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The Audacity To Disagree With Buffett

In the great debate of Actively-Managed vs Passive Index Funds, it looks as if Warren Buffett is winning. But not for the reason he thinks, according to Capital Group Chairman, Tim Armour. Bottom-Line Up Front: Low-Expense Funds whose Managers invest their own money alongside the Investor is the way to ensure a higher chance of success in mutual funds investing. Buffett, a proponent of Passive Index investing, recently shared this wisdom in his annual shareholder letter.

But while Armour agrees with Buffett’s “bottom-up” investment approach, he disagrees that the reason passive funds can outperform actively-managed funds is because of poor investing strategies. Armour contends that high-costs and excessive trading is at the root of mediocre returns with actively-managed funds. But offers that passive index funds are more volatile and less insulated to market downturns. Armour says the key to success has nothing to do with choosing a passive versus actively-managed fund. It has to do with rigorous analysis of low-cost funds that focus on delivering “long-term” investment returns better than the market during bad times. An investor focused on that is better positioned to find the right fund, always.


Warren Buffett has been considered one of the greatest investors of the last few generations. From his beginnings with Buffett-Faulk & Co., to his current massive conglomerate, Berkshire Hathaway, Buffett has experienced enormous success in investing. He is considered by many to be the golden standard, and his investment strategies are taught in some business schools. A graduate of Columbia University, Buffett holds a masters degree in Economics.

Tim Armour has been in the investment markets for more than 30 years, all of them with Capital Group. In July 2015, he was named Chairman of the board of the same company. He holds a bachelors degree in Economics from Middlebury College.

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