November 20, 2023
Question:
I noticed on the news that stocks are up a lot more than my stock funds, does that mean I don't have good funds?
Answer:
That’s a good question!
No, that does not necessarily mean you don't have good funds; it likely means you have diversified funds.
So far in 2023 U.S. stocks are a tale of two markets and a 180-degree reversal from 2022.
You’re right that the broad stock market (by broad we are referring to the S&P 500) is up 17.57% (as of Nov 17) while the tech focused Nasdaq is up around 34.96%.
Based on these numbers, one would rightly think all their equity investments are doing very well. However, if a portfolio has a value/dividend tilt, performance is far different.
One broad measure of large value stocks (Morningstar’s US Large Value Index) shows a 5.01% return whereas growth stocks (Morningstar’s US Large Growth Index) are positive by 38.29% (both as November 17). While value stocks have underperformed so far this year, they were by far the outperformer in 2022.
A well-diversified portfolio should hold both growth and value equities so you can benefit when either style is in favor.
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