For the past 12 months, with the broad stock market down around 25%, mutual funds specializing in large value stocks fell less than 10% while funds holding small value stocks gained around 7%. During this same period, large growth and large value funds lost more than 40% and 30%, respectively.
Just a few years ago, growth funds were riding high, attracting billions of dollars from investors, who shunned value funds. The lesson to be learned: it pays to hold both types of funds and to invest in whatever is out of favor. Now, that means tilting toward growth funds.
Long-term (the past 10 years), both large value and large growth funds have gained 11% per year, despite the market’s ups and downs. However, you could have pushed up the returns a bit by leaning to the out-of-favor style.
