What happens when growth stocks perform better than value stocks?
Letting dough rise for too long when making bread can weaken its structure, eventually causing the loaf to collapse. When seeking to make “bread” in terms of money, letting your winners run too long can lead to a lopsided portfolio. This increases the risk that your fortunes rise and fall based on the performance of one country, sector, company, or even one stock style.
Many portfolios include a mix of growth and value stocks, which don’t react the same way to market events—when one isn’t doing well, the other typically has been in favor. This diversification may help balance performance and manage risk.
Growth Style Has Won More Than Value Style
An often overlooked aspect of the stock market since 2009 is that it has rewarded growth stocks more than value stocks. If left unchecked, your portfolio may have changed over the past few years and actually increased in risk. That’s why it’s important to monitor your mix of growth and value stocks.