June 8, 2019
Here is the article.
Growth stock investors look for companies with rising sales and profits, enterprises that dominate their markets or aspire to do so. These companies are typical of those in the S&P 500 index.
Value investors, on the other hand, look for stocks that may be temporary bargains, out of favor for reasons that might include poor management, weak finances, new competition or problems with unions, government agencies and defective products — or sometimes perfectly good companies that are in struggling industries.
One by one, these stocks usually make lousy investments. But when they are bundled by the hundreds or even thousands in mutual funds, they have historically outperformed growth stocks. The best value funds use a systematic, mechanical approach to identifying value companies based on financial ratios.
Over the past 87 years, a large-cap value index outperformed the large-cap growth index by nearly three percentage points a year; a small-cap value index outperformed a small-cap growth index by nearly five percentage points.
With additional slices of large-cap value stocks and small-cap value stocks, our portfolio's historic return would have risen to 9.9%, with a slightly lower standard deviation as compared with Step One. And notice how much this would have added to the 44-year cumulative return: More than $2.3 million, 23 times the original $100,000 investment
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