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Warren Buffet believed that he could garner more returns by putting his money in an S&P passive index fund as compared to a hedge fund. So sure was he that he put up a one million dollars bet that would go to charity if he would lose. Timothy Armour respects Warren’s perspective; his thoughts are well grounded from his many years of investment. The approach Warren talks about involves cheaper investments that are held in the long term. This method has been proven to work over the years. Timothy Armour agrees with him, citing that the industry is full of rogue funds that are out to devour investors. History has proven that active funds do relatively worse than passive funds, but they can’t be ignored. Other times, it has proved its worth. Tim cites his company as an example. With 86 years of investment experience and 18 funds, it has averaged $1.47 billion annually in all circumstances. This average is after all expenses are deducted.

The Comparison

The debate, however, is not about active or passive funds. Both methods have their demerits. Despite passive index funds being the most preferred way of investing, it does not protect investors from the risk of losses during downtimes. Few investors are aware of the risks involved. According to a recent survey conducted by Timothy Armour’s firm, only 50 percent of investors knew of the associated risks. Some active funds, on the other hand, have high management fees that end up eating the investor’s returns. Others do excessive trading that provides poor returns. Investors need to understand the best course of action when investing to reap big without much hustle. It is about investors getting affordable investment option that promises high returns. With the retirement rate rising by the day, people need to know the best way to save.

About Timothy Armour

Timothy Armour is a renowned economist, with interests in the capital markets. He got his training in economics at the reputable Middlebury College.

Timothy Armour has been in the investment arena for more than three decades. He joined Capital Group as a player in the firm’s Associate Program. Armour worked his way through the ranks to clinch top position.

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