Math doesn’t lie.
If you have ever listened to Dave Ramsey you likely know he regularly recommends investing money in the stock market across 4 types of mutual funds, in equal 25% allocations.
Here is an example of what I am referencing.
https://www.youtube.com/embed/wxvwt4UshH4?si=Tby1txJAFb5Rlbjy
The 4 types are “Growth, growth and income, aggressive growth, and International”, all with a “10+ year track record”.
Dave usually goes on to encourage time in the market vs. timing the market, which I generally agree with. He also advises avoiding single-stock investing for most people, which is also an idea I can embrace.
There are some glaring issues however with his mutual fund allocation recommendations that I want to examine.
As it is widely reported, over 10 years, only 8.59% of actively managed funds outperformed the S&P 500.
Not only is that a very small amount of funds for the average investor to be hunting down and tracking annually, but his mix is highly subject to above-average volatility, likely holding a lot of the same companies in every fund, and “International Funds” are always a loser.
