When it’s Value vs. Growth, History is on Value’s Side

Amongst professional investment managers, there is a perennial question about whether “growth” stocks or “value” stocks are better. At Gilkison, we apply an evidence-based approach to everything we do, which leads us to take an overweight position in value stocks relative to the market (and some other investors). For more information on what value and growth stocks are, you might like to refer to our Knowledge Centre.

One of the big issues with investing is that the present-day view is not necessarily the most sensible thing to base your decisions on. After all, every one of us is investing for the long term; indeed for the remainder of our lives, and want the best possible outcomes in that longer-term context. To achieve this, there will almost certainly be periods when the chosen path is not looking so good and questions arise; have I done the right thing?

In relation to the question of “Value” vs “Growth”, the graph below shows that although there have been periods of time when Value stocks have underperformed, over the longer term, there is a significant reward for holding steady.  Historical performance does not come close to guaranteeing a future outcome, however, there is strong evidence that patterns do exist.  In a world filled with options, our clear preference is to base important decisions on the thing history has proven most reliable.

Read the article here.