Warren Buffett may have made a killing by sticking to passive indexes, not everyone agrees with his approach.
Following a challenge Buffett issued several hedge fund managers, where he wagered he could earn more than they could by sticking to S&P 500 passive index funds, investor Tim Armour pointed out that this strategy isn’t the most sound for increased returns.
Buffett’s success isn’t in question, only his methodology. In a recent op-ed, Armour pointed out that in order to secure returns investors shouldn’t worry so much about active and passive indexes. As market activity changes so do the potential for returns from either. Instead, investors, particularly those entering into the market for the first time, should look to fund managers and how much they’re invested in their own funds.
For Armour, this shows increased confidence in any particular fund’s ability to not only return to investors but to do so at an average that exceeds index benchmarks. It’s a method of investment Armour has himself applied at Capital Group Companies and he claims to have averaged 1.47% higher on benchmarks for his returns after fund expenses are factored in.
With the retirement population set for a boom with more people holding 401(k)’s than perhaps any other time, new investors are vulnerable to predatory practices by unscrupulous fund managers. Armour says to look out for these characters and identify the ones that stand to gain or lose with the success or failure of their own funds.
Like Timothy Armour on Facebook.
About Timothy Armour
Timothy Armour holds a Bachelor’s Degree in Economics from Middlebury College, which allowed him to transition to a career with Capital Group Companies.
Three decades of experience managing finance and investment, and learning about major developments in telecommunications, Armour was named Capital Research and Management Company’s Director and Principal Executive Officer.
Learn more about Timothy Armour at http://www.investmentnews.com/article/20150729/FREE/150729863/capital-group-parent-names-armour-chairman-replacing-rothenberg