The multi billionaire and celebrated business magnate, Warren Buffett, in 2008, made a bet with the members of the sizable asset management and advisory firm, Protege Partners, that he could make more money on a single investment than all of their hedge fund sages combined – Protege gladly accepted with both respective parties agreeing that all proceeds would go to charity.
Buffet placed his bet on a standard passive index fund, the S & P 500, whilst Protege Partners took their own investment strategy for the game in a wide array of different directions. Now, eight years later, it looks as if Mr. Warren Buffett backed the right horse, as he has made considerably more than Protege, and if the trend continues there is little chance for them to catch up to the business moguls gains.
Despite the praise that has been heaped upon the charity venture in the press one lone man cautions prospective investors against employing a similar strategy – that man is none other than Timothy Armour, a notable investor and businessman in his own right and the current head of research, chairman and CEO of the prominent financial firm, Capital Group.
Where Mr. Armour breaks with Buffett is upon the protection provided by passive index funds. He notes that while it is true that they can be a valuable way to craft a portfolio over-reliance upon them can lead to a wide variety of complications down the road. The main reason for this, according to Armour, is that passive index funds give those who utilize them ZERO protection from down markets. America is currently in a bull market and this is definitely a contributing factor to Mr. Buffett’s recent gains (alongside his considerable experience) but there is one sure thing in the world of investment – bull markets always turn.
Fine more about Timothy Armour at https://timothyarmour.wordpress.com/