And now to consult the panel of experts in the comment section.

You miss 100% of the shots you don’t take. -Wayne Gretzky -Michael Scott -Michael Jordan -Dave Ramsey

How can you admit it isn't 12% compounded and promptly plug 12% into a compound interest formula?

Dave is completely not responding to criticism of his quoted average rate of return. He's making a straw man argument.

Vanguard's Wellington Fund (Investor Class) has done 8.31% since 07/01/1929 Founded in 1929, Wellington Fund is Vanguard’s oldest mutual fund and the nation’s oldest balanced fund. It offers exposure to stocks (about two-thirds of the portfolio) and bonds (one-third). Another key attribute is broad diversification-the fund invests in about 100 stocks and 500 bonds across all economic sectors. This is important because one or two holdings should not have a sizeable impact on the fund. Investors with a long-term time horizon who want growth and are willing to accept stock market volatility may wish to consider this as a core holding in their portfolio.

You will be lucky to get 8%, but Dave is right about having to do something. The most important thing is to act. 8% > 0%

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12% is a fraud. If Dave is so confident, he should donate $1 million to charity if his pick doesn't result in 12% in 10 years. He won't do it because he knows 12% requires amazing luck among the very best active fund managers who could underperform in the future. CalPERS won't guarantee more than 7.5% despite having hundreds of the best investment managers because it is so hard get more performance without super high risk.

man I'm gonna be rich, just gotta pay off this debt. time to BUST IT

Using arithmetic mean annual return instead of compounded annual return (CAGR) is misleading. A gain of 100% one year and a loss of 50% the next gives an arithmetic mean annual return of 25% for that period, but CAGR shows your real return - 0%.

If anyone says you can get more than 10% run for the hills. Notice Dave never names the mutual funds which get 12%.

Don't just invest, first, learn. Learn about the stock market, mutual funds, IRA, etc. Then discuss your financial goals with a certified financial advisor. Don't give your money to anybody to invest, investigate who they are first. Be careful, there are lots of scams out there. Invest gradually and pay attention to your accounts. But most importantly, learn how to manage money wisely, learn how to save and live modestly beneath your wage. If you don't develop those saving habits now, when you get your retirement, you might just lose it all.

Dave saying 12% is hurting his reputation in some nerdy circles. If he has the data to back this number, he should present it.

Heck, I'll take 4%!!!! I still have more money than others because I invest some freaking money into it! Lol

12% non-compounded average means you can lose. Lose 50% one year then get 74% the next is an average of 12%, but you would still be down 26% with an average return of 12%. Basically what he says is meaningless if it isn't compounded.

Well, nothing like a little real life example to compare to Ramsey's rosy projections. I'm a federal employee and been contributing to my retirement in the Thrift Savings Plan for 20 years. I've always been 100% invested in the stock market in the C and then later S and I funds. The C fund is a S&P 500 index fund, the S a Wilshire 4500 index fund and the I an international index fund. All have rock bottom expenses and of course, grow tax free.I haven't tried to time the market, just kept contributing every two weeks, rain or shine.I've contributed a total of $267K. My balance now is around $550K. Plug that into your calculators and see how it compares to the 12% claims. (hint, not very well) As best I can tell, I'm at about a 6.5% annual return. The TSP website won't tell you your rate of return for more than 12 months and I can't find a good calculator where I can plug in bi-weekly investments over 20 years. So, over two decades, a fairly long time period, and only 6.5% return, ON THE SAME INVESTMENT (S&P 500) RAMSEY SAYS 12% IS A REASONABLE EXPECTED RATE OF RETURN.I wish he was right, but my account says otherwise.

Average return of S&P 500 with dividends since 2000 is 6.88%. Dave needs to change his 12% figure

Wake up people.. it’s called assets under management, the only people that get rich is wall street. Fees, Fees, Fees!

this whole rant is ridiculous. he spends 5 min saying "ah, if you dont agree that the market gets 12%, you're a nerd blah blah". he can keep saying it all he wants, the market does not average 12%.

I would love to hear about your mutual fund that has averaged over 12% returns over 50 years. Even the Magellan fund can't say that.

Dave explains clearly on the radio and in his books how he came up with the 12% uncompounded figure (arithmetic average annual total returns of the S & P 500 since 1926; the compounded figure, assuming dividends are reinvested, however is about 9.9%). Here is the problem (I have taught his Financial Peace University class at our church twice): In all of the examples that I have seen or heard him use, he uses the compounded figure of 12% and does not make it clear that it is not the same as his 12% uncompounded figure. This means that most of his examples of future value are inflated by a factor of almost 100%! Here is an example from his FPU DVD's: "The average car payment in North America today is $492 over 63 months." "Let's take $492 and invest it instead of putting it in a car payment from age 30 to age 70. It's 5.8 million dollars!" (He used 12% compounded.) Using 9.9% compounded, the answer should be 3.0 million dollars. This is at best, misleading. Since Dave is not a CFP® he is not subject to the CFP® Ethics Standard 2.1.

'"You miss 100% of the shots you don't take" - Wayne Gretzky' - Michael Scott

Started at 28yo, wish i started earlier, but it's still OK to start now =)

By quoting the real, compounded interest rate of 7.5%, people are actually encuraged to invest MORE not less. If someone wants a million dollars in 40 years, if you tell them they're going to get 12%, they're only going to save $85 a month but they really need to be saving $330.

Ths is the definition of a person with a chip on his shoulder

You know how Dave is wrong about this? He has to go on tangents about "people getting a 0% return" and "poor college professors", instead of realizing that the S&P 500 has actually averaged 8% since its inception.

god he dances around this question so much.

Lots of folks quoting funds that have earned 12%. Problem is a diverse portfolio would have investments including global stocks some cash equivalents that didn't earn 12% so most folks average return would be less than 12%.

" "You miss 100% of the shots you don't take" -Michael Jordan" -Dave Ramsey

hi just want to say your great, I love the way you share info. I share all your videos with my 22 and 23 year old.

Anytime someone begins name calling their opposition "nerds", I choose the side of their opponents. It is basically saying the opposition is smarter as if that's an insult.

0:28 Dave, NO. The S&P 500 is NOT the top 500 stocks on the New York Stock Exchange. You're simply factually incorrect. Some members of the S&P 500 are NOT traded on the NYSE. You're simply incorrect factually.

The overall point is a good one (long-term investors SHOULD invest in the stock market), but on the numbers Dave is pretty far off (and oddly angry/defensive). From 1928 to June 2014 (when this video was published) the average S&P return including dividends was about 9.7%. The difference between 10% & 12% may not seem like much but anyone who does planning knows that over long (20+ year) periods that difference is HUGE. I always like to err on the conservative side and use 8-9%, but 10% is not unrealistic. 12% is just too optimistic for my taste.

Just stumbled across this video. So much wrong with it. Average returns aren't the important part. Compounding is what matters.

Sorry Dave is wrong on this one. Since inception, the S&P 500 index, which is the best US Market measurement we have, has returned 9.8% on average, not 12%. That said, you can still become a millionaire at that return rate if you invest diligently for your whole life.

What are the names of the funds you invest in Dave Ramsey?

as a pension actuary, dont use as 12% an assumption. Find me a single well funded public pension plan (publicly available information) using a long term assumption over 10% and ill buy you dinner. However, if you invest 15% youll be fine.

People are insane... FXAIX has averaged 14.8% since 1988 and PREIX around 13.5%. 12% is estimating the mid-range, not even optimistic.

Average returns are disingenuous. Annualized all the way

Nice rant. But I came here to find out how to find the best mutual funds. Another video about this topic please

Not to invest does not get you zero rate of return when you include the effect of inflation! You are actually losing purchasing power 2-4% per YEAR. So really your rate of return by not investing is NEGATIVE 2-4%.

There are funds that have averaged an annual return of 16.74%. VGHCX is one of them.

love the way you put things Dave. I am by no means a finance guy, but you make it so easy to understand. thank you so very much sir

yeah you are absolutely right, putting in money is paramount but you aint gonna get 12% more like 7-8%

This 12% stuff is not a realistic average, however 8% is certainly an easy find. I completely agree with his assertion that the process of saving at any rate is better than not saving at all. The 12% return average would be awesome but I'll have to settle for the best I can find which is no where near 12%.

So... where do you make 12%?

Wow. That is wrong on so many levels! The market doesn't average 12% There is a difference between mean, geometric mean and average annualized performance. It also depends on when you have entered the market you may actually lose if you take it out in a down period. No one knows if your retirement will start at the end of a bull market or at the end of a bear market. 12% is not realistic and is misleading

People: 12% isn't realistic Dave: I own multiple 12%> mutual funds

I have a number of funds but it's pretty rare for me to get 12%. There have been a few quarters that have exceeded that but most of mine average 3 to 4 percent.

i do agree about the 0% thing, do nothing ,see thing.

A good average return over the years is 6-8 % without touching the principle. You will have a lot of money at retirement if you can do that.

One thing you can count on is for Dave to deflect any question on a steady 12% return with the ‘Gotta invest’ schtick.

i still invest, but i don't think the avg return is gonna be 12% annually. please show math to prove me wrong.

I’m surprised Dave doesn’t have an issue with dishonesty. Well I guess nobody is perfect. You can’t just call people nerds when your math is wrong.

Did Dave really just take a Wayne Gretzky quote and say Michael Jordan

I love your advice Dave and all that you do but I gotta say that was a quote from Wayne Gretzky

Dave Ramsey is a millionaire. Warren Buffet is a billionaire. Index funds all the way.

I don't think people who talk 8% returns are telling people not to invest, they are just being conservative so people plan for what's average rather than what's possible. I expect 8% returns and I still invest aggressively.

When I can't win an argument based on facts, I get mad and call my opposition "freaking morons" and then go on the offensive and point out all of their faults!

Go to Fidelity.com and you can do a quick search to find several Fidelity mutual funds that have an average 12% or greater over the last 10 years as of 9/22/16. Here a few examples: FSCSX: 1yr - 21.54; 3yr - 17.19; 5yr - 19.68; 10yr - 14.13 FSMEX: 1yr - 22.95; 3yr - 23.70; 5yr - 20.13; 10yr - 13.61 FSCHX: 1yr - 18.84; 3yr - 8.78; 5yr - 12.91; 10yr - 12.75 The bigger point: if you don't invest your money, your return on investment will be 0.

So.... the answer to the original question?

Regarding that part where the S&P is "only gaining 6%" ...sounds like that calculation leaves out the dividends. If you reinvest the dividends, your rate of return will factor higher.

It’s actually more like 10%, calling people nerds and getting emotional doesn’t change that.

stoxk market has consistently historically returned 10 percent not 12.and ceartainly not with his expensive mutual funds

I know what he means by: "never put any freeking money in it". I had NO IDEA I was supposed to ADD EXTRA money every month IN ADDITION to what the company was taking out every paycheck. I thought that's all I had to do. But yoooo....a coworker said he puts in $1600 a month every month. I though: "HUH?" I felt like a dufuss. Now I do it, too many years too late, but I'm doing it!!! No matter what!!! who knew? Is Dave right all the time about everything? Of course not, but he still has more knowledge than I do.

Dave is 100% correct to be invested in stocks. But talking about 12% annually and mutual funds rather than ETF's, Dude learn what you know and dont know.

So out of that 12%, what amount of it do you keep?

That quote is Wayne Gretzky, not Michael Jordan !

I am currently 18 yrs and about to graduate from High School. I would love to know how can I start investing? What website do I use and are they safe? I'm new to this and I till go to college but I have that planned out and the money I have left over from my summer job I would like to invest it

I love watching your videos Mr.Ramsey . You have helped a 25 year old prepare for the future ! "Invest some freaking money"

I called baloney on the 12% claim. Until I actually checked my accounts. I was surprised. And I take a more conservative approach.

Using 12% in your planning is silly. You will not invest enough capital by using this percentage. Dave is a good man but he is just wrong. Use 6% instead. He is a real estate guy so I wouldn’t expect him to know what he’s talking about. Why don’t you think he discusses specifics?? Duh...

What dave tries to say is that he invests all the time. So when your entry is at a high or low it doesnt matter. Very good advice. Thx. At the moment i am at 7% but it was 9 2 days ago. But dont sell. Next week when earnings are ok it will be 11:)

Yes you can get 12% or better here is a Mutual Fund I have had for over 10 yrs and it has outstanding returns.: :Fidelity Growth Company Commingled Pool Class 3" YTD 19.45%, 1yrs. 40.22%, 3yrs 21.44%, 5yrs. 17.86, Life 18.15%

where is the how to video on first time investing? like which website to use, how to do it ....

The banks will make you POOR.

It was Wayne Gretzky, not Michael Jordan, but your point is clear!

last year my 401k was 13%, but this year it's about 1% so far.... a couple years ago it was -3% it hasn't done great, from 2002 to 2007 it earned about $20k, in 2008 it lost $15k. then by 2012 it earned that 20k back.... from 2012 to about 2016 it earned another $30k, and since then it's kinda just went up and down evening out and not doing much more.

Dave seems to be using exaggerated rate of returns to get people to invest. It's better to be realistic. More than likely the market will not turn 12%. Safer to say itll do half that. I use ETF and other index funds myself.

Real returns vs nominal returns is an extremely important difference. Finance vs economics here. You forget your 12% nominal gains are detstroyed by the federal reserves destruction of the dollars value. It IS important to mention. Especially when you are complaining about CDs being under 2%, youre LOSING real value due to inflation.

Just buy the SnP 500 Index fund. DO NOT buy loaded mutual funds that dave recommends. thats the problem. Can anyone give me a fund dave recommends that gets 12%???

1:05 No, there is only one way to (correctly) do the math. Take the ratio, then take the Nth root of that number, where N is the number of years. That’s your annualized rate of return. It will ALWAYS be less than (or equal at best) to the average rate.

It is very easy to calculate the forward return of the SP500. You take the earnings estimate for next year(140), divide it by the value of the SP500 and add a growth rate (Long run USA GDP growth). The SP500 cannot grow faster than GDP for a long period of time and over a 30 year period, valuation does not matter (Over this period, a 50% reduction in valuation would hit returns 2.5% annualized). This calculus makes the Long run SP500 return 10% or less. It will likely be less as cyclical and political pressures hit earnings and interest rates rise.

Dave Ramsey forgets that the people with certificates of depression are the backbone of the business' he is investing in xD

I like your shows Dave, but you are WRONG! The S&P 500 has averaged close to 10% over it’s 90 year lifetime!!

It was Wayne Gretzky not Michael Jordon

Lol. If the facts are on your side, pound on the facts. If the facts are not on your side, pound on the table. That is Dave Ramsey all right. Wrong on the maths, and proud of it.

I don't want to miss my shot. BUT, I also don't want to throw away the ball. We all want to get nothing but net. However, there are lots of sharks on the other team who want to steal the ball. We all need to take the right shot to win. That's why we're listening to Dave Ramsey. He's our coach and we're all on the same team trying to win! Plus, we want to date some good-looking cheerleaders! Just a little joke there for fun! :-)

Everyone is caught up in the 12%. The whole point is that you need to eliminate your debt and save money, so you're not a 70 year old eating cat food in your cardboard box on Sunset Blvd.

People don't take into account taxes or inflation

Lol 2:43 guy in the blue is like here we go

dont forget to pay the tax man!

Maybe I'm not understanding him right when he says "it's not 12% compounded", but doesn't he mean that you're only getting 12% on your principal each year? If he does, he's a big fat liar! When he runs his example in FPU of the couple that invests 6K per year for 40 yrs and ends up with 5.8M dollars, he's DEFINITELY running that with compounded 12% returns - I've done the MATH myself on that! Of course, if you save money you'll have more than if you didn't! DUH, DAVE! The point is that it's NOT easy to get excited about investing when you REALLY are gonna get 6 or 7% annualized, compounded (after all the commissions and fees), after 40 f'ing years of investing and not enjoying any of that money. So, in order to get you excited about it and get him more popularity, Dave purports the MYTH that you can really get 12%. He definitely "sells" it as though it is compounded. He definitely NEVER mentions the actual return after commissions and fees. WHY???

I know all about compounding as do most people in this comments section, while it would be so much easier for Dave to just indicate the CAGR, I am fairly confident his general point is: when you are picking mutual funds and you come across a fund that has an "average" return of 12% and a different fund that has an "average" return of 6% over the same time period, preferably 30+ years, maybe consider the one with the "average" of 12%. Most all the critics here are 100% right, but it is also very true that the mutual fund industry started using AAR or Average Annual Returns to track their long term performance to intentionally mislead potential investors by padding the "perceived" return. But it is also true that many funds now do provide the CAGR or compound annual growth rate.....and I will be the first to assure you that there are for sure certain mutual funds that have had a CAGR of more than 12% over the past 30 year time frame, which includes Black Monday, the Dot Com Bubble and the Financial Crisis. I will give you a hint, they are in the Technology and Healthcare sectors. One general problem is that many of you are only thinking "401K" and you will definitely be limited by the choices you have. However, If you contribute to Roth IRA in addition to your 401k, as long as you don't go over the contribution limit you may find that you have a great many more choices in terms of "mutual funds" in your IRA. Of course index funds are great too for the average working retail investor, and Dave suspiciously avoids recommending them, but that is an entirely different conversation.

Even 4% is better than any CD or savings account interest rate I've seen. I've had a lot of money just sitting around and wish I'd known there was an option better than zero-point-piddly percent.

I'm averaging about 15 percent In the stock market over 9 months..... And I started knowing nothing did it all on my own

No pension, no money.

Unprofessional, and talking down to viewers. Never said where he gets anywhere close to a consistent 12 percent rate. No idea why people listen to this nonsense. He is clearly the second type of CFP.

I think that was Wayne Wayne Gretzky quote not Michael Jordan....

You miss 100% of the shots you don't take. - Wayne Gretzky.