Growth versus Value

[bbarberayr]

Ran a chart comparing IVW to IVE (S&P growth versus value).  Growth has dramatically outperformed since 2009, but this is one of those reversion to the mean type of metric and long periods of outperformance by growth are usually followed by multi-year periods of outperformance by value.  Hard to used this to time the market, but seems to be happening now through this marker turmoil as growth stocks get hit and value stocks hanging in their better.

 

To get an idea of what types of stocks are in each area, take a look at:

 

http://www.ishares.com/us/products/239728/ishares-sp-500-value-etf

http://www.ishares.com/us/products/239725/ishares-sp-500-growth-etf

 

Value is high in financial, industrials and energy, growth in tech, health care and consumer discretionary.  These could be areas we should be focusing on.

 

Any thoughts?

[jschembs]

The earlier you learn this, the better:

 

Most analysts feel they must choose between two approaches customarily thought to be in opposition: "value" and "growth." Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing.

 

We view that as fuzzy thinking (in which, it must be confessed, I myself engaged some years ago). In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value, constituting a variable whose importance can range from negligible to enormous and whose impact can be negative as well as positive.

 

- Old, Genteel Uncle Warren

[gary17]

This is a topic that is probably in every investor's mind... I've had the opportunity to discuss this with a few very successful investors this year. 

I still love my own analogy of an engineering degree - the price tag of the education is probably $150K over 4 years but the "value" is far more than that over an engineer's career.  The engineer will grow his experience and likely earn ever greater returns on his initial investment.

 

It is nice to be buying $1 for $0.50; but I'd be happier to pay $2 for $1 if that $1 turns into $100 in the future :)) 

[Jurgis]

The earlier you learn this, the better:

<snip>

In our opinion, the two approaches are joined at the hip:

 

just buy SP500 and be done with it.  8)

 

:P