Passive index funds will outperform active hedge funds over an extended period, according to famed investor Warren Buffett, and Capital Group CEO Timothy Armour agrees. However, in a commentary article for CNBC Investing, Armour indicates that the key to successful investing has less to do with the distinction between active and passive, and more to do with the cost of the investment.
Armour has no problem admitting Buffett’s bottom-up investment strategy is time-tested and true, but it is not perfect and it is not always the best option. Some mutual funds guarantee long-term returns, but the returns may be poor because of high maintenance costs. In addition, mutual funds lose value from excessive trading, and these costs are difficult to account for because they are often underappreciated by investors. Timothy Armour also indicates that passive index funds are not as safe as some investors believe. The truth is that index funds expose investors to all the risks of market downturns and provide little or no protection.
With over 30 years of investment experience, Timothy Armour was elected Chairman of Capital Group in July of 2015 after the passing of Jim Rothenberg, the previous Chairman. Armour is also Director and Principle Executive Officer at Capital Research and Management Company.
Armour joined Capital Group in 1983 as a participant in The Associates Program, according to Bloomberg.com, and has never left. He earned his Bachelor’s Degree in Economics from Middlebury College and climbed Capital Group’s corporate ladder to the top holding several positions including Equity Investment Analyst, Equity Portfolio Manager and Chairman at The Capital Group Companies, Inc.
Check YouTube for more information about Tim Aarmour.