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Growth Value 1

Growth Value 1

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Growth and Value Investing

© 2008 Morningstar, Inc. All rights reserved. 3/1/2008 LCN200803-2013997

All rights reserved. 3/1/2008 .486 Mutual funds 701 Stocks Small-cap   2.908 Stocks © 2008 Morningstar.Equity Investment Classification Large-cap   9. Inc.500 Mutual funds 283 Stocks Mid-cap   2.066 Mutual funds 4.

Inc. sales Low book-to-price. 3/1/2008 . All rights reserved. high price-toearnings ratios Paying lower or no dividends Slower growth of earnings and sales High book-to-price. 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   © 2008 Morningstar.What are Growth and Value Stocks? Growth stocks   Value stocks   High growth rate of earnings. low price-toearnings ratios Higher dividend yields Turnaround opportunities Risks    Risks  Future growth does not occur as expected Book-to-price ratios rise unexpectedly.

Inc. 3/1/2008 . An investment cannot be made directly in an index. All rights reserved. © 2008 Morningstar.Risk and Return by Size and Style Growth and value stocks 1969–2007 16% Compound annual return Small value 14 Mid value 12 Large value 10 Large growth Mid growth Small growth 8 15% Standard deviation 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.

8% –24.6% 40 39.4% –40 Large growth Large value Mid growth Mid value Small growth Small value Past performance is no guarantee of future results.4% 20 Compound annual return: 9. 3/1/2008 .1% –20.5% 58. Each bar shows the range of compound annual returns for each asset class over the period 1969–2007.2% 60.Range of Annual Returns Growth and value stocks 1969–2007 60% Return 61. This is for illustrative purposes only and not indicative of any investment.0% –40.7% 9. All rights reserved.6% –20 –32.4% –33.3% 47. Inc.1% 14.2% 13.8% 9. © 2008 Morningstar.3% 51. An investment cannot be made directly in an index.8% 0 –22.6% 10.

1 $55.22 $31.69 10 1 0 1969 1975 1981 1987 1993 1999 2005 Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. All rights reserved. 3/1/2008 . An investment cannot be made directly in an index.8% 10. Assumes reinvestment of income and no transaction costs or taxes.000 Compound annual return 100 • Small value • Large value • Large growth • Small growth $220.Growth and Value Investing 1969–2007 $1.02 $29. Hypothetical value of $1 invested at the beginning of 1969. © 2008 Morningstar.2 9.8 9.84 14. Inc.

8 4. Assumes reinvestment of income and no transaction costs or taxes.Growth and Value Investing 1998–2007 $5 Compound annual return • Small value • Large value • Small growth • Large growth 10.53 1 0.3 $2.8% 6.79 $1. An investment cannot be made directly in an index. All rights reserved.84 $1. Hypothetical value of $1 invested at the beginning of 1998.7 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Past performance is no guarantee of future results. © 2008 Morningstar. Inc.3 5.75 $1. 3/1/2008 . This is for illustrative purposes only and not indicative of any investment.

3/1/2008 . An investment cannot be made directly in an index. Performance differential measures the outperformance of each asset class over one another on a 12-month rolling basis. This is for illustrative purposes only and not indicative of any investment.One-Year Growth and Value Cycles 1969–2007 Performance differential 40% • Large growth • Large value 30 20 10 12-month rolling returns 75% 50 25 0 –25 Jan–Dec 1969 Jan–Dec 1974 Jan–Dec 1979 Jan–Dec 1984 Jan–Dec 1989 Jan–Dec 1994 Jan–Dec 1999 Jan–Dec 2004 Past performance is no guarantee of future results. © 2008 Morningstar. Each 12-month rolling return represents the annualized return over the prior 12 months. Inc. All rights reserved.

An investment cannot be made directly in an index. © 2008 Morningstar. Performance differential measures the outperformance of each asset class over one another on a 36-month rolling basis. Inc. 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. All rights reserved.Three-Year Growth and Value Cycles 1969–2007 Performance differential 25% • Large growth • Large value 20 15 10 5 0 36-month rolling returns 50% 25 0 –25 Jan 1969 Dec 1971 1974 1976 1979 1981 1984 1986 1989 1991 1994 1996 1999 2001 2004 2006 Past performance is no guarantee of future results. 3/1/2008 .

All rights reserved. **Based on the years 2000–2007. 3/1/2008 .Growth and Value by Decade Compound annual rates of return by decade 25% Return • Growth stocks • Value stocks 20 15 10 5 0 –5 1920s* 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s** Past performance is no guarantee of future results. An investment cannot be made directly in an index. © 2008 Morningstar. Inc. This is for illustrative purposes only and not indicative of any investment. *Based on the years 1928–1929.

3/1/2008 . All rights reserved. An investment cannot be made directly in an index.Moving With the Market Annual performance comparison 1988–2007 • Large growth 50% • Large value • S&P 500 40 30 20 10 0 –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. © 2008 Morningstar. Inc.

All rights reserved. Inc.4 3.Bull Market Performance Booming 1990s: 1995–1999 Growth $4.8% 17.249 $2.500 $3.2 • Small growth: 17. Hypothetical value of $1.500 500 1995 1996 1997 1998 1999 1995 1996 1997 1998 1999 Past performance is no guarantee of future results.000 invested at the beginning of 1995.379 • Large value: • Mid value: • Small value: Compound annual return: 24. An investment cannot be made directly in an index.258 $2.500 $2. This is for illustrative purposes only and not indicative of any investment.4% • Mid growth: 23.6 Value $4. © 2008 Morningstar.7 16. 3/1/2008 .033 $2.842 2.500 Compound annual return: • Large growth: 34.136 1.

000 $812 $767 $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.5% 13. 3/1/2008 .9 • Small growth: • Mid growth: • Large growth: • Small value: • Mid value: • Large value: $1. This is for illustrative purposes only and not indicative of any investment. © 2008 Morningstar. All rights reserved. Inc.800 Value Compound annual return: –5. Hypothetical value of $1000 invested at the beginning of July 2000.5 Compound annual return: 16.705 $1.400 1.568 1.7 –0.Bear Market Performance Early 2000s bear market: July 2000–December 2003 Growth $1.8% –7. An investment cannot be made directly in an index.3 –14.

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    © 2008 Morningstar. Inc.Blending Growth and Value  Balance growth investments with those that produce income Invest in both large and small companies. All rights reserved. 3/1/2008 .

3 SG 29.4 MG 23.0 MV 10.1 LV 15.8 MV –13.4 MV 2001 14.3 LG 0.8 LG 22.9 SV 43.9 LG • Large growth (LG) • Large value (LV) • Mid growth • Mid value • Small growth (MG) (MV) (SG) • Small value • Diversified portfolio (SV) (DP) Past performance is no guarantee of future results.4 LV 7.7 LG 4.8 MV –4.2 DP 40.1 SV 2005 14.7 MG 7.9 MV 20. All rights reserved.8 SG 2003 48.3 MG 2000 25.8 DP 7.6 SG 3. Inc.9 LV 13.0 LV –3.6 SV Lowest returns 24.5 MG –22.5 MG –23.6% LG 1999 51.8 SG 2.9 LG –27.1 MG 6.4 SG 6.1 SV 13.1 LG 47.6 SV 29.3 SG 0.0 LV 13.4 SG 2004 21. An investment cannot be made directly in an index.2 MG –8. © 2008 Morningstar.3 SV –19.8 DP –20.5 LV 4.9 DP 13.8 MV 4.6 SG 9.9 MV –0.8 L V –20.7 SG 3.8 MV 19.9 MG 4.0 LG –22.8 MG 22.1 LV –21.1 LG 16.2 SV 2007 12.8 LG 8.1 DP 2.3 MG 15.0 DP 13.4 SG –2.3 DP 8. This is for illustrative purposes only and not indicative of any investment.1 LV 39.0 MV 2006 23.2 SV 8.7 DP 39.4 DP –18.8 SV 2002 –12. 3/1/2008 .Style Winners and Losers 1998–2007 1998 Highest returns 47.4 MV –5.7 SV –3.6 LV 10.9 DP –7.

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