Returns on Investments Trading on Active versus Passive Funds, According to Warren Buffet

Recently, the Oracle of Omaha, as he’s fondly referred to by millions, made a bold wager. In his million-dollar wager, Buffet claimed that he would outdo the top-rated hedge fund investors on Wall St. by investing in passive stocks and shares listed on the S&P 500. The winnings, one million dollars was, eventually going to be doled out to charity.

In an opinion piece posted on CNBC, Tim Armour of Capital Group Inc., concurs with the sentiments about shady mutual funds and managers by Warren Buffet, 100%

How Brokers Mint Millions Using Your Money

According to Tim, trading in the leading product labels often results in poor returns on investments fund, especially for short-term investors. Tim cites two primary reasons why that is the case. One, high membership fees and payment processing costs. Two, there’s a great deal of excessive trading which takes place in between the days and months leading up to your payday.

Tim notes that passive index investments aren’t necessarily the easiest and safest bets. The experienced portfolio manager reiterates on the convenience of long term opportunities. Short term investing, for instance, in passive funds on the S&P 500 is akin to a double-edged sword. During markets downturns, these indexes risk being wiped out completely and your entire portfolio comes tumbling in minutes.

Keep Costs Low for Better Margins

Mr. Armour succinct example, using America’s most active mutual funds versus the top five listed passive funds. Mr. Armour reasons, had you invested, let’s say, $10K in the top five mutual funds in America 40 years ago, you’d have made more money than someone who invested the same amounts in the leading S&P 500 https://medium.com/@timarmour.

Tim reminds us of the importance of selecting competitively priced investment mutual fund firms. Additionally, never sign up with a company which doesn’t reveal the exact investment choices and decisions done by the leading management team.

About Tim Armour

Timothy D. Armour holds several high profile positions at the hedge fund investment firm, Capital Group Inc. He’s the firm’s CEO, Chairman and, Principal Executive. Tim has a 35-year experience working in the financial Fastlane. He operates from the headquarters of Capital Group in Los Angeles. Tim is an alumnus of the business School of Middlebury College. At Middlebury, Tim specialized in Economics studies.

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