With a risk-on sentiment permeating through a recovering economy, is it best to follow a growth-based strategy or a value-based plan? Either way, ETF investors should take a look at the Vanguard Growth Index Fund ETF Shares (VUG) and the Vanguard Value Index Fund ETF Shares (VTV).
For growth seekers, VUG tracks the performance of a benchmark index that measures the investment return of the CRSP US Large Cap Growth Index. The fund employs an indexing investment approach designed to track the performance of index, a broadly diversified index predominantly made up of growth stocks of large U.S. companies.
The advisor attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index. VUG’s expense ratio comes in at a low 0.04%.
For value seekers, VTV seeks to track the performance of a benchmark index that measures the investment return of large-capitalization value stocks. The fund employs an indexing investment approach designed to track the performance of the CRSP US Large Cap Value Index, a broadly diversified index predominantly made up of value stocks of large U.S. companies.
Like VUG, the advisor attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index. The ETF also has a low 0.04% expense ratio.
Which Factor Is Winning?
The case can be made for both funds. On one hand, investors may want a value-based strategy in a recovering economy where the Covid-19 pandemic still remains a wild card as news of mutative forms permeates the markets. On the other hand, a risk-on sentiment supports the case for a growth-based strategy for those who believe the markets are due for another bull run after a rough 2020.
When it comes to comparing the performance of both funds on a year-to-date basis, value has the edge with VTV up about 3.5% higher than VUG.
The 3-month chart shows a closer race, but with VTV still edging VUG by 1.36%.
The one-year chart tells a completely different story, with VUG beating out VTV by over 25%.
Investors can always use both factors to capture upside in growth potential while ensuring value-based exposure in the event of a downturn.
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