Investors seeking a steady stream of income would do well to explore the realm of high-yielding equities, a market segment often overlooked in favor of its flashier growth-oriented counterpart. A comparison of two popular ETFs reveals a stark contrast: the iShares Russell 1000 Value Index ETF boasts a yield of 1.8%, dwarfing the 0.4% offered by the iShares Russell 1000 Growth Index ETF.
While growth stocks have historically outperformed their value counterparts, the tables turned in 2022, marking a rare instance of value stocks emerging victorious. This anomaly is all the more striking when considering the past decade, during which growth stocks have dominated, with the Russell 1000 Growth Index surging an impressive 575%, compared to the Russell 1000 Value Index’s more modest 200% gain.
However, this is not always the case. In the tumultuous decade spanning 2000-2010, which included the Great Recession, value stocks proved the superior performers, eking out a meager 8% gain, while growth stocks languished, declining 15% over the same period.
The value investing philosophy has its roots in the seminal work “Security Analysis,” penned by esteemed economist Ben Graham, whose illustrious student roster included none other than Warren Buffett. So, what triggered this recent shift in performance? Several factors are at play, including seismic changes in the economy, the rising importance of intangible assets, and the current interest rate landscape. As the tide turned in 2022, investors would do well to reassess their portfolios and consider the allure of value stocks.
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