Index funds are good investments, so are Dividend paying stocks…but the best portfolios make money in up, down and sideways markets. Dividend stocks and fixed income funds combined with index funds and tacticle actively managed small, mid and large cap funds, domestic and international and emerging markets…paying attention to style drift,correlation and reballancing, fund fees and understanding the effects of geometric mean on your index funds….that will get the best results.

But, before we get this far, we need to pay off the 27% credit card and have more than 500 bucks in the checking account….

Kuddos to you Dave….you are helping the people who need you.

Treasury securities are “safe” but there is a flight to quality right now and the massive amount of buying at the auctions has driven down the interest rate to .01%, only slightly better than stuffing it under your mattress.

Having the nerve to stay in the game right now, and buy buy buy, will make you wealthy in the long run. If you need some cheerleading, read Nick Murray…if you need some perspective on what just happened, go to Ric Edelman’s website and read his Sept. 19 report.

25% – Growth Funds
25% – Growth and Income Funds
25% – International Funds
25% – Aggressive Growth Funds

If you have any money that you will be using in the next five years, it should not be *invested*, but put into a high yield money market fund with check writing privileges, no withdrawal penalties, etc.

The core of his message is buy and hold and invest over the long term, with regular contributions to your investment plan, and reinvest your dividends.

Secondly the rate of return on dividends increases as they raise it. For example the current yield on Trans Canada Pipelines (a Canadian stock my Dad owns) is about 3%, but my dad’s actual yield is about 10% because he bought the stock when it went on 50% off sale. (Was 20 he bought at 10 and is currently 35) as well they have raised the dividends numerous times.

I would skip index funds and stick to good quality companies that have a history of raising there dividends. Over time your dividend investments will replace your regular income. But the secret is to buy you stocks cheap! For more info google DRIP stocks. (Dividend Reinvestment Plans)

But YMOYL goes further in pushing investment in the 30-yr U.S. bond enabling one to live off the interest, and I think Vicki Robin ought to update that last section of the book more frequently. I’d honestly like to know what she thinks and where she is finding interest income sufficient to live these days.

I’m not sure pushing 30-year bonds as the sole investment was ever good advice, but it certainly isn’t now when we have inversion (and 30-years were even sunsetted until recently). Post-financial independence is an integral part of the book and necessarily involves investment considerations.

OF COURSE you can make a mistake while checking someone else’s numbers. Let’s see a few different ways that this can happen:
1. A typo or incorrect math when “running the numbers.” Generally having two people independently doing the math will catch these errors, but not always.
2. The data source has errors in it. This won’t get caught by multiple people doing the calculations if both people use the same data source. This source of error is much harder to catch.
3. An assumption used in the calculation is wrong, or not applicable in this situation. This happens in engineering a lot, and unless someone realizes that the assumption or formula does not apply, then this mistake will not get caught.

This third one is exactly what MossySF is suggesting. It appears you used raw stock performance, not accounting for dividends. Quite silly since dividends can be a major source of income. Also, you do not clearly state (perhaps because you do not know) if Ramsey used dividends in his calculations. This could easily change the numbers such that every 10 year period was a winner…and with significantly different rate of return.

You say you used the DJIA raw data. Why did you pick that the basis for your number? The raw data there only shows the stock index which does not include dividends. That means any period you are calculating could be anywhere from 2%-6% less per year than the actual return.

I don’t know if he was choosing growth over value/blend for some reason at that time, but it’s bad advice to invest all in growth. As much as I admire “Your Money or Your Life” it has the same flaw giving short shrift to the investment advice.

1960-1969: 117%
1961-1970: 96%
1962-1971: 155%
1963-1972: 79%
1964-1973: 14%
1965-1974: 38%
1966-1975: 90%
1967-1976: 43%
1968-1977: 38%
1969-1978: 78%
1970-1979: 126%
1971-1980: 89%
1972-1981: 91%
1973-1982: 173%
1974-1983: 291%
1975-1984: 275%
1976-1985: 258%
1977-1986: 308%
1978-1987: 346%
1979-1988: 264%

The periods ending in 72-73, 76-77 were small gains. But just waiting a few years later and the gains skyrocket — especially if you were buying during these down periods.

On the otherhand, I do have the S&P500 total returns starting from 1928 — and there are 10 year periods with slight losses.

1928-1937: -6%
1929-1938: -15%
1930-1939: -9%

Of course, just 2 years later, the rolling 10 year periods make a huge jump in returns

1931-1940: 9%
1932-1941: 69%
1933-1942: 120%