Capital Challenges Buffett

Warren Buffett, whose proven his acute business acumen over the course of a storied career, recently made a wager with a group of hedge fund managers for $1 million to be donated to charity, that he can achieve higher returns by investing in an S&P 500 passive index fund. As the end-date for the wager approaches, it looks as though Warren Buffet will come out on top and collect the funds. Warren Buffett’s stance in making this wager came from his view that many of the funds currently available on the market are expensive and achieve such little return. According to Warren Buffett, simple, low-cost investments should be held for the long-term, therefore allowing a safer road to high-yield investments. While Timothy Armour agrees with much of Mr. Buffett’s strategy, their perspective’s diverge when it comes to the safety of utilizing the S&P 500 passive index fund. Armour believes that although traditionally thought to be the safe investment choice, it is now time to challenge that theory. As per a recent survey in which 1200 investors were reviewed online, nearly half of them were unaware of the volatility that they are exposed to during market downturns, as the safety factor is nearly nonexistent in comparison with its counterpart. Over time it has been observed that on average, actively managed funds have done worse, but there have been several exceptions that have outperformed. Timothy Armour looks to this example: If an investor placed $10,000 in the very first S&P 500 passive index fund, today he would have over $500,000, but if that same amount were placed in one of the top-performing active funds from American Funds, the return on investment would have been higher and more information click here.

Timothy Armour is the Chairman and Chief Executive Officer of Capital Group and Chairman and Principal Executive Officer of Capital Research and Management Company, Inc., having over 34 years of experience in the investment world. He graduated from Middlebury College in 1983, where he soon after joined The Associates Program, beginning his career with Capital Group and learn more about Timothy.

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