Greeting ETFMathGuy subscribers! This post is a reminder that the latest free and premium optimal portfolios are now available for your review. So, please log in and see how the latest market conditions have affected these ETF portfolios. To begin, we discuss value versus growth ETFs and recent trends in their returns.
Recent returns on value investing leveling off?
A few months ago, we wrote about how value-driven ETFs returned about 5% more in the first quarter than growth ETFs. Revisiting the returns of the ETFs IVV, VUG, and VTV for the first half of 2021 shows this gap has shrunk to 3% after growing to more than 10%. In fact, as the chart here shows, the value ETF is below its early May high, while the growth ETF appears to have begun a new upward trend.
Is the relationship between value and growth ETFs typical?
The relationship between two variables can be directly measured using correlation which varies between 1 and -1. So, a correlation of 1 between two investment returns indicates their returns are identical. Traditionally, the correlation between value and growth investments was around 75%. However, as this Wall Street Journal article highlights, the current correlation between growth and value is now below 25%.
Performance of the ETFMathGuy Premium Portfolios
Based on actual investment performance, the risk and return of the moderate and aggressive portfolios over the last 18 months appear below. Consequently, this period includes all of the calendar year 2020, and the first half of 2021.
| Moderate | Aggressive | S&P 500 (IVV) | |
| volatility (risk, annualized) | 19.5% | 22.5% | 21.2% |
| total return | 23.9% | 32.7% | 36.4% |
We will continue to update our ETFMathGuy portfolios with current market conditions using our updated backtesting calibration results. So, time will tell if value ETF investing continues to outperform growth ETF investing.
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