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Commentary

Value vs. Growth: Widest Performance Gap on Record

Large-growth funds smashed large-value funds last year.

Despite a fourth-quarter surge, U.S. stock funds following value investing strategies suffered one of their worst years on record relative to growth funds in 2020, with the large-cap growth stock funds trouncing large-cap value funds by an even wider margin than during the dot-com bubble year of 1999.

Large-growth stock funds--which generally invest in companies with strong earnings growth profiles--returned an average of 34.8% in 2020. That was 32 percentage points ahead of the average large-value fund, which have portfolios of companies that are deemed cheap compared with their potential or are seen as turnaround stories. That exceeded the gap registered in 1999, when growth beat value by 30.7 percentage points.