For the past fifty years, Warren Buffett has continued to be one of the best investors in the world. He has turned a number of his investments into major corporations and is now one of the wealthiest people in the world. Buffett is also well known for providing people with sound financial advice, which can help them to build a long-term strong investment portfolio.
In 2016, Buffett made a bold statement that it would always be better to invest in index funds as opposed to actively managed hedge funds. The reason for this is that the hedge funds charge high fees while index funds are very cheap. Buffett even entered into a friendly competition with a number of high profile funds to prove that his strategy was correct.
After a six month competition, Buffett was found to be the winner as the index funds earned a higher investment return over that period of time compared to the competition. While Buffet did win the bet, not all people are sure that his investment suggestion is still the best option. One person that has suggested another approach is Tim Armour, who is one of the heads of The Capital Group.
Tim Armour stated that one of the reasons that Buffett won the bet was because he made the bet during a bull market. The value of hedge funds often comes during bear markets when the stock markets can decline considerably. During these time periods, hedge funds are able to make investments to hedge against market declines. Tim Armour further stated that during his twenty year run with The Capital Group, the company has had an investment return of 1.5% annually on average higher than the returns earned by index funds. Over the course of a long period of time, this could add up to a big difference in profitability. Click here to know more.
Visit his LinkedIn Profile: https://www.linkedin.com/pub/dir/Tim/Armour