How Important Is Style?

July 26, 2011

 

Again, the actual returns in the past year for all of the growth funds I looked at were clustered around 30 percent, so what you’re looking at in the table below is just the difference between each fund sponsor’s growth and value ETFs, in percentage terms.

WisdomTree

Vanguard

Schwab

Rydex

PowerShares

iShares S&P

iShares Russell

First Trust

1m

1.78%

3.69%

2.38%

3.94%

3.49%

3.07%

3.11%

3.34%

3m

0.11%

2.87%

1.40%

2.61%

0.70%

3.90%

1.92%

0.82%

6m

-2.16%

1.87%

1.59%

4.21%

1.56%

4.66%

2.92%

2.88%

1y

-5.82%

5.49%

7.56%

14.57%

7.78%

7.33%

7.95%

6.78%

 

As you can see, the WisdomTree value fund actually outperformed its growth fund over the year. The Rydex Growth fund far outperformed its value fund. Other than those outliers, growth funds outperformed the value funds in a similar fashion for the one-month and one-year time periods. Still, the three-month and six-month return discrepancies are all over the place.

Each index provider has different rules governing the population of its growth and value indexes. Some include “core” stocks in both indexes, thus narrowing the gap between the two. They also all use different selection and weighting methods, which impact returns. Rydex’s value and growth funds, in particular, both outperformed the other ETFs in their segments: RPG returned 42 percent and RPV returned 27 percent.

Growth Returns

 

Over the past year, there’s a 6 percent difference between returns of the average growth fund and the average value fund.

Even among the growth funds, there’s an 18 percent difference between the highest growth performer (Rydex’s RPG) and the lowest growth performer (WisdomTree’s ROI).

Similarly, there’s 9 percent difference between the highest value performer (WisdomTree’s EZY) and the lowest value performer (iShares’ IVE).

Value Returns

Long story short—style designations do matter, but your choice of ETF and time period matter more.

 

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