Disagrees With Warren Buffett When It Comes To Active Funds
Warren Buffett’s advice to investors is simple; buy low-cost S&P 500 passive funds and leave them alone until retirement.
The Chairman and CEO of Los Angele-based financial investment firm Capital Group, Tim Armour, agrees that looking for low-cost funds is important. However, he says this doesn’t rule out using active funds and overlooks one of the big pitfalls of passive investing.
Tim Armour says that there are actively managed funds that feature low fees, and also don’t trade too much which also reduces the amount investors earn. The trick, he has said, is to find a fund where the manager has placed a large amount of their personal money. This encourages the hedge fund manager to do their best and keep the fund inexpensive. He has also said that a major problem with passive investing is that it leaves you 100% exposed to the stock market when they inevitably tank while a fund that is actively managed can mitigate losses.
One of Tim Armour’s long-standing bits of advice to investors is for them to “find active managers who earn their keep”. If the fund manager isn’t beating the market then you should move your portfolio to someone else who is. As an equity portfolio manager himself, he has done very well managing funds at Capital Group.
Armour has over 30 years of experience in the financial industry, all of it spent at Capital Group. After completing The Associates Program at the company, he worked as an equity investment analyst that specialized in telecommunication companies and United States service companies.