Podcast Summary: "What is the Dave Ramsey Portfolio?"

Ask The Compound
Hosts: Ben Carlson, Duncan Hill
Date: October 22, 2025

Overview

This episode of Ask The Compound dives into viewer questions regarding portfolio construction, performance persistence, safe retirement withdrawal rates (especially for those aiming to “die with zero”), diversification pitfalls, and a practical breakdown of the famed Dave Ramsey investment strategy. Ben and Duncan use real-world data, back-of-the-envelope math, and candid conversation to demystify these financial concepts—always with a nod to practical application.

Key Topics & Insights

1. Persistence in Stock Outperformance

[02:00–06:49]

• Question: What percentage of stocks that beat the S&P 500 over a five-year window also beat it in the previous five years?
• Ben’s Research:
  • 2016–2020: ~150 out of S&P 500 stocks outperformed (about 30%)
  • 2021–2025: 241 outperformed (about 50%)
  • Both Periods: 41 stocks outperformed across both five-year spans.
• Notable repeat performers: Microsoft, Google, Nvidia, Broadcom, Facebook, Hilton Hotels, Caterpillar, Decker Outdoors, Walmart.
• Surprise: The number of consistent out-performers is higher than expected, especially in a concentrated index dominated by mega-cap tech.
• Comparison to Fund Managers:
  • SPIVA Persistence Data: Only 2% of large-cap equity funds remained in the top half over consecutive five-year periods; outperformance is rare and not persistent among mutual funds.
• Big Takeaway:

  “I think the takeaway here is just that buy and hold in individual stocks is probably your best bet.” — Ben Carlson [06:42]

2. Withdrawal Rates for ‘Die With Zero’

[07:03–13:15]

• Scenario: Listener with $3M, plans to spend it all, wants an ‘optimal’ annual withdrawal, assuming no heirs.
• 4% Rule Explained: Withdraw 4% of starting portfolio value, adjusted only for inflation each year—not portfolio fluctuations.
• Historical ‘Safe Max’ Rate: Bill Bengen’s research puts it at 4.7% (never failed historically), but higher withdrawal rates could be justified when not seeking to leave a legacy.
• Flexible Reality:
  • A 6–7% withdrawal rate could be justified for a "die with zero" mindset, understanding failure probability increases (~50/50 at 7%).
  • Key considerations: Sequence of returns risk; potential to “turn the dial up” when markets are strong, pull back after losses.
• Life Planning Wisdom:

  “It’s nice to go from delaying gratification to actual gratification. Good on you for enjoying your wealth.” — Ben Carlson [12:37]

• Charity Note: The 'die with zero’ philosophy doesn’t preclude charitable giving—donations can be part of spending rather than a bequest.

3. Does Diversification Always Win?

[13:21–17:41]

• Young Investor’s Discovery: S&P 500 outperformed a “diversified” simulated portfolio over the past decade by 2.5% annualized.
• Why? US equity dominance has been cyclical; S&P 500 recently bested most other asset classes, but this was not always the case (i.e., the "Lost Decade" 2000–2009).
• Long-Term View:
  • Diversification shines across decades, not short windows.
  • Avoid “recency bias”—periods when S&P wins are often followed by periods it lags.
• Professional Manager Struggles:

  “What chance do I have to outperform if these really smart people can’t do it?” — Ben Carlson [16:37]

• Young Investors: Focus on staying invested, let compounding work, don’t fixate on short-term strategies.

4. The Dave Ramsey Portfolio – Does It Work?

[18:07–22:00]

• Breakdown: 25% each in (1) growth & income (large cap), (2) growth (mid cap), (3) aggressive growth (small cap), (4) international funds.
• Ben’s Verdict:
  • "Fine allocation." Splitting across these asset classes is reasonable and well-diversified.
  • Small tweaks (e.g., slightly more small caps, different cash/bond allocations) are less important than sticking with the plan and regularly rebalancing.
  • Quote:

    “Getting the big pieces right up front... perfect is the enemy of good.” — Ben Carlson [18:53]

• Ramsey Quibbles:
  • Has encouraged very high withdrawal rates (8–10%), which is controversial.
  • Strong anti-debt views—good for many, but his anti-credit-card stance can be problematic for responsible card users (credit is safer than debit for fraud).
  • No gold in the portfolio, which seems contrary to his persona, but is not a real issue.

5. When to Derisk 529 Accounts for College

[22:16–25:06]

• Listener: 100% S&P 500 in a 529; when to switch to a target date or more conservative allocation?
• General Guidance:
  • 5–7 years before college is a reasonable time to begin derisking.
  • Move in tranches (gradually shift out of equities) rather than all at once, for emotional and practical reasons.
  • Target date funds offer a pre-set glide path; using or mimicking them can work well.
• 529 Investment Choices:
  • Usually limited to funds (index, active, target date).
  • Responsible to slowly de-risk; there’s never a perfect time, but smoothing the transition reduces “market timing” regret.

Memorable Quotes

• On Stock Outperformance & Managers:

  “Picking the stock pickers that outperform might be even harder.” — Ben Carlson [06:15]

• On Withdrawal Rates:

  "If you really want to roll the dice, [7%] is a pretty good spot to be in. Half the time it fails, half the time it does just fine." — Ben Carlson [10:29]

• On the S&P 500 vs Diversification:

  “The biggest thing for you is to keep investing and allowing your money to compound in the stock market because you’re way ahead of the game at 18.” — Ben Carlson [15:44]

• On Portfolio Design:

  “There are plenty of different asset allocations that can work... perfect is the enemy of good.” — Ben Carlson [18:53]

• On Dave Ramsey’s Recommendations:

  “His whole thing is paying down debt. And you have to think of the audience he’s talking to. But do I have a problem with his portfolio? No, as long as you can stick with it.” — Ben Carlson [21:53]

Timestamps for Important Segments

• Stock Outperformance Over Time: 02:00–06:49
• Withdrawal Rate for “Die With Zero”: 07:03–13:15
• Diversification & US vs. International: 13:21–17:41
• Dave Ramsey Portfolio Analysis: 18:07–22:00
• 529 Plan Derisking Strategy: 22:16–25:06

Tone & Style

The episode combines Ben’s data-driven, pragmatic approach (“Here’s the money chart...”) with Duncan’s playful, sometimes skeptical banter. The language remains conversational, approachable, and peppered with practical tips, cautionary tales, and industry wisdom—making otherwise complex topics digestible and immediately actionable.

For more, send your personal finance and investing questions to askthecompoundshowmail.com or join the lively chat during show recordings.