- Despite the superior performance of growth stocks over the last 10 years, we need not look far back in history to witness the potential consequences of straying from value.
- We do not believe that growth stocks will always be the only game in town.
Over the long run, value investing has generally outperformed the broader U.S. equity market when it comes to building wealth. Patient investors who have stayed true to a value-minded philosophy over several economic cycles have seen compelling results as the market eventually recognised the underlying worth of the assets.
However, in the five-month period ending May 31, 2020, the Russell 1000 Value Index trailed the Russell 1000 Growth Index by over 20%. Since the end of the global financial crisis in March 2009, the Russell 1000 Value Index has lagged the Russell 1000 Growth Index by more than 5% annualised. In periods like this, when a particular area of the market underperforms relative to expectations over a long period of time, some investors are understandably tempted to stray from a commitment to their original philosophy.
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