Warren Buffet is the Chairman of Berkshire Hathaway and often considered one of the best investors of all time. Buffet, who is one of the wealthiest people in the world as well, has often stated that most people would be better off investing in low-cost funds, as opposed to actively managed funds that have higher expense ratios.
To prove his point, Buffett recently entered into a bet against a few different mutual funds and hedge funds to see who could get a better return in a 12-month period. Buffet, who only invested in a few different index funds, ended up getting a better return over the year than all of the funds that he was up against.
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While it would seem that Buffett proved his point, some are still not sure that his strategy is the best option. Timothy Armour, who is the principal of The Capital Group, stated that one of the reasons that Buffett was successful was because he happened to invest in a bullish economy. During bearish economies, hedge and mutual funds have the ability to build in stop-loss protections and hedge against risk while index funds do not. Because of this, over the long haul, The Capital Group has an average rate of return 1.5% higher than an index fund, even after fees are considered.
The Capital Group is a prominent investment firm and asset manager. Timothy Armour has worked for this firm for over 20 years, spending much of this time in portfolio and asset management.
Learn more about Timothy Armour: https://www.business.com/advice/member/p/timothy-armour/