This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Sector Funds Trump Value

NEW YORK ( TheStreet) -- In the 1990s, academic researchers showed that low-priced value stocks had outdone more expensive growth names over long periods. That encouraged many investors to emphasize value stocks.

Some of the most popular ETFs in recent years have been value choices, including iShares Russell 1000 Value (IWD) and Vanguard Value (VTV).

But investors who put extra weight on value recently have had little to show for their efforts. During the past 10 years, the Russell 1000 Value index returned 6.7% annually, while the Russell 1000 Growth returned 6.8%.

"The difference between growth and value is not as great as many investors have been led to believe," says Paul Baiocchi, an analyst for "It didn't really matter whether you took growth or value because the patterns of returns have been so similar."

Instead of emphasizing a growth or value fund, investors might as well buy the whole market, says Baiocchi. If investors want to fine tune their portfolios, then they can get more distinctive results by using funds that specialize in a sector, such as energy or financials.

"If you are looking to make a call on the economy or lower the volatility of your portfolio, you should use sectors instead of growth or value funds," he says.

In a recent study, Baiocchi and Paul Britt looked at the past performance of the major sectors of the S&P 500 as well as growth and value segments. They found that the growth and value portfolios tended to act much like the S&P 500 -- and the correlations have been increasing in recent years.

The researchers found that each sector has delivered distinctive returns. During the past 10 years, financials lost money, while utilities more than doubled. During the financial crisis, all sectors dropped at once. But since then, the sectors have resumed following distinctive courses.

During 2011, the gaps in performance were especially wide. For the year, Consumer Staples Select Sector SPDR (XLP) returned 14.1%, while Energy SPDR (XLE) returned 2.8%, and Industrial SDPR (XLI) lost 1.1%.

This year the Utilities SPDR (XLU) returned 0.7%, while Technology SDPR (XLK) returned 15.4%.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
IWD $99.71 0.00%
VTV $82.74 0.00%
XLP $52.96 0.00%
XLE $64.89 0.00%
XLI $55.30 0.00%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs