Vanguard predicts value outperforms grrowth

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Carol88888
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Vanguard predicts value outperforms grrowth

Post by Carol88888 »

I saw Vanguard's release on the expected outperformance of value over growth for the next decade.
https://investornews.vanguard/why-u-s-v ... rm-growth/

I am wondering what others think of this. The expected outperformance is 5-7% annualized a decade which seems enormous to me.

Do you think this is actionable advice?

Do you think Vanguard has any expertise in making these calls?
Tom_T
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Re: Vanguard predicts value outperforms grrowth

Post by Tom_T »

I don't think anyone has any expertise in accurately predicting the future. That includes Vanguard.
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Re: Vanguard predicts value outperforms grrowth

Post by Silverado »

Tom_T wrote: Wed May 05, 2021 9:36 am I don't think anyone has any expertise in accurately predicting the future. That includes Vanguard.
That is not strong enough....

I know no one has proven they have expertise in predicting the future of markets.
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Re: Vanguard predicts value outperforms grrowth

Post by aristotelian »

Vanguard has also been predicting international to outperform. One of these days it will finally happen.
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Re: Vanguard predicts value outperforms grrowth

Post by CyclingDuo »

Carol88888 wrote: Wed May 05, 2021 9:28 am I saw Vanguard's release on the expected outperformance of value over growth for the next decade.
https://investornews.vanguard/why-u-s-v ... rm-growth/

I am wondering what others think of this. The expected outperformance is 5-7% annualized a decade which seems enormous to me.

Do you think this is actionable advice?

Do you think Vanguard has any expertise in making these calls?
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Re: Vanguard predicts value outperforms grrowth

Post by hi_there »

"We expect value to outperform growth over the next ten years by five to seven percentage points, annualized, and perhaps by an even wider margin over the next five years."

There is no way that they can accurately predict this, but I do appreciate analysts who are not afraid to make predictions that are outliers to the norm. If only it was normal to look back at previous analyst predictions and hold them accountable after the fact.
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Re: Vanguard predicts value outperforms grrowth

Post by txhill »

I almost wish Vanguard would stay out of the predictions game entirely.
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Re: Vanguard predicts value outperforms grrowth

Post by Thesaints »

Over the years stocks have migrated from the Value subindex to Growth and back. Just look what Exxon did as an example.
"outperformance" may very well mean "less worse performance". Given that at present capitalization is more concentrated to the Growth side and, in particular, the largest index components are almost all classified as growth", I don't see why not.
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Re: Vanguard predicts value outperforms grrowth

Post by atdharris »

Didn't they predict international outperformance a decade ago? How'd that work out for them?
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Re: Vanguard predicts value outperforms grrowth

Post by watchnerd »

Carol88888 wrote: Wed May 05, 2021 9:28 am I saw Vanguard's release on the expected outperformance of value over growth for the next decade.
https://investornews.vanguard/why-u-s-v ... rm-growth/

I am wondering what others think of this. The expected outperformance is 5-7% annualized a decade which seems enormous to me.

Do you think this is actionable advice?

Do you think Vanguard has any expertise in making these calls?
Sure, it's actionable.

I act on it by holding TSM, so if it happens, I get a piece of it.
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Re: Vanguard predicts value outperforms grrowth

Post by junior »

Carol88888 wrote: Wed May 05, 2021 9:28 am I saw Vanguard's release on the expected outperformance of value over growth for the next decade.
https://investornews.vanguard/why-u-s-v ... rm-growth/

I am wondering what others think of this. The expected outperformance is 5-7% annualized a decade which seems enormous to me.

Do you think this is actionable advice?

Do you think Vanguard has any expertise in making these calls?
Do random, largely anonymous people on the Boglehead forum have expertise in making this call? I think it's clear that they probably have less expertise than Vanguard.

Is it actionable advise? Probably not for you, since you have to have conviction to do a value tilt, and asking random people on a message board suggests you don't.

I would like to do a 20% or so tilt to small cap value, but that isn't practical since most of my money is in a 401k that doesn't offer it. So I have more like a 10% tilt.

If you do a value tilt, don't compare yourself to a benchmark of what your portfolio would have looked like if you hadn't done the tilt. This is because when your portfolio underperforms, you should be betting, if you do it right, on "reversion to the mean" so that your portfolio's past performance is completely irrelevant when compared to a benchmark.

But this requires conviction, and if you have to ask, you probably don't have it.
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Re: Vanguard predicts value outperforms grrowth

Post by pennsylvania211 »

txhill wrote: Wed May 05, 2021 10:58 am I almost wish Vanguard would stay out of the predictions game entirely.
+1
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Re: Vanguard predicts value outperforms grrowth

Post by Nathan Drake »

atdharris wrote: Wed May 05, 2021 11:38 am Didn't they predict international outperformance a decade ago? How'd that work out for them?
No, they did not.

They are forecasting higher returns for international in the next decade
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Re: Vanguard predicts value outperforms grrowth

Post by Robot Monster »

pennsylvania211 wrote: Wed May 05, 2021 11:59 am
txhill wrote: Wed May 05, 2021 10:58 am I almost wish Vanguard would stay out of the predictions game entirely.
+1
Bogleheads shun all predictions except for one, it seems: US outperformance.

“The three largest countries in the international index [EAFE] are Great Britain, Japan and France, and to bet those countries will do better than the U.S. in the long run is a bad bet.” -- Jack Bogle link
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Re: Vanguard predicts value outperforms grrowth

Post by Svensk Anga »

txhill wrote: Wed May 05, 2021 10:58 am I almost wish Vanguard would stay out of the predictions game entirely.
I suspect they did this study in order to have some backing when they need to talk folks down from going all in on growth.
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Re: Vanguard predicts value outperforms grrowth

Post by Nathan Drake »

I appreciate Vanguard forecasting returns. It gives some insight into areas of the market that are over/undervalued, those trends can obviously still continue, but mean reversion does inevitably occur
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Re: Vanguard predicts value outperforms grrowth

Post by Horton »

If they feel so strongly, then they should add it to their TDF and LifeStrategy funds...but I highly doubt that will happen.
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Re: Vanguard predicts value outperforms grrowth

Post by watchnerd »

Horton wrote: Wed May 05, 2021 12:30 pm If they feel so strongly, then they should add it to their TDF and LifeStrategy funds...but I highly doubt that will happen.
I'm not sure I follow the logic

Neither of those fund families has a track record of ever tilting towards growth, small, value, etc.

They're not factor tilt funds.
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Re: Vanguard predicts value outperforms grrowth

Post by LilyFleur »

It's not just Vanguard; I've read this in the Wall Street Journal as well.
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Re: Vanguard predicts value outperforms grrowth

Post by UpperNwGuy »

The easiest prediction anyone can make is that an asset class that has performed poorly in recent years will turn the corner and start outperforming. This applies to any asset class: value, international, whatever. Often those predictions turn out to be correct, but that doesn't make them brilliant or especially insightful.
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Re: Vanguard predicts value outperforms grrowth

Post by Horton »

watchnerd wrote: Wed May 05, 2021 12:36 pm
Horton wrote: Wed May 05, 2021 12:30 pm If they feel so strongly, then they should add it to their TDF and LifeStrategy funds...but I highly doubt that will happen.
I'm not sure I follow the logic

Neither of those fund families has a track record of ever tilting towards growth, small, value, etc.

They're not factor tilt funds.
My original comment was meant to be slightly sarcastic, but If they are focused on the best possible outcomes for retirement savers and now apparently have a view that value will outperform growth in the future, then why not?

This content is just “mind candy” for advisors and tilters.
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Re: Vanguard predicts value outperforms grrowth

Post by watchnerd »

Horton wrote: Wed May 05, 2021 1:00 pm
My original comment was meant to be slightly sarcastic, but If they are focused on the best possible outcomes for retirement savers and now apparently have a view that value will outperform growth in the future, then why not?

This content is just “mind candy” for advisors and tilters.
Oh, I don't think TD or LS fund are focused on best outcomes.

They're straight up 50th percentile results, plus cheap-ish costs, and ease of use.
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Re: Vanguard predicts value outperforms grrowth

Post by Thesaints »

Don't you guys think the expected "overperformance" is simply due to the fact that value can't fall as hard as growth, these days ?
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Re: Vanguard predicts value outperforms grrowth

Post by watchnerd »

Thesaints wrote: Wed May 05, 2021 2:03 pm Don't you guys think the expected "overperformance" is simply due to the fact that value can't fall as hard as growth, these days ?
If you're saying that valuation contraction affects growth stocks more harshly, that's certainly a factor.

But that's not all the article was saying.
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Re: Vanguard predicts value outperforms grrowth

Post by GaryA505 »

aristotelian wrote: Wed May 05, 2021 9:54 am Vanguard has also been predicting international to outperform. One of these days it will finally happen.
Or one of these years, or decades. :?
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Re: Vanguard predicts value outperforms grrowth

Post by asif408 »

atdharris wrote: Wed May 05, 2021 11:38 am Didn't they predict international outperformance a decade ago? How'd that work out for them?
Here is a link to their 2012 prediction and a quote from the paper below: https://personal.vanguard.com/pdf/s289.pdf
The projected distribution for international equities shown in Figure 12 is not unlike that for U.S. equities, with similarly wide-tail outcomes. The expected return differential between U.S. and non-U.S. equity portfolios is not statistically significant under most VCMM scenarios, in part because valuations across broad geographic areas of the global equity market are similar as well
So the answer to your first question is no, and the answer to your second question is much better than your recollection they predicted international outperformance a decade ago.
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Re: Vanguard predicts value outperforms grrowth

Post by TheoLeo »

Value will outperform growth once FAANG+M are value stocks.
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Re: Vanguard predicts value outperforms grrowth

Post by Taylor Larimore »

Bogleheads:

Vanguard once had a market-timing fund called Asset-Allocation Fund based on stock forecasts. It was also included in their Life Cycle funds.

The results were so terrible that the fund was discontinued.

I believe it is impossible to forecast future stock and bond returns, and that it is best to ignore anyone's stock (and bond) forecasts. I recommend buying the U.S. total stock market and U.S. total bond market -- with a dash of international stocks for insurance -- then stay-the-course.

Best wishes.
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Re: Vanguard predicts value outperforms grrowth

Post by Thesaints »

Taylor Larimore wrote: Wed May 05, 2021 3:21 pm Bogleheads:

Vanguard once had a market-timing fund called Asset-Allocation Fund based on stock forecasts. It was also included in their Life Cycle funds.

The results were so terrible that the fund was discontinued.

I believe it is impossible to forecast future stock and bond returns, and that it is best to ignore anyone's stock (and bond) forecasts. I recommend buying the U.S. total stock market and U.S. total bond market -- ...
and how much of each ?
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Re: Vanguard predicts value outperforms grrowth

Post by watchnerd »

Taylor Larimore wrote: Wed May 05, 2021 3:21 pm
I believe it is impossible to forecast future stock and bond returns
I think it's very possible for me to forecast the future nominal returns of the individual bonds I hold to maturity. :)
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Re: Vanguard predicts value outperforms grrowth

Post by Northern Flicker »

junior wrote: Wed May 05, 2021 11:59 am
Carol88888 wrote: Wed May 05, 2021 9:28 am I saw Vanguard's release on the expected outperformance of value over growth for the next decade.
https://investornews.vanguard/why-u-s-v ... rm-growth/

I am wondering what others think of this. The expected outperformance is 5-7% annualized a decade which seems enormous to me.

Do you think this is actionable advice?

Do you think Vanguard has any expertise in making these calls?
Do random, largely anonymous people on the Boglehead forum have expertise in making this call? I think it's clear that they probably have less expertise than Vanguard.

Is it actionable advise? Probably not for you, since you have to have conviction to do a value tilt, and asking random people on a message board suggests you don't.

I would like to do a 20% or so tilt to small cap value, but that isn't practical since most of my money is in a 401k that doesn't offer it. So I have more like a 10% tilt.

If you do a value tilt, don't compare yourself to a benchmark of what your portfolio would have looked like if you hadn't done the tilt. This is because when your portfolio underperforms, you should be betting, if you do it right, on "reversion to the mean" so that your portfolio's past performance is completely irrelevant when compared to a benchmark.

But this requires conviction, and if you have to ask, you probably don't have it.
If you can do a 10% tilt to small caps in your 401K then there should be no reason you cannot do a 20% tilt.
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Re: Vanguard predicts value outperforms grrowth

Post by z3r0c00l »

Excuse my ignorance on this topic but has it ever been demonstrated conclusively that there are actually value and growth stocks? Is there a mathematical definition, a set of metrics, that everyone agrees on for these two groups?
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Re: Vanguard predicts value outperforms grrowth

Post by watchnerd »

z3r0c00l wrote: Wed May 05, 2021 3:57 pm Excuse my ignorance on this topic but has it ever been demonstrated conclusively that there are actually value and growth stocks? Is there a mathematical definition, a set of metrics, that everyone agrees on for these two groups?
Yes.

Regression analysis is used to identify factors.

Of course, we could have named them other things than value and growth.
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Re: Vanguard predicts value outperforms grrowth

Post by junior »

Northern Flicker wrote: Wed May 05, 2021 3:55 pm
If you can do a 10% tilt to small caps in your 401K then there should be no reason you cannot do a 20% tilt.
The 10% tilt comes from what funds I have in my Roth IRA. I have no value funds in the 401k.
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Re: Vanguard predicts value outperforms grrowth

Post by Taylor Larimore »

Thesaints wrote: Wed May 05, 2021 3:49 pm
Taylor Larimore wrote: Wed May 05, 2021 3:21 pm Bogleheads:

Vanguard once had a market-timing fund called Asset-Allocation Fund based on stock forecasts. It was also included in their Life Cycle funds.

The results were so terrible that the fund was discontinued.

I believe it is impossible to forecast future stock and bond returns, and that it is best to ignore anyone's stock (and bond) forecasts. I recommend buying the U.S. total stock market and U.S. total bond market -- ...
and how much of each ?
thesaints:

Our asset-allocation between stocks and bonds is probably the most important decision an investor makes-- more important than a particular stock or bond fund.

Our asset-allocation depends on our (1) time-frame, (2) risk-tolerance and (3) personal financial situation.

Use this Vanguard Questionnaire for help:

https://retirementplans.vanguard.com/VG ... -OX77-OGQQ

Best wishes.
Taylor
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Re: Vanguard predicts value outperforms grrowth

Post by 02nz »

aristotelian wrote: Wed May 05, 2021 9:54 am Vanguard has also been predicting international to outperform. One of these days it will finally happen.
Today was "one of these days": VTI down 0.02%, VXUS up 1.03%. :happy
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Re: Vanguard predicts value outperforms grrowth

Post by 1789 »

Lets see who is a better fortune teller among these companies.
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Re: Vanguard predicts value outperforms grrowth

Post by mrspock »

Carol88888 wrote: Wed May 05, 2021 9:28 am I saw Vanguard's release on the expected outperformance of value over growth for the next decade.
https://investornews.vanguard/why-u-s-v ... rm-growth/

I am wondering what others think of this. The expected outperformance is 5-7% annualized a decade which seems enormous to me.

Do you think this is actionable advice?

Do you think Vanguard has any expertise in making these calls?
Good for a laugh. For fun, go read their predictions from 2011 and 2015.

I wish they’d just stop publishing this nonsense and focus on delivering low cost funds.
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Re: Vanguard predicts value outperforms grrowth

Post by james22 »

UpperNwGuy wrote: Wed May 05, 2021 12:56 pmThe easiest prediction anyone can make is that an asset class that has performed poorly in recent years will turn the corner and start outperforming. This applies to any asset class: value, international, whatever. Often those predictions turn out to be correct, but that doesn't make them brilliant or especially insightful.
No, the easiest prediction anyone can make is that an asset class that has performed poorly (or well) in recent years will continue to do so.

It's what (almost) everyone does.
When people say things are different, 20 percent of the time they are right. John Templeton
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Re: Vanguard predicts value outperforms grrowth

Post by UpperNwGuy »

james22 wrote: Wed May 05, 2021 9:53 pm
UpperNwGuy wrote: Wed May 05, 2021 12:56 pmThe easiest prediction anyone can make is that an asset class that has performed poorly in recent years will turn the corner and start outperforming. This applies to any asset class: value, international, whatever. Often those predictions turn out to be correct, but that doesn't make them brilliant or especially insightful.
No, the easiest prediction anyone can make is that an asset class that has performed poorly (or well) in recent years will continue to do so.

It's what (almost) everyone does.
Not so. The professional predictors always seem to go with the underdog. You're talking about the average investor's amateur predictions.
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Re: Vanguard predicts value outperforms grrowth

Post by Actin »

At this point, you'd probably come out pretty good if you did nothing but the exact opposite of whatever vanguard suggests.
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Re: Vanguard predicts value outperforms grrowth

Post by ram »

I did not know about Vanguards prediction. But based on my belief of "regression to mean" I have a slight tilt towards large cap value. This is to the extent that our Roth accounts will allow.
Time will tell whether it was good to do so or not. I am not expecting as much upside as Vanguard is predicting.
( I was in the top quintile in the Boglehead prediction contest last year :happy )
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Re: Vanguard predicts value outperforms grrowth

Post by Visitor76 »

We may scoff at this article, but so far this year value has outperformed growth.
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Re: Vanguard predicts value outperforms grrowth

Post by marcopolo »

Nathan Drake wrote: Wed May 05, 2021 12:08 pm
atdharris wrote: Wed May 05, 2021 11:38 am Didn't they predict international outperformance a decade ago? How'd that work out for them?
No, they did not.

They are forecasting higher returns for international in the next decade
I believe they have been making this prediction about the "next decade" for a number of years. That would put us well into the decade from when they first started forecasting the decade of international out performance.
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Re: Vanguard predicts value outperforms grrowth

Post by TheLaughingCow »

I don't really see any "value" stocks in this market. Every stable domestic company has been bid up to 20x forward earnings or more.

The closest thing to value stocks today might be large foreign companies like DHL and British American Tobacco but those have their own problems.
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Re: Vanguard predicts value outperforms grrowth

Post by TheLaughingCow »

Visitor76 wrote: Wed May 05, 2021 11:46 pm We may scoff at this article, but so far this year value has outperformed growth.
Great, now we know Vanguard can predict the past :)
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Re: Vanguard predicts value outperforms grrowth

Post by JoMoney »

There are lots of guesses out there. Vanguard has been making predictions about ex-US out-performance for quite some time. Keep making guesses, bound to get something right sooner or later.

Might be worth noting that both value and growth could have miserable/negative performance, with 'value' simply losing less and achieve that out-performance.
Also worth noting that over the past decade the S&P 500 Growth bested the S&P 500 Value by a bit over 4% annualized, I don't see why it would be unthinkable to imagine at some point it might go the other way... and the methodology they're discussing is a "Pure Value" portfolio more concentrated then most "Value/Growth indexes".
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Re: Vanguard predicts value outperforms grrowth

Post by james22 »

UpperNwGuy wrote: Wed May 05, 2021 10:01 pm
james22 wrote: Wed May 05, 2021 9:53 pm
UpperNwGuy wrote: Wed May 05, 2021 12:56 pmThe easiest prediction anyone can make is that an asset class that has performed poorly in recent years will turn the corner and start outperforming. This applies to any asset class: value, international, whatever. Often those predictions turn out to be correct, but that doesn't make them brilliant or especially insightful.
No, the easiest prediction anyone can make is that an asset class that has performed poorly (or well) in recent years will continue to do so.

It's what (almost) everyone does.
Not so. The professional predictors always seem to go with the underdog. You're talking about the average investor's amateur predictions.
Sure, the very definition of naïve (the average amateur investor) forecasting is that this period will be the same as the previous.

But stock analyst's (the vast majority of professional predictors) ratings do essentially the same, going with momentum.

As for the (relatively few) big names, as many go with momentum as with with reversion (the underdog).
When people say things are different, 20 percent of the time they are right. John Templeton
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Re: Vanguard predicts value outperforms grrowth

Post by UpperNwGuy »

james22 wrote: Thu May 06, 2021 6:33 am
UpperNwGuy wrote: Wed May 05, 2021 10:01 pm
james22 wrote: Wed May 05, 2021 9:53 pm
UpperNwGuy wrote: Wed May 05, 2021 12:56 pmThe easiest prediction anyone can make is that an asset class that has performed poorly in recent years will turn the corner and start outperforming. This applies to any asset class: value, international, whatever. Often those predictions turn out to be correct, but that doesn't make them brilliant or especially insightful.
No, the easiest prediction anyone can make is that an asset class that has performed poorly (or well) in recent years will continue to do so.

It's what (almost) everyone does.
Not so. The professional predictors always seem to go with the underdog. You're talking about the average investor's amateur predictions.
Sure, the very definition of naïve (the average amateur investor) forecasting is that this period will be the same as the previous.

But stock analyst's (the vast majority of professional predictors) ratings do essentially the same, going with momentum.

As for the (relatively few) big names, as many go with momentum as with with reversion (the underdog).
I think we're saying the same thing. In this thread, we're talking about Vanguard's predictions. They go with the underdog in both the US vs ex-US choice and with the growth vs value choice. Both are easy predictions for them to make.
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Re: Vanguard predicts value outperforms grrowth

Post by Nowizard »

Junior: +1. It takes individual discipline (My word) or abject ignorance (Perhaps, the view of at least some Bogleheads) to hold a value tilt for well over a decade, as we have done, but we believe it provides greater diversification and have been content with its underperformance when compared to the total stock market. Its considerable outperformance relative to the total stock market index YTD would be expected to result in questions about a value tilt. Vanguard's prediction only adds to that, along with comments by those who validly use other investment approaches.

Tim
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