The Ideal Blend of Growth and Value
Posted: 1 Apr 2009
Date Written: November 30, 2006
As style-based investment strategies flourish, many investment professionals advocate diversified style-based portfolios, holding both growth and value funds, to reduce style risk. In practice, however, it is not clear that style-based diversification, as compared to a core approach, increases return and decreases risk. Our analysis of US data suggests that a style-neutral core portfolio will likely generate higher long-term risk-adjusted performance than a comparable style-based one. Although this is not true internationally, the relatively new and changing style environment coupled with the core fund growth tilt leads us to believe that these historical results may not be indicative of future results.
Keywords: Mutual Fund, Style, Value, Growth
JEL Classification: G20
Suggested Citation: Suggested Citation