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Passive Versus Active Investing – Warren Buffet Claims


Active versus passive investing. Mr. Warren Buffett believes that passive investing makes for a greater long-term return than active investing. He is so sure about this claim that he is willing to bet 1 million dollars – which will go towards charity – that he can achieve this result up against a group of active fund managers by investing in a S&P 500 passive mutual Fund. There are many facts that supports this claim as Timothy D. Armour elaborates this notion.

Warren Buffett believes in the bottom-up investing approach. Timothy Armour agrees that critical analyzing of companies and constructing a solid portfolio is the right approach to a wealthy retirement and Warren Buffett is the prime example of a wealthy investor who continuously delivers the message that, Americans need to get on board with saving more for retirement and making the smartest investments.

Warren Buffet also believes that low-cost is a key component to greater returns from your Investments. Passive Investments definitely have an advantage over active investing in that regard which strengthens his claims. Finding the best fund managers intels two approaches – according to extensive research and experiments – and finding a fund manager with low expenses – low-cost funds – is one them. The second approach is high manager ownership – mainly uses much of their own money. Fund managers that intels these two components makes for less expensive investing.

Having better outcomes than the market over the long run is not luck. During good and bad markets, Timothy Armour’s firm has averaged 1.47 percentage points above the relevant annual index benchmarks. Who is Timothy Armour?

Timothy Armour is a portfolio manager out of a Los Angeles office. He holds a title as a chairman and chief executive officer of Capital Group, Inc. He has 34 years of investment experience.

He joined the Capital Group Company, Inc in 1983 where he began his career as a participant in the associates program. He managed to obtain a bachelor’s degree in economics from Middlebury College. In addition to his extensive resume, he is also an equity portfolio manager and the chairman of the Capital Group Companies Management Committee.

When it comes to active versus passive investing, Warren Buffet’s claims of passive over active investing for greater returns deems as most appropriate, especially for the long-term. Thirty-four year investing veteran Timothy D. Armour is in agreeance with this claim and the cost of active investing is a key deciding factor. Warren Buffet has many key backing factors in which strengthens his betting decision and after close consideration into his claims, he does make valuable points in which illuminates his bet.

Read more on Bloomberg.

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