Why Warren Buffet Might be Wrong on Active Funds

Warren Buffet made a bet a few years ago to prove that passive funds are better than active funds. He said that he would make more money if he invested in an S&P 500 index fund than the returns made from active investing. Buffet stated that he would give a million dollars to charity if he lost. Warren is on course to win his bet at the moment. Timothy Armour is the Chairman of the Capital Group. He believes that this notion is flawed. He said that passive funds and active funds could not be compared because of their varying nature and read full article.

They do not protect the investor in the event of an economic crash. The volatility of passive investing is very low. The investor has no hedge in a market crash, and they are not guaranteed any safety. Active funds charge very high fees. The majority of them perform poorly. Some active funds have been very lucrative for investors. They have generated huge returns to investors in the long term. Armour proposed two filters for helping investors to choose an active fund that is worth its keep. One should look for a fund that offers low fees. One should do this if they want to maximize their returns because a huge percentage will go to the investor and what Timothy knows.

One should also consider the managers of the fund and whether they are directly involved. The managers should invest their money alongside their clients. This shows that they are committed to the fund and have an incentive to make sure the fund performs well. Armour attended Middlebury College where he pursued a degree in business. He started his career at Capital Group where he worked as an apprentice. Armour is an equity portfolio manager. He works in the L.A offices of the firm today. Armour was named the Chairman of the Capital Group of Companies in 2015. He replaced Jim Rothenberg who passed away while on vacation. He is also the CEO of the company and the chairman of Capital Research and Management and resume him.

Other Reference: https://www.americanfunds.com/individual/news/senior-management-changes.html

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