Billionaire Warren Buffett wagered a $1 million charitable gift that could produce better returns by investing in the S&P 500 passive index fund than a group of hedge fund managers. Consumers, however, should be cautious about industry labels such as active versus passive.
Instead of focusing on labels, investors should focus on good long-term returns, and low costs are key to achieving those returns. Passive index returns, it should be noted, are not as safe as some say as they offer no protection against market downturns. Two simple filters can offer some insight into a sound investment approach; low expenses and high manager ownership. Finding hedge fund managers who invest their own money alongside their clients is a sound way to outpace average market returns.
Tim Armour was named chairman of Capital Group in July 2015. Armour earned a bachelor’s degree at Middlebury College and has worked for Capital Group for 33 years including in their Capital World Growth and Income Fund, Scotia Global Opportunities Fund, and The New Economy Fund. Armour suggests finding active managers earn their keep is a matter of finding those who procure relationships with investors. Capital Group has partnered with Samsung to develop active investment strategies for retail investors and institutional investors in South Korea. Armour says the plan is to co-design investment strategies to fulfill savings of South Korean investors. Timothy Armour was not surprised by the market correction with the September 2015 market selloff sparked by Chine and sees economic growth ahead during the Trump presidency.