Tim Armour, the CEO and Chairman of Capital Group, recently gave his thoughts on Warren Buffett’s new financial endeavors. Buffett has put his money into charity so that he can achieve a better return on his investment compared to hedge fund managers. Buffett is betting on investing in a passive index fund.
Buffett is correct in stating that there are too many funds that shortchange investors. Armour supports Buffett’s emphasis on cost effective investment that should be around for the long term. Buffett has been successful with his strategy of bottom up investing, which emphasizes saving money for retirement and learn more about Tim.
However, Tim Armour disagrees with Buffett on some issues. Consumers should be concerned about product labels. Many mutual funds do not provide successful returns in the long run. The risks and opportunity costs of passive index investments are largely underestimated. Low costs are an important part of having a good long term investment return.
It is unfair to assume that passive index returns are the ideal way to plan for a better retirement. Index funds do not defend against down markets. Markets fluctuate and overcoming these negative lapses is an important part of being a successful investor and read full article.
While the average actively managed fund has not done well, there have been exceptions. No one can predict the future to see which funds will do better than others. Investors can identify fund managers by looking at those who invest much of their own money beside investors in their fund. This results in managers outperforming their benchmark indexes and Tim’s lacrosse camp.
Regardless of what some proponents comment, there is nothing random about outperforming the market over a long period of time. Armour notes that Capital Group’s equity funds have over 600 years of investment experience. Americans are leading their own retirement, and many young people are concerned that they will not be able to save enough money as they age. There needs to be a serious conversation about what investors can do to receive higher returns.
Timothy Armour is the Chairman and Principal Executive Officer of Capital Research and Management Company, Inc. Armour is a portfolio manager with over 30 years of investment experience. Before working for Capital Group, Armour covered World telecommunications. Armour received a bachelor’s degree in economics from Middlebury College.