**#5 In Dave Ramsey's Continuing Series Of Lies**

This is an excerpt from promotional material attempting to (illegally1) sell people the poor advice of one of Dave Ramsey's "Endorsed Local Providers"

"When Dave says you can expect to make 12% on your investments, he’s using a real number that’s based on the historical average annual return of the S&P 500. The current average annual return from 1926, the year of the S&P’s inception, through 2011 is 11.69%."

Let's take it one lie at a time. First, "He's using a real number that based on the historical average annual return of the S&P500." - True but intentionally deceiving.

This is one of many, many examples of Ramsey using the average person's ignorance against them. The statement itself is true. The deception comes in his use of the words "Average Annual Return".

Knowledgeable financial professionals know the term is meaningless, and they know what Dave

*really*means, but can't say, is "Compound Annual Growth Rate"

Let's look at it more closely;

"Annual Return" is, well, the annual return. If you begin the year with $100, and at the end of the year you have $110, you annual return is 10%. Simple? Yes.

January 1 - $100

December 31 - $110

Return (or increase) - $10 *There can't be an "Average Annual Return", since there is only one year

Now, suppose at the end of the second year, you lose money and you end the year with $100 again.

January 1 - $100

December 31 - $100

Return (or increase) - $0

What is your

**total**return for the 2 year period?

ZERO.

You started with $100 and at the end of two years you have $100. Your return is ZERO.

Every literate person can understand this.

*But....***According to Dave "Liar" Ramsey, you made 5%.**

He says your year 1 return was 10%. Your year 2 return was 0%.

10+0= 10

divided by the number of years (2),

10/2 = 5

And viola! you have a "Average Annual Return" of 5%.

**Where is this $5 Dave?**

**The Truth**

**Dave Ramsey is intentionally substituting the meaningless term 'Annual Average Return' for**

**Compound Annual Growth Rate (CAGR).**

The CAGR is the number legitimate Financial Advisers use, and, with accurate informational input, can give you realistic numbers to use in making major life planning decisions.

Ramsey knows when he says 'Average Annual Return', most people will think 'Compound Annual Growth Rate', even though they don't know the term. "They will think Dave Ramsey said I can expect to gain 12% per year, every year."

Addendum

The Compound Annual Growth Rate of the Standard and Poor's 500 Index for the period 1929 to 2011 is actually 2.43%2, a huge difference from

**Dave's 12% Lie**, and the real-world difference between a comfortable retirement and abject poverty.

1- Securities Law, including the Securities Exchange Act of 1934, make it illegal to profit from the sale of securities unless one is licensed. Dave Ramsey is not a licensed securities professional, but receives "kickbacks" from members of his ELP scam

2- Adjusted for Inflation