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Vinvesting.com is the leading social networking site for value investors where you can get the latest investment ideas, insights and interviews from great investors like Warren Buffett, Templeton etc. Over the last 70 years, value stocks clocked a 13.4% average annual return, vs. 10.2% for growth stocks, according to Ibbotson Associates. |
Value Investing Has Failed
Submitted by admin on Fri, 07/25/2008 - 11:38
It's been a lousy time to be invested in stocks. In the past year, the S&P 500 has had a return of negative 16.8%. Of course, that should be no surprise to anyone who follows stocks. In this sort of market, you're happy to break even.
The more interesting thing about this market is the performance of value stocks versus growth stocks. Historically, value has outperformed during recessions. But this time, value stocks have been horrible investments. Over the past year, the Russell 1000 Value Index is down 18.8%, while the corresponding growth index is only down 10.8%.
This result is so poor that it's almost unparalleled. A study by Ibbotson Associates looked at the performance of value stocks between 1969 and 2005. In that 36-year period, the worst year for value investing was in 1974, with a -21.8% return. But that year, growth did even worse, with a -32.4% return.
So why is value investing performing so poorly?
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