David discovers his financial advisor's portfolio grew only 7% while the S&P 500 surged 17% this year.
The episode begins with a caller, David from Indianapolis, who has checked his financial statements and found his portfolio grew only 7% this year, while the S&P 500 increased by about 17%. He admits he doesn't know the specific mutual funds he's invested in and hasn't contacted his advisor about it. Dave Ramsey points out that David had money sitting in a money market account not being invested, which is another issue. Ramsey emphasizes that a financial advisor's job is to teach and inform, not to babysit the investor, and that David is responsible for knowing his investments. The caller compares his returns to the S&P 500, leading to a discussion on whether he should fire his advisor. Ramsey explains that he uses his own advisor to find mutual funds that outperform the S&P, but the investor makes the final choice. The caller questions the benefit of paying an advisor when he could simply invest in a Vanguard S&P 500 index fund himself. Ramsey acknowledges that passive investing in the S&P 500 is a valid option, known as the Boglehead approach, but argues that a good advisor can help outperform the market and provide holistic financial planning. The hosts discuss how advisors can help with taxes, real estate, and overall portfolio management. They note a trend of more people moving toward self-directed investing via platforms like Vanguard. Ramsey states that advisors should earn their fee by outperforming the market by at least 1%, and that his SmartVestor pros are required to have a 'heart of a teacher.' The episode concludes with Ramsey defending his advice against critics who call him a crook for not endorsing passive index investing exclusively.
