Passive Index Not The Only Way To Invest

Tim Armour’s opinion on an investment strategy varies from longtime investor Warren Buffett. Mr. Buffett has wagered a large sum ($1 million dollars) that he can achieve a better investment return than hedge fund managers by investing in a passive index fund. Tim Armour agrees that a long term, low investment approach is the best; however, he has his own ideas on where to go from there.

He believes that the term active versus passive investing is just labeling that does not help investors. Many management groups give poor or mediocre returns along with high fees and high trading. Using a passive index doesn’t mean that you will make more money if it is handled poorly or the risks and costs are unknown to the buyer. Passive index funds also have no safety against a down market. This means the buyer is not protected if they lose money. Mr. Armour’s opinion is the buyer can use two filters to find a good fund manager: low expenses and high manager ownership. Managers who invest their own money alongside investors in a fund will help it be more successful than the average benchmark in which the fund is measured.

Tim Armour is the chairman and CEO of Capital Group. He is also an equity portfolio manager and has had over 34 years experience, all with Capital Group. He graduated from Middlebury College with a bachelor’s degree in Economics. In his early career at Capital Group he worked as an equity investment analyst in global telecommunications and U.S. companies. Tim is based in Los Angeles, California.

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