Tim Armour is a highly respected investment manager. Hence when he speaks, people listen. He talks about Warren Buffet comments on expensive and mediocre funds as these tend to shortchange investors.
He is committed towards simple and low-cost investments that should not only be bought but held for a very long term. He is aligned with Warren Buffett’s approach to analyzing the companies before investing. This is the only way to build a durable portfolio as has already been well-proved by him over so many decades.
Tim Armour clearly indicates that Americans need to start saving much more for retirement. They need to invest and stay invested for a long time.
Armour says that investors should be wary. There are a number of mutual funds that are providing mediocre or even poor returns, either due to high management fees or because of excessive trading. There are the volatility risks that need to be considered. There are the opportunity costs in case of passive index investments that tend to be typically underestimated or they may even be unknown. Hence rather than focusing on active or passive, it needs to be all about long-term returns on investment. Here low costs will be playing a major role in determining these returns.
Just saying blindly that passive index returns are safe and hence perfect for a better retirement is not true anymore. The fact is that index funds do help, but they will provide no support in case the markets are down. This is because they are completely volatile leading to losses when the market is down.
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