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.
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.