Warren Buffett’s million dollar wager that he can outdo hedge fund manager investment returns by investing in an S&P 500 passive index fund may be a likely winner this year, but that does not automatically mean they are right for everyone, Tim Armour explains in his recent article.
And while Timothy Armour agrees that there are too many mediocre yet expensive funds that shortchange their investors, he disagrees with the central premise of Buffett’s wager: that passive index investments are automatically the safest and best path for anyone seeking to save for their retirements, mainly because they do not offer a cushion when the market moves downward. Ultimately, he argues, active versus passive is beside the point. The point is that any investment portfolio, whether active or passive, delivers long term success to those who need it.
Without a crystal ball to see into the future, predicting where a market will go ultimately depends on having a skilled reading of the present and likeliest future states of a stock. There is nothing random about doing well, and the mark of a good investment is that it outpaces the average during down times and firms such as Tim Armour has done just that, averaging 1.47 percentage points annualized above the relevant index benchmarks even after subtracting for fund expenses.
In recent months, Tim Armour has predicted that the international markets are on a track for faster growth with more inflation and rising interest rates, mainly because of a seismic change in the US, China, and other nations regarding globalization and politics.
Tim Armour is the chairman and CEO of the Capital Group, and has been with the company for 34 years. He started there upon graduation from Middlebury College with The Associates Program and was an equity investment analyst. Tim Armour was named chairman in 2015.
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