Value versus growth investing: Which is better?

Quality matters more than style, Russell manager says.

Philip Rebiere 9 August, 2016 | 5:00PM
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Historically, the value style of investing -- selecting stocks that are trading at a price lower than the company's intrinsic worth -- has outperformed the growth style, which is characterized by investing in companies with superior earnings prospects.

This tendency is reflected in the performance discrepancies in style-based indices. In the United States, the Russell 1000 Value Index has returned 12.1% in U.S-dollar terms, from its Dec. 31, 1978, inception to June 30 of this year. This is more than a full percentage point higher, compounded annually, than the 10.9% return of its growth counterpart, the Russell 1000 Growth Index.

In Canada, there has been a similar pattern, based on data compiled by providers of style-based indexes. The MSCI Canada Growth Index has delivered a total return, including reinvested dividends, of 8% since inception in December 1974, compared to 11.4% for the MSCI Canada Value Index.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Bausch Health Companies Inc34.92 CAD3.01Rating
CVS Health Corp84.63 USD1.50Rating

About Author

Philip Rebiere

Philip Rebiere  Phil Rebiere, a freelance contributor for Morningstar, is a student in the business-management program at Western University's Richard Ivey School of Business.

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