How Important Is Style?

July 26, 2011

People have been talking about ‘growth’ vs. ‘value’ investing for a long time and, judging by the growing ETF market, they’re not going to stop talking any time soon.

To be exact, there are 44 U.S. growth ETFs and 44 U.S. value ETFs that cover small caps, midcaps, large caps or the total market. That compares with 110 U.S. equity ETFs that don’t have style designations, so style ETFs make up a little over 44 percent of the U.S. equity offerings (I didn’t included leveraged and inverse funds in my tally. With them, I counted 259 U.S. equity funds, 105 of which are focused on style).

The market is pretty significant and, as I said, growing. Russell recently launched not one, but three different types of growth ETFs for investors who want to get a little more granular.

Seeing all of these ETFs, I was curious whether the choice of a growth or value fund really made a difference.

I looked at eight pairs of ETFs that cover the growth and value portions of their respective indexes. Those ETFs are:

  • WisdomTree LargeCap Growth (NYSEArca: ROI)
  • WisdomTree LargeCap Value (NYSEArca: EZY)
  • Vanguard Mega Cap 300 Growth (NYSEArca: MGK)
  • Vanguard Mega Cap 300 Value (NYSEArca: MGV)
  • Schwab U.S. Large-Cap Growth (NYSEArca: SCHG)
  • Schwab U.S. Large-Cap Value (NYSEArca: SCHV)
  • Rydex S&P 500 Pure Growth (NYSEArca: RPG)
  • Rydex S&P 500 Pure Value (NYSEArca: RPV)
  • PowerShares Dynamic Large Cap Growth Portfolio (NYSEArca: PWB)
  • PowerShares Dynamic Large Cap Value Portfolio (NYSEArca: PWV)
  • iShares S&P 500 Growth (NYSEArca: IVW)
  • iShares S&P 500 Value (NYSEArca: IVE)
  • iShares Russell 1000 Growth (NYSEArca: IWF)
  • iShares Russell 1000 Value (NYSEArca: IWD)
  • First Trust Large Cap Growth Opportunities AlphaDEX (NYSEArca: FTC)
  • First Trust Large Cap Value Opportunities AlphaDEX (NYSEArca: FTA)


Over a one-year period, on average, the growth funds outperformed the value funds. The overall returns for the growth funds were clustered around 30 percent, with Rydex’s RPG standing out from the pack with returns of about 42 percent in the past year.

Growth vs Value Returns


But when you break it down into the difference in returns between each of the index pairs and look at different time periods, the story changes a little bit.

The table below shows the percentage difference between each issuer’s growth and value funds for the time period indicated. The numbers reflect growth relative to value returns.


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