‘Are you smarter than Warren Buffett?’: This Los Angeles man slammed Dave Ramsey for touting actively managed funds — here are some essential tools for your next big portfolio move

‘Are you smarter than Warren Buffett?’: This Los Angeles man slammed Dave Ramsey for touting actively managed funds — here are some essential tools for your next big portfolio move
‘Are you smarter than Warren Buffett?’: This Los Angeles man slammed Dave Ramsey for touting actively managed funds — here are some essential tools for your next big portfolio move

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A debate about active versus passive investing arose on an episode of “The Ramsey Show” when a caller accused host David Ramsey of misguiding investors. Chris from Los Angeles wasn’t pleased with Ramsey's recommendation of actively managed mutual funds.

“My first question would be, ‘Are you smarter than Warren Buffett?,' Chris asked bluntly. “You push people into actively managed funds when over time, if you push people into an index fund, they would have about 50% more money when they [retire].”

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Billionaire investor Warren Buffett has been a vocal advocate for passive investment strategies. He has previously recommended low-cost index funds for average investors and said that 90% of his wife’s inheritance would be deployed in such funds when he passes.

Ramsey conceded that index funds are "wonderful." Still, he rejected Chris' claim that an investor would earn 50% more in an index fund than actively managed funds "unless you're an absolute idiot" in picking active funds.

“The actively managed mutual funds that I personally have picked have outperformed the indexes by more than 2% as a portfolio,” Ramsey stated. “Because it’s fairly easy to study mutual funds and pick [ones] that outperform.”

Ramsey also pointed out that Buffett made his enormous fortune through active investing.

Buffett himself is active

Buffett has invested in stocks and private companies for several decades through his investment vehicle, Berkshire Hathaway. He purchased his first stock at age 11.

Ramsey says Buffett doesn’t practice what he teaches.

However, the key argument for passive investing is skill and fees. Unlike Ramsey, Buffett doesn’t invest in mutual funds but buys stocks directly, circumventing money managers' expensive fees. “As Gordon Gekko might have put it, ‘Fees never sleep,’” Buffett once wrote.

To be sure, Buffett is a professional investor with decades devoted solely to investing. For amateur investors, conducting thorough research can be time-consuming and overwhelming.

This is where Motley Fool Stock Advisor comes in.

Motley Fool Stock Advisor can be an invaluable resource for those who aren't professional investors but still want to achieve market-beating returns. The service offers expert stock recommendations, backed by thorough research and analysis, helping investors make informed decisions without dedicating their lives to the market.

Founded in 1993, the Motley Fool now has over 1.75 million members. Its analysts diligently scour the market for companies with strong long-term potential so you can make smart investment choices that align with your financial goals.

Thankfully, it's aso easier than ever to start trading. Interactive Brokers allows you to buy and sell stocks and ETFs without commission fees or minimum investment requirements.

Notably, IBKR Lite simplifies investing with unlimited free trades of U.S.-listed stocks and ETFs. It also lets you buy fractional shares, flattening new investors' learning curve.

Read more: Car insurance rates have spiked in the US to a stunning $2,150/year — but you can be smarter than that. Here's how you can save yourself as much as $820 annually in minutes (it's 100% free)

Circumventing fees

Investing can often seem daunting, especially with the myriad fees that can eat into your returns. These expenses can significantly reduce your investment gains, from management fees to transaction costs.

For those looking to minimize fees and take a more hands-on approach to investing, tastytrade offers a compelling solution. tastytrade is a financial network that provides investors with a wealth of resources, including live programming, trading tools, and educational content, all designed to empower you to take control of your investments.

As a brokerage, tastytrade stands out for its low commission structure. You can keep more of your hard-earned money working for you with competitive pricing on options, futures, and stock trades.

The platform also prides itself on providing extensive educational resources. From beginner to advanced traders, you’ll find many videos, articles, and live shows that break down complex trading strategies into easy-to-understand concepts.

A safer approach

For investors who seek to avoid the stock market's volatility and prefer a more stable approach, consider a relatively vanilla instrument: certificates of deposit, also known as CDs.

Unlike stocks, which can fluctuate in value, a CD provides a fixed interest rate for the term of the deposit. You’ll know exactly how much you’ll earn, providing peace of mind and predictable growth.

When you invest in a CD, you won’t need to bear market risk or expose your savings to the economic cycle. And because CDs are FDIC-insured, they are one of the safest options for safeguarding and growing wealth.

For a limited time, you can save even more with Synchrony Bank’s 13-month CD, featuring a 5.15% Annual Percentage Yield (APY). That's more than 11 times the national average APY of 0.45% for savings accounts, according to the FDIC.

Just set up an account, select the 13-month CD product, and add the amount you want to deposit in order to get started.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.