With $1 million on the line, Warren Buffet has wagered that amount for charity proving that he can gain better returns compared to a group of hedge fund managers. His proposed method is by investing in an S&P 500 passive index fund. His strategy is to commit to low cost, simple investments and holding it out for the long run. It turns out that he may actually win this gamble.
In Buffet’s recent annual shareholder letter, he offered some wisdom based on his experience of investing. Consumers, however, should still be wary of product labels no matter which industry. The “active versus passive” discourse present in multiple industries does not serve investors well. Many mutual funds involve excessive trading and high management fees which could provide poor returns.
Delivering good long investment returns at a low costs are key components to a successful investment. Passive index returns, despite being known for being a safe path when it comes to investing, provide no cushion against down markets. In addition, the unpredictability and opportunity costs of passive index investments are usually underestimated or unknown.
Tim Armour commenced the discussion of expanding investing opportunities. Mr. Armour serves as the chairman and chief executive officer of Capital Group. He succeeded James Rothenberg as the chairman of Capital Group on July 28, 2015.
Mr. Armour was an experienced investor working for Capital Group before serving as the chairman with 34 years of investing experience working for Capital Group. Tim covered global telecommunications and U.S. service companies earlier in his career. He graduated form Middlebury College in Vermont with a Bachelor’s degree in Economics.