Warren Buffett’s Investment Approach could be Very Wrong

Warren Buffett gambled with $1 million for charity hoping to receive higher investment returns than any other hedge fund investor. He invested the cash in an S&P 500 passive index fund, and since the results of his bet will be out by the end of the year 2017, it is possible that he might collect it. The good thing about this investment is that it involves little cost and is not complex at all. Mr. Buffet did not just invest in it without any concern, and his approach involved analyzing different companies so as to build a strong portfolio. Timothy Armour, an investment executive at Capital Group does not agree with Buffet’s insights about index funds, and these were his viewpoints:

He said that many companies offer different investment products labeled as active and passive for a consumer to decide on which one to choose. All investments involve costs such as management fee among others and it is possible to earn mediocre returns not only because of the costs involved but because of the volatility risks and other opportunity costs unknown to the investor. Thus knowing a good investment scheme will not depend on the aspects of the debatable active or passive status but the amounts of costs involved and the volatility risk. Many people will convince you that passive index returns stand as the safest way towards retirement. Apparently, they do not seem to offer any cushion in case of market downturns. From a survey carried out in the year 2016, it was revealed that index funds are fully exposed to volatility and losses if market downturns happen to occur. However, despite such arguments, Mr. Buffett believes that investing in passive index funds can bring long-term investments returns and at the same time have peace of mind. To him, the investment was a safe bet and more information click here.

About Timothy Armour

Timothy Armour is a prominent investment executive who serves Capital Group as a chairman and CEO. He has a vast experience in handling investments especially equity investments. He had served different individual and companies in his career at Capital group serving in diverse positions before he became the CEO and also after. He was once an equity investment analyst, and he managed to serve numerous global telecommunications and other U.S. service companies. Timothy graduated from Middlebury College with a Bachelor’s degree in economics and Timothy’s lacrosse camp.

Other Reference: https://www.thecapitalgroup.com/us/about.html

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