Tim Armour Comments On Recent Bet
During the 2016 calendar year, one of the most intriguing and entertaining events occurring was a bet between Warren Buffet and a few major hedge and mutual funds. Essentially, Buffet bet that he could earn a better return on investment by investing in a low-cost index fund than he could by investing in a mutual fund. The fund managers took Buffet up on his bet as each side promised to donate a sum of money to charity if they lost.
Ultimately, Buffet won the bet as the global stock markets had a great year and outperformed most mutual and hedge fund managers. Buffet pointed out that this was just the latest example of why it is better to invest in low-cost funds, as opposed to actively managed funds.
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While Buffet clearly won the bet, some are not so sure that his investment theory is always the best option. Tim Armour, who is the head of portfolio management at The Capital Group, stated that Buffet was partially successful due to the fact that the overall stock market had a great year. The true value of actively managed funds comes during down years when the stock market could lose more than 20%. In these years, actively managed funds can set a number of investments that can reduce losses through downside protection.
Armour, who has been the head of The Capital Group for more than 20 years, also stated this his company has a great track record. In his 20 years, his fund has outperformed the market by 1.5% on average.
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