Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.

For regular SAA and TAA portfolios, the next re-balance will be on Monday, September 24, 2018. You can also find the re-balance calendar for 2017 on ‘Dashboard‘ page once you log in.

As a reminder to expert users: advanced portfolios are still re-balanced based on their original re-balance schedules and they are not the same as those used in Strategic and Tactical Asset Allocation (SAA and TAA) portfolios of a plan.

Please note that we now list the next re-balance date on every portfolio page.

Value, Growth And Blend Stock Style Investing

In stock investing, it’s popular to talk about value investing as many famous investors such as Warren Buffett are all classified as value investors. For many index fund investors, value investing is immediately associated with value tilted index funds such as Vanguard large or small cap value funds. Unfortunately, there are some subtle details that investors should be aware of. 

First, let’s look at the performance.

Historical performance

In general, other than the size (large, mid, small cap) factor, value (value, growth, blend) is the other factor/style that can have major impacts on a portfolio/fund’s returns. The following shows the recent returns among them:

Portfolio Performance Comparison (as of 9/7/2018):
Ticker/Portfolio Name 1Yr AR 3Yr AR 5Yr AR 10Yr AR 15Yr AR 20 Yr AR AR since 1994**
P LargeCap Growth Value Blend Rotation 20.9% 17.9% 14.1% 10.9% 10.3% 8.1% 10.9%
VIGRX (Vanguard Growth Index Inv) 21.1% 17.4% 15.2% 12.2% 9.8% 7.2% 10.3%
VIVAX (Vanguard Value Index Inv) 17.2% 15.7% 12.5% 9.9% 9% 7.5% 9.3%
VFINX (Vanguard 500 Index Investor) 18.6% 16.6% 13.8% 11.0% 9.2% 7.2% 9.7%

*: AR: Annualized Return

**: Since 3/11/1994

10 year chart: 

Detailed year by year comparison >>

In the above, we use VFINX (Vanguard 500 Index Investor) to represent large cap blend style as Vanguard large cap index fund has fewer historical data. 


  • The large blend is almost always in the middle of value and growth, regardless of which style among the two is better. For example, in the past 10 years, VFINX returns 11%, right in the middle of VIVAX’s 9.9% and VIGRX’s 12.2%. 
  • Other than losing slightly for the past 20 year time frame, growth stocks have outperformed value stocks for all other periods: 1, 3, 5, 10, 15 and since 1994 (actually, not listed in the table, for the past 25 years: VIGRX’s 10.2% vs. VIVAX’s 9.2%). 

Before you jump to the conclusion to ditch value style, you are reminded that, as what we have mentioned many times before, the above is only a snapshot data point for the current time.  If we look at the performance comparison through a moving window (rolling years returns), we can see the two styles can alternatively outperform each other. We will look at this in more details shortly. 

The subtleties of pure value or growth investing

The problem of buying and holding value or growth styles of stocks for a long time can be revealed in some closeup examination of the investing method. In general, a value index fund such as VIVAX (Vanguard Value Index Inv) picks stocks that have low (cheap) valuation based on some  metrics (such as low Price/Earnings (PE) ratio, Price/Sales ratio, Price/Bookvalue ratio etc.). These stocks are reviewed periodically (usually annually or semi-annually). At a review (or so called index rebalance) time, stocks that are now no longer cheap should be sold while new cheap stocks are added. Similarly, a growth stock index is also maintained in this style. 

Value investing has been made famous by great investors such as Warren Buffett. However, there is a subtle difference between a regular rebalanced value index and these investors’ methodology. For example, when purchasing a stock, Buffett not only wants it has cheap valuation, he also stipulates that such a stock should possess a solid underlying business model that has the power to grow its earnings over times. Furthermore, he rarely sells these stocks once acquired as for him, the holding period of a stock is a long term or forever. Basically, what Buffett does is that he finds an opportunity when market cheaply misprices a stock but once he acquires it, he will hold it for a long time, letting the stock’s underlying business take care of its intrinsic earnings. Thus, one can see that at an arbitrary snapshot of time, his holdings can consist of stocks with cheap and expensive valuation. In a word, unlike a value index, his portfolio of stocks are not necessarily cheap or undervalued. That is why many have argued that Buffett’s methodology should be classified as Growth At A Reasonable Price instead of a simple value investing. 

Basically, when a business enters a growth period, it can last for a long time, sometimes much longer than many people would have expected. This is eventually reflected by its stock price: it can be pricey for some time, in fact, it can be pricey for a long time. One could even argue that the price momentum, which has been well recognized, is strongly correlated with a stock’s fundamental (however, one should be careful that the two are not the same and precisely because of this in-efficiency, it creates opportunities for these great investors). 

Thus, one can see that a pure value index or portfolio can prematurely liquidate some great pricey stocks. On the other hand, a growth index can certainly purchase some pricey stocks and this can affect its long term performance. 

Of course, the blend style is simply a tradeoff between the value and growth styles — it simply holds all of the stocks, regardless of their valuation. Thus, one should expect its returns should be just in between the two indices, which is precisely what we have observed. 

The style rotation

By now, it should be clear that the buy and hold of a value or growth index fund is not an optimal solution. For a Strategic Asset Allocation (SAA) portfolio, we either advocate holding blend or total market index funds or if one wants, holds both value and growth funds together (though it becomes tricky to decide what weightings one should use for the two). For a more dynamic portfolio such as Tactical Asset Allocation(TAA) or even within a strategic portfolio, one can adopt a rotation strategy in order to enhance returns. 

P LargeCap Growth Value Blend Rotation shown in the above table is a momentum based portfolio that can switch among the three funds: value VIVAX, growth VIGRX and blend VFINX. What one can see is that this portfolio has done better that the blend portfolio by approximately 1% annually for the past 15, 20 and almost 25 years. For a shorter term time frame, it also does well — outperformed VFINX for the past 1, 3 and 5 years, only losing to it for the 10 year period. 

This portfolio is basically a restricted style rotation portfolio compared with the one discussed in our previous newsletter August 20, 2018: How Momentum Investing Stacks Up? which can rotate among size style index funds too. 


Since growth stocks have outperformed value stocks for the past several years now, people often wonder whether this soon will change. Let’s further look at some of the previous periods to understand how the two behave: 

From 1993 to 2000

In the period leading to the peak of the 1990s’ bull market, growth outperformed value. This was mostly due to investors’ favor of technology, especially internet stocks. 

From 2000 to 2007

In this period leading to the peak of the bull market before the 2008 financial crisis, investors chased value stocks, especially those in financial services such as banking and real estate related industries. In this period, value outperformed growth by a large margin. 

From 2007 to 2018 (present)

In the current bull market, the new technology and/or internet businesses have become more mature, fundamentally changed some of business landscape in industries like e-commerce and communication. FANG stocks have dominated. Growth has outperformed value. 

It is thus tempting for one to venture to guess that in the next market cycle (from peak to peak), value stocks will outperform growth stocks. Whether that’s the case or not is still subject to debate. But one thing is clear, in the coming correction/bear market, the prices of growth stocks will for sure drop steeper than the value stocks, given some of (value) stocks that have been beaten down for some time in this period. For example, the prices of consumer staples and utility stocks have basically been flat for more than two years now. 

In conclusion, one should not simply take buzz words such as value or growth and blindly follow what popular pundits suggest. Digging a little bit deeper can go a long way to gain insights into investing strategies, as in any other fields. 

Market Overview

US stocks have decoupled from the rest of the world for quite sometime. Currently, these stocks have again taken a breath and wobbled a bit even though the US economy has shown very strong momentum and consumer confidence is near its all time high. We don’t know whether this is the final top of the current bull market and we are agnostic to making a prediction. However, in the face of currently overvalued and over stretched market condition, we advocate risk management and active risk review. As always, we are reminded that when investors are euphoric, it’s often a time to exercise prudence. Stay the course. 

For more detailed asset trend scores, please refer to 360° Market Overview

In terms of investments, U.S. stock valuation is at a historically high level. It is thus not a good time to take excessive risk. However, we remain optimistic about U.S. economy in the long term and believe much better investment opportunities will arise in the future. 

We again would like to stress for any new investor and new money, the best way to step into this kind of markets is through dollar cost average (DCA), i.e. invest and/or follow a model portfolio in several phases (such as 2 or 3 months) instead of the whole sum at one shot. 

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