To say there is a lot of debate between proponents of active fund management and passive index investing would be a serious understatement. Certainly Warren Buffett’s advice carries a lot of weight as he urges more investors to use low cost index funds. Enter, Tim Armour, Chairman and CEO of Capital Group, one of the world’s largest investment firms. He has a unique perspective regarding the ongoing discussion.
He certainly appreciates Buffett’s wisdom and style of investing. Evaluating companies from the bottom up and investing for the long haul is proven. However, Armour points out that index funds provide no protection during market downturns and times of increased volatility. He also underscores the need for investors to do better than the crowd during difficult times. His answer to the dilemma is something of a hybrid approach and learn more about Tim.
While acknowledging that most active fund managers will under perform the benchmarks, he advocates two simple filters to find the best options. Low management fees and high rates of manager ownership. When these two factors are in place there is a greater likelihood of beating the benchmarks. This conclusion comes after comprehensive research of thousands of funds through multiple decades. So, here’s to potentially happier and more lucrative retirements.
Tim Armour has been Chairman of Capital Group since July of 2015. They are a premier investing firm and home of the American Funds. Tim has over thirty years of investing experience all with Capital Group. He started as an equity investment analyst and holds a bachelor’s degree in economics from Middlebury College and more information click here.