Investing Strategy as Market Shifts from Growth to Value

The value strategy has underperformed growth over the past decade, but over the past 12 months “it appears the pendulum has swung to favor value stocks and recent data suggests the trend is accelerating,” says a recent article in Forbes that suggests investors might be best served to adopt a combination strategy.

The article emphasizes the importance of long-term planning, noting that both a growth and value strategy will probably make money in the long run, underscoring the importance of understanding the composition of your investment portfolio. It cites comments from Halpern Financial senior wealth adviser Dan Trumbower: “It is important to know what you are invested in and why so that you are more likely to stick with your long-term plan for investing. Ideally, you should not be jumping into growth when it performs well and dumping value when it isn’t doing so well. Market timing is not a successful strategy to build long term wealth.”

According to Matthew Eads, Vice President of Eads & Heald Wealth Management in Atlanta, Georgia, “There will not be a neat instantaneous division between the end of one style and the beginning of the new style. It will be a messy and confusing transition filled with doubt.” He notes that it could take a period of 7 years before the broader market realizes the shift, and it’s that transition period that presents opportunity for investors.

Rebalancing—not market timing–is essential, the article asserts. According to Canterbury Consulting Vice President Matthew Lui, “Retirement investors should understand the difference between growth and value stocks in order to make sure that they are not inadvertently overexposed to one or the other.”

The article suggests that instead of viewing value and growth strategies as an “either/or option,” investors might consider them as “dance partners in an investment ballet,” and adopt a combination of both.