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A Snapshot of Growth vs. Value Investing
View from the Observation Deck
After 2018's disappointing showing, stocks rewarded shareholders handsomely in 2019.
We update this post every few months so that investors can see which of the two styles (growth or value) are delivering the best results.
The S&P 500 Index closed at 3,230.78 on 12/31/19. It stood 0.28% below its all-time closing high of 3,240.02 on 12/27/19, according to Bloomberg.
The S&P 500 Pure Growth Index outperformed its value counterpart in all five periods featured in the chart.
The total returns through 12/31/19 were as follows (Pure Growth vs. Pure Value): 15-year avg. annual (10.75% vs. 9.45%); 10-year avg. annual (15.12% vs. 13.83%); 5-year avg. annual (10.88% vs. 7.38%); 3-year avg. annual (16.11% vs. 9.12%); and 1-year (28.99% vs. 25.45%).
As of 12/31/19, the largest sector weighting in the S&P 500 Pure Growth Index was Information Technology at 35.3%, according to S&P Dow Jones Indices. The largest sector weighting in the S&P 500 Pure Value Index was Financials at 32.7%.
The Large Growth and Large Value fund categories tracked by Morningstar, which include both open-end mutual funds and exchange-traded funds, reported estimated net outflows totaling $57.24 billion and $9.65 billion, respectively, in the first 11 months of 2019, according to its own release.
Large Blend funds and ETFs, however, reported estimated net inflows totaling $105.03 billion over the same period, an indication that investors are presently taking the guesswork out of style investing by owning both, in our opinion.
This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The S&P 500 Pure Growth Index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest growth characteristics based on three factors: sales growth, the ratio of earnings-change to price, and momentum. It includes only those components of the parent index that exhibit strong growth characteristics, and weights them by growth score. Constituents are drawn from the S&P 500 Index. The S&P 500 Pure Value Index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest value characteristics based on three factors: the ratios of book value, earnings, and sales to price. It includes only those components of the parent index that exhibit strong value characteristics, and weights them by value score.
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Thursday, January 2, 2020 @ 12:42 PM
These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.