This Investing Strategy Is Dumb

Summary

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Podcast Summary: "This Investing Strategy Is Dumb"

Podcast: The Ramsey Show Highlights
Host: Ramsey Network (feat. Dave Ramsey & co-host)
Date: August 7, 2026
Duration: ~9 minutes

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Episode Overview

This episode addresses the widely taught approach to conservative asset allocation as one nears retirement—specifically, the theory that investors should shift portfolios heavily toward safer assets like bonds. Dave Ramsey lays out his perspective on why this approach is "dumb" and details what he believes to be a smarter, more growth-oriented investment strategy, even in the years leading up to and into retirement. The discussion also briefly explores how this philosophy carries over into college savings accounts (529s).

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Key Discussion Points & Insights

1. The “Conventional Wisdom” on Asset Allocation

[00:06–00:48]

• The commonly held financial planning advice is to reduce risk as you approach retirement by moving investments into bonds, growth and income funds, or high-yield savings.
• This is known as the asset allocation theory: higher risk when young, lower risk when old.

2. Dave’s Critique of the Theory

[00:49–03:53]

• Dave Ramsey strongly disagrees with traditional asset allocation's application:
  • "The reason that is dumb is that when you retire...you don't need the whole $2 million right then." (Dave Ramsey, 01:40)
  • He notes that most retirees only withdraw a portion annually, often less than the portfolio generates in returns, which means the principal remains invested for potentially decades.
  • Statistics show someone healthy at 65 may live until 90, giving "25 freaking years for that to make 6% or make 12%, and I'm not doing that. So that's just dumb." (Dave Ramsey, 03:36)
• Dave’s guiding principle: If you have substantial assets, you’re not forced to make everything perfectly “safe” because you won’t need all your money at once, and the portfolio's returns should support a comfortable standard of living.

3. When Would Dave Change His Portfolio?

[04:04–05:19]

• Ramsey clarifies that he only evaluates changes if a particular fund is underperforming its category or benchmarks (e.g., S&P 500 for growth stock funds).
  • "If it’s coming in less than the S&P, I should just be in the S&P." (Dave Ramsey, 04:48)
• He recommends reviewing fund performance annually or over multi-year blocks, not reacting to short-term market swings.
• Example: Switching from an underperforming fund to a better one—even possibly changing the overall fund strategy—but only after long-term evaluation.

4. The Emotional Side of Investing

[05:14–06:50]

• Ramsey acknowledges emotional comfort is an acceptable reason for more conservative allocations if market swings induce too much stress.
• "I'd rather you sleep at night than do this." (Dave Ramsey, 05:59)
• He recognizes that for some, especially older investors or surviving spouses, emotional risk tolerance might supersede mathematical returns.

5. Critiquing the Financial Planning Establishment

[06:52–07:35]

• Dave expresses skepticism at how rigidly the financial planning industry presents asset allocation models, comparing their fervor to religious dogma:
  • "They present this stuff like it came from the Bible...as if you don't believe it, you don't believe in the law of gravity or something." (Dave Ramsey, 07:08)
• He notes the backlash from the financial industry due to his unorthodox (but he believes, more profitable) stance.

6. Application to Education Savings (529s)

[07:41–08:40]

• Co-host asks if Dave’s philosophy also applies to 529 plans.
  • Dave agrees; since college money is used over several years, there’s time for market recovery.
  • "You're not taking the risk. The day they go to college, some of that money's not gonna be touched for four years." (Dave Ramsey, 07:50)
  • Suggests moving only the first year’s tuition into high-yield savings for safety as college approaches, leaving remaining funds invested for future years.

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Notable Quotes & Memorable Moments

• Asset Allocation Skepticism:

  • "That is dumb." (Dave Ramsey, 01:56)
  • "I think the asset allocation theory is just bogus, because it assumes everybody’s gonna need all the money right now, which you don’t, and that you’re gonna die right now, which you’re not." (Dave Ramsey, 03:47)

• Perspective on Longevity:

  • "When you make it to 65, the average death age is more like 90." (Dave Ramsey, 03:17)

• Performance Review Philosophy:

  • "If my growth stock mutual fund is not outperforming [the S&P]...I should just be in the S&P." (Dave Ramsey, 04:48)

• On Emotional Comfort:

  • "I’d rather you sleep at night than do this." (Dave Ramsey, 05:59)

• Against Blind Faith in Industry Wisdom:

  • "They present this stuff like it came from the Bible...as if you don't believe it, you don't believe in the law of gravity or something." (Dave Ramsey, 07:08)

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Timestamps for Important Segments

• Introduction to Asset Allocation Theory: [00:29–00:48]
• Dave’s Rebuttal on Needing “Safety” Near Retirement: [01:40–03:53]
• Practical Criteria for Changing Portfolio/Funds: [04:04–05:14]
• Addressing Emotional Risk Tolerance: [05:14–06:50]
• Industry Skepticism and Rigid Doctrines: [06:52–07:35]
• Application to 529 College Savings: [07:41–08:40]

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Summary

Dave Ramsey uses this episode to challenge traditional retirement investing wisdom, arguing that reducing risk too quickly (by shifting to bonds and safer vehicles) can unnecessarily limit returns over what could be a lengthy retirement. He advises most retirees, who have followed his advice and saved well, to stay invested for growth, only switching to safer vehicles if emotional comfort demands it or if funds underperform over the long term. The same philosophy, he says, can be applied to college savings: remain invested for growth unless the money is needed imminently.

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Transcript

[A]

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[B]

You teach your listeners not to panic during a stock market downturn and to just hold on for the ride. Is there ever a scenario where one would consider changing their investment portfolio? For instance, if someone is getting close to retirement? That's an interesting question, Dave. I'll let you take that. What do you think? I mean, I could tell you what I, I would tend to.

[A]

Well, the people say when you get close to retirement to move it. That is a theory in financial planning called asset allocation. The theory says when you're young, take more risk and as you get old, move the assets away from risk because you need to be able to count on them.

[B]

Target date funds.

[A]

I disagree with the theory and I certainly disagree with the implementation of the theory. And let me walk you through why. Okay? So the typical financial planner that follows that theory will tell you, okay, I'm 65. At 65, you should move your money towards bonds and growth and income mutual funds, which is largely bonds and dividend paying stock companies, and get away from aggressive growth mutual funds. Get away from growth stock mutual funds. Get away from something that's an S and P and move even into high yield savings. Okay, so when you do that, you lower your returns from 10 to 12% down to 6 to or even 5 to 8% would be your portfolio change, but you take less risk. The reason that is dumb is that when you retire, if you have saved substantial money like we teach, and you get there and you've got $2 million, you've got a million dollars, which people call here all the time that have or have the potential to. We talk to them all the time. We show people how to do that. So if you have $2 million when you retire, you don't need the whole $2 million right then. So if it goes down a little bit the next year after you retire, it's not the big deal because all you're going to be doing is living off of a portion of the returns. You're not even gonna be taking off all the returns. So if you've got $2 million and it's invested and it's making 10%, that's $200,000 a year. You probably don't need $200,000 a year. You're probably taking off 150. So you leave 50 in there, it's growing and you never are touching the nest egg. So the nest egg can go up and down without really affecting your life. You don't need the safety when you would need safety is if you have no money now, if you got $100,000, maybe. But if you've got a million, it changes the whole scenario, or 500 to a million or 2 million or 5 million or whatever it is, okay? And so I'm, you know, I've got substantial assets, millions and millions. So I've moved zero to safety. And here's the other reason that's dumb, okay? I'm 65. I'm in good health, all right? I'm not overweight, I don't smoke, all that kind of stuff, right? So all the statistics say once you make it to 65, average death age of a male now is 74. Females is 76. But that includes infant mortality, okay? So when you make it to 65, the average death age is more like 90.

[B]

You got a long ways to go is what you're saying.

[A]

Yeah. So I got 25 freaking years for that to make 6% or make 12%, and I'm not doing that. So that's just dumb. So that's why I think the asset allocation theory is just bogus, because it assumes everybody's gonna need all the money right now, which you don't, and that you're gonna die right now, which you're not.

[B]

I think you're right. I think this question is probably someone who doesn't have a lot there. And when it downturns, it probably makes them feel the significance of whatever they're pulling off of it.

[A]

Now, what I would do to his question, and it's a good question, is there ever a scenario. Consider changing the investment portfolio? Yes, I would change my investment portfolio when I have a mutual fund that is not keeping up with other mutual funds of its category.

[B]

Yep, I agree with that.

[A]

And so if I've got a, you know, the s and P500 is the baseline of the stock market. And so if my growth stock mutual fund is not outperforming that regularly, on average, over a long period of time, not in one day, not in one month, not even in one year. But if I look at mine about once a year and I go, okay, is this thing trendlining? It should be competing with the S and P and beating it above it.

[B]

Yeah.

[A]

If it's coming in less than the S and P, I should just be in the S and P. It'd be dumber. Okay. Be easier. I could just dumb it down. And so. And I've got aggressive growth stock mutual funds. I don't compare those to the S and P. I compare those to the other indexes that are measuring that market. So I want to know other aggressive growth stock is mine underperforming them? Then I would change my portfolio or.

[B]

But you're not changing your strategy, you're just changing your funds at that point.

[A]

I would change the funds, I would even change the strategy, but only over a long viewpoint. When you ask this kind of question, when you change your investment portfolio, it's often people that are looking at it every day and that'll drive you nuts. So you need to think on this. Think in blocks of time of a year and five years and 10 years. And when you think of blocks of time like that, then is there something indicating you need to change your mix? Yeah, that'd be okay. That'd be fine. Or if something has happened and your view of the world is different. Okay, that's fine. So I'll give you an example. If I died and Sharon looked at what we were doing and said, okay, I understood it when Dave and I were doing it, but I don't like it. I don't like that I'm going to go all safe just because I want to sleep better. Well, she could do that. That would be okay. And so if I talk to someone that's 78 on the air here and I'm talking to them, they just, any amount of variance is going to cause them to stay awake at night. I'll just put them in high yield savings. That's fine. I'd rather you sleep at night than do this. But there's all kinds of evidence that says you'd be fine doing it the other way. But if your emotions can't handle it, then that's your risk tolerance. Then we wouldn't do that. We wouldn't tell you to do that. But no, the funny thing about the financial world, and it seems like today's been the day on this event, it really has last two days. But is that the stuff we're taught in that world? And George is studying the CFP materials right now, certified financial planning materials. And he and I are having this great discussions over some of the crap they're shoveling out. And he's learning some good stuff academically, but it's also, is that they present this stuff like it came from the Bible or something, like it's absolute truth because it came from this group of nerds. And this asset allocation model that you have to move to safety as you get towards 65 years old is taught with such fervor that it's as if you don't Believe it. You don't believe in the law of gravity or something? And so me being on the air for 30 years saying, I don't believe it. I think it's a bad plan. All those guys, they go bananas on Dave Ramsey. Dave Ramsey doesn't know what he's gonna. Oh, he's gonna cause all these people to lose everything they own. They're all gonna be poor because of Dave Ramsey. No, they're not. They're gonna. A lot more money.

[B]

Do you have the same philosophy for things like 529s as the child gets closer to same one, keep the same.

[A]

Yeah, because here's the thing. You're not taking the risk. The day they go to college, some of that money's not gonna be touched for four years.

[B]

That's right. It still has time.

[A]

And so if the market. If Trump bombs Iran and the market

[B]

drops, it has time to recover.

[A]

Don't panic and take it all out and lock your losses in. You know, in 2008, when the market went in half, people talked to Warren Buffett and said, Mr. Buffett, you lost a trillion dollars today or you lost a billion dollars today. He goes, I didn't lose anything. I unsold it. You lock your losses in when you sell it. As long as you're holding it, you're riding the roller coaster. And no one gets hurt on a roller coaster except those that jump off in the middle of the ride. And so, same thing's true there. Now, what you could do if you're coming into college and let's say you got $200,000, I might pull the first year out and put it in high yield savings.

[B]

Mm.

[A]

Put 50 over there.

[B]

Got it.

[A]

And then that other 150. And then maybe the next year I start talking about that. But the chances of that statistically being down over four years, very slow. Almost zero. Create your free every dollar budget today. The simplest way to budget for your life.