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Value vs Growth Debate

At Stratus, we believe in long-term investing strategies that tilt toward risk factors with higher expected returns.  One of these risk factors is over-weighting value stocks in relation to growth stocks because paying a lower price for a stock means we should expect a higher return.  However, over the last decade growth stocks have outperformed value stocks, which has led many investors to wonder whether the value "premium" is a viable risk factor anymore.

To help answer that question, we would like to provide you with some interesting research from Dimensional Fund Advisors* (DFA).  In this short piece, Dimensional compares the July 2009 to June 2019 return of value and growth stocks with their long-term return (July 1926 through June 2019).  This comparison shows that over the past 10 years, value stock returns have been in-line with their long-term averages while growth stocks have vastly outperformed their long-term averages.  Based on this data, here's the question we pose to investors: Is it worth making a bet that growth stocks will continue to depart from their long-term historical average returns?

Remember that markets are volatile and changing your investment strategy without considering comparisons to other time periods is often a way to miss the long-term out-performance of a specific risk factor.  We believe a consistent, well thought out plan is your strongest strategy for wealth creation.

We'd be happy to talk with you If you'd like to discuss your portfolio allocation and financial planning strategy.