loss "feels" less onerous. For the one with only $100K annual income, the loss is emotionally far more substantial.
I am not denying psychology plays a part. I am a psychologist. What you are referring to is prospect theory. However, money not made can be almost as damaging as money lost over time. If I save for 30 years and only put money in a savings account instead of investing in the equities market because psychologically losing money would be to difficult for me. I have likely lost more money than I would have if I was in the market do to inflation eating away the value of my cash.
Psychology vs. Rationality. Being aware of the psychological impact a loss can have is one of the most important aspects of being able to act rationally if/when it does happen.
I stand by my opinion that there is not one good reason to buy AIVSX and pay a 5.75% load. There are thousands of funds that perform equal or better without a load.
No disagreements from me. But AIVSX is available in a lot of 401k plans without the load. So, depending on the other choices, it may be a decent option. I would never buy it, or any other fund, if I had to pay a load. Some people can get cheaper share classes of this fund in their 401Ks as well (RICFX, RICGX). People who can get these share classes (no load for these share classes) in their 401Ks should seriously consider it (assuming administrative fees in their plan are low or nil).
Last edited by mysticaltyger; 04-18-2015 at 02:56 PM..
It has been suggested that he is referring to the Investment Company of America (AIVSX). It claims an annual return of 12.13% since its inception in 1934:
index results are very different than investor results.
investors have different buy in points , different rebalance points , many add money, others dollar cost average in , all have different tax structuring , different portfolio's that work as a team and a whole host of differences that give most investors nothing in common with an index.
an investor can miss on one point and make it up on another. it is almost silly to compare what you do and equate it to a static index unless you never add money , never sell , never rebalance ..
don't forget you can pound a car salesman for the lowest price , then pound the finance guy for the best terms and 3 years later you trade it in wholesale.
in the mean time grandma pays a higher price , has higher expenses for financing but sells the car privately. grandma wins..
in the real world no one gets everything perfect. you may do better in one aspect but you give it back somewhere else.
Last edited by mathjak107; 04-20-2015 at 02:22 PM..
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
