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CEO Tim Armour Says Using Actively Managed Funds Makes Sense

Warren Buffett’s long-standing advice to investors is to buy a passively managed fund that follows the S&P 500 as no other strategy offers the same returns.

The Chairman and Chief Executive Officer of Capital Group, Tim Armour, doesn’t believe it’s as black and white as that and that having actively managed funds as part of your investment portfolio does make sense.

Most actively managed funds cost investors too much as they have high fees and trade stocks far too often. Tim Armour says that is not how all of them work, though, and you can find an actively managed fund that has lower fees and a reasonable amount of trades. The key, he said, is to also find one where the hedge fund manager has his own assets in the fund he is managing as those have much better returns. He also said that passive funds have no protection from falling markets, which he said is often overlooked.

Tim Armour, who lives in Los Angeles, California, was elected as the Chairman of the Board of Directors at Capital Group in July 2015. He was named, in accordance with the succession plan in place, after the untimely death of the former Chairman, Jim Rothenberg. Mr. Armour has spent his entire 32-year career at Capital Group and continues to serve as a financial adviser.

This isn’t the first time that Tim Armour has written about the virtues of actively managed funds. He has said before that investors shouldn’t settle for average returns. He has said that investors need to find a fund manager who “earns their keep” but finding stocks that are more valuable than their currently priced at. This strategy will lead to superior returns over the long-term. He has encouraged people to find these managers as it is the best path to financial success.

Learn more about Tim Armour: http://www.reuters.com/article/us-americanfunds-armour-idUSKCN0HY0EN20141009

Untapped Resources: David Giertz Has Some Ideas on Planning for Retirement

Mr. David Giertz, a Senior Vice President at Nationwide Life Insurance Company in the financial distribution and sales department, recently discussed, with a Wall Street Journal reporter, the fact that a study revealed his representatives are not talking to customers about their Social Security income. Mr. David Giertz reveals that their survey, of the Nationwide reps, shows that not enough reps are talking to their customers about what will be a large piece, to varying degrees, of most all client’s retirement plan. Mr. Giertz contends that it is important to think about this, and it is being suggested that clients will leave if they are not spoken to about the value Social Security income will have in their overall plans.

The data at https://about.me/davidgiertz indicates that Social Security could be as much as 40% of a client’s retirement portfolio, and if client’s feel that their needs are not being met by an advisor who is not considering Social Security as part of their retirement planning, they will likely go to a firm that is considering those funds when helping clients plan for retirement noted on angel.co. The funds paid into Social Security have to be drawn down on, regardless of whether a client wants it or not, and those funds are going to be paid out, at the very least, under the auspices of required minimum distributions (RMD).

The discussion on Twitter about what to do with RMDs is an important one to have with clients, and this is going to help them make use of those dollars. Most people don’t even plan for it, and when they start rolling in, they’ve no clue what to do with the funds. Invariably they let the deposits build up in banks. This poses 2 problems for a company like Nationwide: the first is those dollars could be being invested rather than sitting in a bank account, and the second is that someone at that bank, who works in the exact same capacity as an advisor at Nationwide, will definitely harvest those funds for investment opportunities. On that note, Mr. David Giertz is indeed very smart to start to address the issue with his representatives.