We Should Reconsider The Passive Index Fund Strategy

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Warren Buffet has recently placed a $1 million bet on his S&P passive fund investment strategy. Whether or not he will collect on that bet has yet to be seen. There are some out there that, though they agree with some of his views of long term investing, don’t totally agree that his investment strategy is fool proof.

In a CNBC article written by Capital Group CEO Timothy Armour, he gives his own perspective on Warren Buffet’s investment program. Firstly, he agrees that the market is saturated with middle-of-the road and pricey mutual funds that give investors the short end of the stick. But he writes that “consumers should be wary of product labels. Debating whether or not active is better than passive, and vice versa, is an industry debate that has no benefit to the actual investors themselves.

Timothy Armour explains that the perception that passive index returns are more secure for retirement need to be challenged. “Index funds have there place,” he continues, “but they provide no cushion against down markets.” According to his knowledge, out of 1,200 investors surveyed, more than 50% of them didn’t know that index funds indeed did expose them to 100% market instability.

Based in Los Angeles, California, Timothy Armour has over 34 years of investment experience. He received a bachelors degree in economics from Middlebury College before beginning his career at Capital Group in 1983. Capital Group partnered with Korea’s Samsung Asset Management in October of 2015, and oversee $1.6 trillion in assets. Tim Armour said about the partnership, “[the] broader plan is to co-design investment solutions to fulfill the savings, retirement and insurance-linked needs of Korean investors.”

One Comment

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