People are deciding how to invest more and more by themselves now. They have chosen the path to choose where their money will be invested instead of giving it to their companies and having them put it in the best place possible. With more and more uneducated investors entering the market it seems that investing is moving away from active investing and more towards passive. This seems to have been a smart move by investors over the past couple of years as indexes have been outperforming some of the top investing funds that people usually go to.
Warren Buffett foresaw passive investing as becoming more of a success in the past few years as he wagered $1 million for charity that he can achieve better returns through investing in the S&P 500 when pitted against hedge fund managers. The end of the bet is coming up soon and it looks that he will win. Tim Armour, the chairman and chief executive officer of Capital Group, agrees with this calculation and the move taken by Warren Buffett. However, when writing about the bet he does bring up a good point that too many investors are not aware of the risks that are involved when using a pure passive play investing strategy. Too many Americans that are choosing this strategy don’t know that investing in these indexes gives you 100% exposure to the market when times go bad because they have no real strategy behind which stocks you choose. Click here to know more.
When investing in specific companies, as active investors do, you can make sure to give yourself some shelter from certain areas of the market so you aren’t blindsided by a bad turn. Tim Armour feels not enough investors understand this and believes that it is a talk worth having to inform unknowing investors.