Warren Buffett has made the case that the majority of people who invest should stick with a passive fund that follows the S&P 500. The fees are very low and this strategy will beat the results of the majority of actively managed funds. Recently Tim Armour, the Chairman and Chief Executive Officer of the financial firm Capital Group, wrote an article on CNBC stating that active funds should play a role in your portfolio.
Armour agrees with Warren Buffett that most funds don’t “earn their keep” as they have fees that are far too high, excessive trading (which drives up costs), and can’t match the performance of the S&P 500. However, that’s not all active funds and also downplays the risks of passive investing. Tim Armour says that there are good mutual funds that have lower fees and don’t trade excessively. The other benefit to actively managed mutual funds is that they avoid the main pitfall of passive funds which will rise and fall with the market. This benefit is that the manager can mitigate the losses when the markets are going down while a passive fund can’t.
Tim Armour has spent his entire professional career at Capital Group where he started in their The Associates Program. While he is the Chairman and CEO of Capital Group he also continues to serve as a financial advisor. He was named the Chairman after the unfortunate passing of Jim Rothenberg, the previous Chairman of the company. He is a graduate of Middlebury College where he earned his bachelor’s in economics.
Armour oversaw the partnership Capital Group formed with Samsung Asset Management. This partnership was formed to develop active investing strategies in South Korea. In a statement about the partnership, he said that the broader plan was to co-develop investment solutions for Korean investors.