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S&P 500 Pure Growth & Value Subsets Frequently Beat Their Parent Index

While recently on the road “chirping for seed” (speaking to clients), a question that frequently came up was “growth or value?” In 2005, S&P DJ Indices introduced a unique set of style indices: Pure Growth, Growth, Blend, Value and Pure Value.

Performance and Volatility of S&P 500 vs. 50/50 Portfolio of S&P Pure Growth/Pure Value Indices

Currently Pure Growth is dominated by the Consumer Discretionary (a 26% weighting) and Tech (28%) sectors, while Financials (26%), Utilities (15%), and Energy (10%) have the largest weighting within Pure Value. The S&P 500 Pure Growth index edged out Pure Value with a 10.9% to 10.4% compound annual growth rate (dividends included) since inception in mid-1995. Annually, however, each index outpaced the other 50% of the time.

Due to this alternating outperformance, some investors may prefer not to try to predict which style will outperform the other in the year ahead and adopt a 50%/50% exposure to both Pure Growth and Pure Value, and for good reason. A hypothetical portfolio of 50% S&P 500 Pure Growth and 50% Pure Value Indices (rebalanced annually) recorded a CAGR of 11.4% to the S&P 500’s 7.8% over the past 20 years. This portfolio also beat the S&P 500 in 75% of the calendar years since 1996.

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Feb 09, 2016
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