When it comes to mutual funds, I tend to like index funds better than actively-managed funds. The main reason for this is because regulations and legal risks tend to tie the hands of most mutual fund managers, with the result that most actively managed funds fail to beat the S&P 500. That said, I'm of the opinion that above-average returns are attainable, and I'm almost six years into the process of proving it with my newsletter (we're up 53%).
Timothy Armour is Chairman of Capital Group, which manages $1.4 trillion of investment assets, most notably through its subsidiary, American Funds. Mr. Armour's piece in the Wall Street Journal today brings out some very good points regarding active vs. passive investing. Perhaps the best quote from his article is as follows:
"And with thousands of funds to sort through to find ones that may or may not deliver, it's not surprising many people throw up their hands and accept the market average return of index funds. But that's a false choice that shortchanges investors who don't want to settle for average. There are active managers who have outpaced their benchmarks over the long term."
Enjoy the article!
Click here to read Mr. Armour’s article at WSJ.com