CEO Takes Buffett to Task Over Investment Strategy

In 2007 the American business magnate and highly lauded investor, Warren E. Buffett took a business bet for charity against a group of serious investors. The contest was conducted thus: both Buffet and his opponents would choose a investment venue and stick with it for a set number of years at the end of which the venue that had accrued the most money would be the winner. Buffett settled on a S & P 500 standard passive index fund where as his opponents decided to invest in numerous different hedge funds. Fast forward to 2017 and the contest is nearing its close; Buffett is bragging and telling his newsletter subscribers that standard passive index funds are the future. That hedge funds are too costly and that they act in a predatory fashion and generally given sub-par returns due to the profit incentive structures.

But are passive index funds really so great and rewarding over the long time frames? One many, in glaring particular, vehemently disagrees with Buffett’s assertions concerning the aforementioned investment strategy.

That man would be none other than another prominent investor and businessman, Timothy Armour, the CEO and Chairman of Capital Group, a immensely successful financial services firm based out of the United States of America. Mr. Armour contents that while Mr. Buffet is correct that standardized passive index funds certainly have a place in any experienced investors portfolio he urges caution when investing in them. Though the capital needed to invest in these funds is relatively low and they are extremely safe investments in a bull market (that is, the current market) they offer absolutely no guarantee of protection to a investor in a time of crisis, in a down market. Timothy Armour can mean absolutely devastating losses from all parties involved, no matter how great the fund or funds happened to be, a market slump – or in the worst case scenario, a collapse – can leave one with a giant ole hole in their wallet and bank account.

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