Professional Documents
Culture Documents
Large-cap
Growth stocks
Value stocks
Risks
Future growth does not occur as expected Book-to-price ratios rise unexpectedly, price-to-earnings ratio decline unexpectedly
Evaluation of stocks as good value is misread Difficult to stick to value policy when prices are beaten down
Risk and Return by Size and Style Growth and value stocks 19692007
16% Compound annual return Small value
14
Mid value
12
Large value
17
19
21
23
25
27
Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. 2008 Morningstar, Inc. All rights reserved. 3/1/2008
58.3%
20
14.8%
22.1%
20.8%
24.4% 33.0% 40.6%
20
32.4%
40
Large growth Large value Mid growth Mid value Small growth Small value
Past performance is no guarantee of future results. Each bar shows the range of compound annual returns for each asset class over the period 19692007. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. 2008 Morningstar, Inc. All rights reserved. 3/1/2008
100
$220.84
10
Past performance is no guarantee of future results. Hypothetical value of $1 invested at the beginning of 1969. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. 2008 Morningstar, Inc. All rights reserved. 3/1/2008
$2.79
0.7 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Past performance is no guarantee of future results. Hypothetical value of $1 invested at the beginning of 1998. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. 2008 Morningstar, Inc. All rights reserved. 3/1/2008
Large growth
Large value
30
20
10
12-month rolling returns 75% 50 25 0 25 JanDec 1969 JanDec 1974 JanDec 1979 JanDec 1984 JanDec 1989 JanDec 1994 JanDec 1999 JanDec 2004
Past performance is no guarantee of future results. Performance differential measures the outperformance of each asset class over one another on a 12-month rolling basis. Each 12-month rolling return represents the annualized return over the prior 12 months. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. 2008 Morningstar, Inc. All rights reserved. 3/1/2008
Large growth
Large value
20
15
10
25
25
1974 1976
1979 1981
1984 1986
1989 1991
1994 1996
1999 2001
2004 2006
Past performance is no guarantee of future results. Performance differential measures the outperformance of each asset class over one another on a 36-month rolling basis. Each 36-month rolling return represents the annualized return over the prior 36 months. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. 2008 Morningstar, Inc. All rights reserved. 3/1/2008
20
15
10
5
1920s* 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s**
Past performance is no guarantee of future results. *Based on the years 19281929. **Based on the years 20002007. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. 2008 Morningstar, Inc. All rights reserved. 3/1/2008
Large value
S&P 500
40
30
20
10
10
20
30
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. 2008 Morningstar, Inc. All rights reserved. 3/1/2008
$4,379
2,500
$2,249
$2,258 $2,136
1,500
500 1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
Past performance is no guarantee of future results. Hypothetical value of $1,000 invested at the beginning of 1995. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. 2008 Morningstar, Inc. All rights reserved. 3/1/2008
Bear Market Performance Early 2000s bear market: July 2000December 2003
Growth $1,800 Value Compound annual return: 5.8% 7.3 14.5 Compound annual return: 16.5% 13.7 0.9
$1,705 $1,568
1,400
$969
600
$577
200
July 2000
July 2001
July 2002
July 2003
July 2000
July 2001
July 2002
July 2003
Past performance is no guarantee of future results. Hypothetical value of $1000 invested at the beginning of July 2000. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. 2008 Morningstar, Inc. All rights reserved. 3/1/2008
Balance growth investments with those that produce income Invest in both large and small companies, as well as a mix of well established and new companies Consider investments that are currently out of favor but have potential to increase in value Blending effectively may cushion against the many ups and downs in the market
16.6 LV 10.7 DP
39.3 SG 29.8 LG
47.9 SV 43.9 MV
20.8 MV 19.6 SG
9.2 SV 8.8 MG
22.1 LV 15.3 DP
8.7 MG 7.4 SG
6.4 MG
23.2 DP
40.3 MG
15.8 DP
7.9 DP
13.9 MG
4.1 DP
13.1 LV
39.0 DP
13.4 LV
7.0 LV
13.0 MV 10.8 SG
2.5 LV
4.8 MV 4.6 SV
29.9 LV
13.1 MG 6.7 LG
4.7 SG 3.3 LG
0.4 MV 5.6 SV
Lowest returns
24.8 LG
8.9 LG
Large growth
(LG)
Large value
(LV)
Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. 2008 Morningstar, Inc. All rights reserved. 3/1/2008