my question would be: What do you think are currently the best options for capturing the large cap growth section of the market---ETF's, individual stocks, etc??
I should say that a portfolio of growth and value ETFs blended together is far from my first choice. I think solving this starts at the sector level. With tech, most clients have the IYW ETF for most of their tech exposure. The thought there is that the potential reward doesn't justify risk taken by owning the usual suspects; MSFT, INTC and CSCO. IYW outperformed MSFT and CSCO but lagged INTC slightly. Most clients also own Yahoo for growth.
In healthcare clients own mostly individual stocks. I think of the sector, ex-big pharma, as being growthier but capturing devices and generics is a no go with ETFs but some folks own IBB for biotech.
In the consumer sector I blend stocks and an ETF. Most clients own Starbucks and Target. These are not necessarily very large cap but sort of and I think of them as being growthy.
Most readers know the extent to which I use foreign. A lot of times it is tough to know whether a particular foreign stock is growth or value. Some clients own a Brazilian mining stock. The name in question always trades at low multiples of everything yet in 2005 it was up 40% and in 2004 it was up 50%. That certainly is a lot of growth but it might be right to call it a value stock. Point being that growth vs value is not that easy to measure like cap size.
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2 comments:
I find it interesting that the question was about a style index category (large cap growth) and you recommended looking at sectors. I've been thinking this way recently. Did Small and Mid caps recently outperform Large Caps because they had a relatively higher percent of Energy stocks? if so it seems to me that Style Indexes are a second-handed way of looking at Energy stock market action. I wish the ETF bunch would provide better sector indexes. I'm beginning to think style indexes are an historical artifact of the pre-globalization era.
OG
I think that this has just been the wrong time for mega caps of all sectors. XOM had a good year but lagged many many energy stocks.
During the late 1990's mega caps were in favor and have been out of favor ever since. The is more precedent for this.
Thge style etfs may come in handy for people that have not yet put away a lot of money to invest. I might suggest a small cap value ETF for a $20,000-$30,000 portfolio that will only own 4-6 positions.
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