Whether value or growth investing is the route to better client returns is an often-debated topic. I was recently part of a team that interviewed investment advisors. Like many advisors, especially those who rely heavily on long-term studies and/or who come from an accounting rather than investment background, they were long-term, committed value investors. They rely on factor studies from firms like Dimensional Fund Advisors showing that value outperforms growth and that small stocks outperform large stocks. But are these true? It doesn’t seem so, because these value managers have been far down the list in performance, at least for the last 10 years. Are they missing something or is that just too short a time frame? I also believe strongly in analyzing where outperformance and risk reduction come from and I routinely review the performance of my various accounts, looking for factors I can use to achieve consistent, risk-adjusted returns that outperform indexes and peers. So, let’s take a look at the returns from value or growth investing. Old Market, New Market It is true if you go back 100 or more years like the DFA studies do, that value has more often outperformed than growth. But most of […]
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