One of the most well known investors of all time is Warren Buffet, who is the mastermind behind Berkshire Hathaway and has amassed a net worth in excess of $50 billion. Since he has been such a successful investor, many people seek out his guidance for financial advice. One of the most common pieces of advice is to invest simply and economically. By this, he often means to avoid investing in funds that come with unique investment mixes and high fees.
Several years ago, Buffet challenged top investment managers by simply making a small charitable bet. Warren Buffet bet that he could receive a better return on investment by investing in a cheap and simple index fund than he would receive from an expensive mutual or hedge fund. In the past month, the time of the bet came due and Buffet was proven to be the winner.
While it is clear that Buffet won this past bet, some people are still not sure that his approach is always the best option. Tim Armour, who is the CEO of Capital Group, has pointed out that Buffet’s success with this bet came during a time of prosperity where the stock market went up. However, there are a lot of periods of time where more active management is necessary to prevent the downside risk.
Armour pointed out that over the past 30 years, the funds that he has managed have had an average return in of more than 1.4% than the stock market. Much of this is due to his fund’s ability to manage risk during downturns and to foresee companies and industries in decline. Armour has over 30 years of investment experience, all of which he has spent with Capital Group. Prior to working for the company, he received a bachelor’s degree from Middlebury College.
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