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What Investing Style Works Today
& Again
Tomorrow?
by Troy Patton, CPA - Finance Geek
 I am a
Large Cap Value (LV) investor with a diversification into other areas.
Lately, many have
asked me if they should be in Large Cap Growth (LG).
My explanation is
below. Those touting great returns currently as the only way to invest should be
careful. History has shown us as the chart does above that value investing over
the last 11 years and beyond has returned greater returns while taking much less
risk.
There are times
however, when it is not working. That is not the time to change tunes. It is the
exact time to know that it will return again shortly.
For instance, in 2006
LV beat LG by 11%+ and it did it again during severe Bear markets like above.
Just because oil and commodities have run for the past 18 months, does not mean
they will lead the pack tomorrow. I would guess it will be quite the contrary.
The last
time those same people said, "it is different this time." They were the ones
licking their wounds after the tech meltdown.
This time
it will be oil and commodities. It is not that these areas will not be higher in
the long-term, but chasing yesterday’s winners will surely result in just that,
you will always be chasing after something, instead of realizing something. 2007
and so far in 2008, LG has done well, but look back to 1998 and 1999 and do not
forget the lessons of yesteryear.
Although
LV has beaten LG over time, the other main point to make is this: LV has done
while taking less risk than LG. If you have the stomach for attempting to guess
which year LG will go up 25% and not go down 25%, then by all means take the
chance. I will sit back and sleep at night knowing that LV will continue to
perform while taking less risk.
In fact
over the last 11 years, LV has only dropped more than 6% in one year 2002. That
same year, my average portfolio only lost 12.6% due to diversification in bonds.
History will repeat if you wait long enough.
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The opinions written within this publications are
the opinions of Troy Patton and are not intended as investment advice or an
offer or solicitation to buy or sell any securities. If you would like to
contact Troy Patton, he can be reached directly at 800-671-5872
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 Have
a finance question or a comment for me?
Send
it to
tony@financegeeks.com
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