Warren Buffett talks about the mediocre funds that are expensive and shortchange the investors. Tim Armour agrees with this view and supports simple investments that are low in cost. He says that these are long terms investments that should be bought and just held. The investment strategy of Warren Buffett does not need any proof of approval. Hence he is the best person to say that Americans have to save more in order to cater for their retirement needs. They must invest and stay invested.
The consumers need to look at the product closely. There are a number of mutual funds that are providing mediocre or really poor returns in the long-run. This can be due to the high management fees associated with them or due to excessive trading. Besides, consumers are not aware of volatility risks. Even the opportunity costs of all these passive investments may be typically unknown. Hence the issue here is not about being active or passive. Rather it is all about the long-term basis of investment returns. A key component of these returns will be low costs.
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Hence passive index returns cannot be considered as safe for retirement any more. Index funds do have an important place, but they cannot be a cushion against the markets being down. The main issue here is that people are now aware of the volatility as well as losses in case of market downturns.
Another fact is that the actively managed funds have not done that well in terms of the market over a meaningful time frame. Tim does talk about exceptions, though.
Tim Armour is the Chairman of Capital Group, and its Chief Executive Officer too. He stated that Warren Buffett is putting on $1 million for charity. But he would have done better by simply investing it in the S&P 500 passive index fund.
Learn more about Tim Armour: https://www.thecapitalgroup.com/us/about.html