Fifteen Years Now
It’s no secret that value investing has struggled. When Vanguard introduced its Vanguard Growth Index Fund (VIGRX) and Vanguard Value Index Fund (VIVAX) index-fund series in 1998, history suggested that Value would lead, comfortably. Not so much. Value did indeed begin well, courtesy of the 2000-02 technology-stock crash, but over the trailing five-, 10-, and 15-year periods (through July 31), Growth Fund is ahead.
The bad news for value investing is that growth stocks’ victory appears rational. The reason for owning value stocks is not that the cheaper firms are superior. The financial markets are not so irrationally priced that good companies can be bought for less, while inferior ones cost more. The logic is instead that the outlook for growth stocks is too high, and that for value stocks too low.
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John Rekenthaler does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.