Timothy Armour is standing behind Warren Buffett in his attempt to gain better returns on his investments than a group of hedge fund managers, and he is doing it by investing in the S&P 500 passive index fund, something most people say is impossible. Like Buffett, Tim Armour knows that it can be done and has the facts to back up Buffett’s claims.
The S&P is a low cost simple investment, but Mr. Buffett has been spending time investing from the bottom up, researching and analyzing companies so he can build a strong portfolio. This passive index investment strategy has its risks, it is volatile and unknown. It offers a way to invest at low costs, but requires much legwork. Being able to do better than the other investors during bad markets is one of the keys to growing a solid nest egg in the S&P.
Armour goes on to note that the average active fund has underperformed over meaningful lengths of time, but there are exceptions. In general, someone who invested $10,000 in the first S&P 500 index fund over 4 decades ago would have over $500,000 today. That is certainly a nice growth, but someone who invested the same amount in more active funds from American Funds would have gained considerably more money. Armour works for a firm that is 86 years old, combining their 18 equity funds, that amounts to about 653 years of investment experience. The Capital Group, Armour’s company, has averaged 1.47 percentage points annually above similar index benchmarks.
Armour currently serves as the Chairman, Director, and Principal Executive Officer for Capital Research and Management Company. He is also the Chairman and Equity Portfolio Manager for The Capital Group Companies, Inc. He began his career with a Bachelor’s Degree in Economics from Middlebury College before starting out in the professional world where he quickly climbed the corporate ladder. He has held board memberships with 3 companies, including AMCAP Fund.