Is there any evidence that “growth”-style indexes and growth ETFs outperform their respective base indexes?
The value premium would state the opposite in fact if one looks at the work of Fama and French. The Investment Entertainment Pricing Theory (INEPT) shows a graph with the rates on small-cap/large-cap and growth/value combinations that may be of interest as well for another article noting the same research. Index fund advisors in Figure 9-1 shows various historical returns up to 2012 that may also be useful here for those wanting more detailed data. How to Beat the Benchmark is from 1998 that could be interesting to read about index funds and beating the index in a simpler way. "They don't, actually. Though in some time frames S&P 500 growth out performs S&P 500, it often lags. This is because ""growth"" doesn't refer to what happens to your account, but rather the type of stock in the index -- roughly speaking, it's the half of the S&P with the best earnings growth.  That would be great, except it's not looking for is to see if that growth is worth buying. A stock with a 20% growth rate is a great buy at a P/E of 15, but a terrible buy at P/E/ 50.  That leads to what JB King was talking about -- there's also the S&P 500 Value, which is roughly the cheapest stocks relative to earnings. Value does tend to beat the broad index over the long haul, because there's nothing like getting a good deal (note a stock can be in both the growth and value categories). This holds true with other indexes as well like the Russel 2000. All that said, you're not going to see a huge difference between S&P 500 and S&P 500 Growth. I believe this is because the S&P 500 itself leans a bit to the growthy side.   PS: With VOOG Vanguard is tracking the S&P 500 Growth Index, which is actually a thing and not Vanguard itself filtering stocks." You are correct that over a short term there is no guarantee that one index will out perform another index. Every index goes through periods of feat and famine. That uis why the advice is to diversify your investments. Every index does have some small amount of management. For the parent index (the S&P 500 in this case) there is a process to divide all 500 stocks into growth and value, pure growth and pure value. This rebalancing of the 500 stocks occurs once a year. Rebalancing The S&P Style indices are rebalanced once a year in December. The   December rebalancing helps set the broad universe and benchmark for   active managers on an annual cycle consistent with active manager   performance evaluation cycles. The rebalancing date is the third   Friday of December, which coincides with the December quarterly share   changes for the S&P Composite 1500.  Style Scores,   market-capitalization weights, growth and value midpoint averages, and   the Pure Weight Factors (PWFs), where applicable across the various   Style indices, are reset only once a year at the December rebalancing. Other changes to the U.S. Style indices are made on an as-needed   basis, following the guidelines of the parent index. Changes in   response to corporate actions and market developments can be made at   any time. Constituent changes are typically announced for the parent   index two-to-five days before they are scheduled to be implemented. Please refer to the S&P U.S. Indices Methodology document for   information on standard index maintenance for the S&P 500, the S&P   MidCap 400,the S&P SmallCap 600 and all related indices. As to which is better: 500, growth,value or growth and value? That depends on what you the investor is trying to do.
With the disclaimer that I am not a technician, I'd answer yes, it does. SPY (for clarification, an ETF that reflects the S&P 500 index) has dividends, and earnings, therefore a P/E and dividend yield. It would follow that the tools technicians use, such as moving averages, support and resistance levels also apply.  Keep in mind, each and every year, one can take the S&P stocks and break them up, into quintiles or deciles based on return and show that not all stock move in unison. You can break up by industry as well which is what the SPDRs aim to do, and observe the movement of those sub-groups.  But, no, not all the stocks will perform the way the index is predicted to.  (Note - If a technician wishes to correct any key points here, you are welcome to add a note, hopefully, my answer was not biased) "I'm assuming the question is about how to compare two ETFs that track the same index. I'd look at (for ETFs -- ignoring index funds): So, for example you might compare SPY vs IVV: SPY has about 100x the volume. Sure, IVV has 2M shares trading, so it is liquid ""enough"". But the bigger volume on SPY might matter to you if you use options: open interest is as much as 1000x more on SPY. Even if you have no interest in options, the spreads on SPY are probably going to be slightly smaller. They both have 0.09% expense ratios. When I looked on 2010-9-6, SPY was trading at a slight discount, IVV was at a slight premium. Looking for any sort of trend is left as an exercise to the reader... Grab the prospectus for each to examine the rules they set for fund makeup. Both come from well-known issuers and have a decent history. (Rather than crazy Uncle Ed's pawn shop, or the Central Bank of Stilumunistan.) So unless you find something in the SPY prospectus that makes you queasy, the higher volume and equal expense ratios would seem to suggest it over IVV. The fact that it is at a (tiny) discount right now is a (tiny) bonus." "i know that hedge funds shouldn't be compared with index funds. they do different things. they serve different functions. but when the headline is they are reporting big gains, and then they report that ""Ken Griffin’s main Wellington and Kensington funds at Citadel rose almost 7 percent."" YTD, and ""Andreas Halvorsen’s Viking and an equity-focused quantitative fund at Renaissance are up more than 9 percent this year through July"" as reporting ""Big Gains"" it's a little silly when an index fund like SCHB is up 10.7% YTD with an ER of 0.03." You are correct about the first two questions.  At the time it was last measured those were the percent invested in the Basic Materials sector for the ETF and its benchmark.  Note, this ETF will be significantly different from its benchmark as it is an equal-weight index rather than the more common capitalization-weighted index.  Meaning that this ETF could have materially different performance from its benchmark. The third column is the average sector weights of all the ETFs in Morningstar's Large Blend category.  These are ETFs that generally invest in a broad collection of large U.S. stocks and (weighted?) average of all of them will be generally fairly close to the benchmark. Equal-weight ETFs remove the large cap bias found in most popular indexes. What results behaves very much like a small-cap or mid-cap index. Observe RSP vs IJR over a 5 year period: IJR (iShares S&P SmallCap 600 ETF) vs RSP (Rydex S&P Equal Weight ETF)  I'm not sure if equal-weighting is worth the reduced efficiency. Mid-cap and small-cap funds have lower expenses (%0.20 for IJR vs %0.40 for RSP) and appear to do better over the long run. We don't know if that pattern will continue, but expense is one of the strongest long-term predictors of performance. "There are some index funds out there like this - generally they are called ""equal weight"" funds.  For example, the Rydex S&P Equal-Weight ETF.  Rydex also has several other equal weight sector funds" "The Investment Entertainment Pricing Theory (INEPT) has this bit to note: The returns of small growth stocks are ridiculously low—just 2.18   percent per year since 1927 (versus 17.47 percent for small value,   10.06 percent for large growth, and 13.99 percent for large value). Where the S & P 500 would be a blend of large-cap growth and value so does that meet your ""beat the market over the long term"" as 1927-1999 would be long for most people." No, it is not. If that were the case, you would have no such thing as a growth stock. Dividends and dividend policies can change at any time.  The primary reason for investment in a company is access to a firm's earnings, hence the idea of P/E. Dividends are factored in with capital appreciation, but studies have shown that dividends are actually detrimental to future growth.   They tend to allow easier access to shareholders because of the payouts, reducing the cost of equity. But, if you reduce the growth rate as well, sensitivity tables can demonstrate deterioration or stagnation over time.   Some good examples are GE and Microsoft. Investing in companies because they are successful and growing is a common fallacy. Their stocks usually don't perform any better than average stocks because you get what you pay for. You have to consider valuation even when selecting growth stocks. With a long enough time horizon, no matter when you buy, equities almost always outperform cash and bonds. There's an article here with some info: http://www.fool.co.uk/investing-basics/how-when-and-where-to-invest/ Holding period where shares have beaten cash  There was a similar study done which showed if you picked any day in the last 100 years, no matter if the market was at a high or low, after 1 year your probability of being in profit was only 0.5, but after 10-20 years it was almost certainly 1.0.  Equities compound dividends too, and the best place to invest is in diversified stock indices such as the S&P500, FTSE100, DOW30 or indices/funds which pay dividends. The best way to capture returns is to dollar cost average (e.g. place a lump sum, then add $x every month), to re-invest dividends, and oh, to forget about it in an IRA or SIPP (Self invested pension) or other vehicle which discourages tampering with your investment.  Yes, values rise and fall but we humans are so short sighted, if we had bought the S&P in 2007 and sold in 2009 in fear, we would have missed out on the 25% gain (excluding dividends) from 2007-2014. That's about 3% a year gain even if you bought the 2007 high -beating cash or bonds even after the financial crisis. Now imagine had you dollar cost averaged the entire period from 2007-2014 where your gain would be. Your equity curve would have the same shape as the S&P (with its drastic dip in 2009) but an accelerated growth after. There are studies if you dig that demonstrate the above. From experience I can tell you timing the market is nigh impossible and most fund managers are unable to beat the indices. Far better to DCA and re-invest dividends and not care about market gyrations! .. "There was a time when everyone felt their goal was to beat the respective index they followed. But of course, in aggregate, that's a mathematical impossibility. The result was that the average say large cap fund, whose benchmark index would be the S&P, would lag on average by 1-2%.  A trend toward ETFs that would match the market had begun, and the current ETFs that follow the S&P are sub .1% expense.  For the fact that studies (Google ""Dalbar"" for examples) show the typical investor lags not by 1% or 2%, but by far more for reasons of bad timing, my own statement that ""I've gotten a return these past years of .06% less than the S&P"" would have been seen many years ago as failure, now it's bragging. It handily beats the typical investor and yet, can be had by anyone wishing to stay the course, keep the ETF very long term." Monetary base and growth are no longer correlated, at least that's what we know from QE in the US. Source, some research I did as an undergrad and papers I can't cite from my phone. But in all seriousness, I doubt there are many mainstream economists that would cite the monetary base as a key driver of growth. Other metrics like Price/Book Value or Price/Sales can be used to determine if a company has above average valuations and would be classified as growth or below average valuations and be classified as value. Fama and French's 3 Factor model would be one example that was studied a great deal using an inverse of Price/Book I believe. "There's another line of business based on the theory of perpetual incremental growth. It's called a ""pyramid scheme""  In the longlongago, there were two general types of stock: growth stocks and income stocks.   Growth stocks were generally smaller businesses that were still, well, growing. You didn't expect much of a dividend from them because they were reinvesting profits into growing into new markets. The focus was on capital growth.   Once a company got fairly large and mature, then the expectation of capital growth tapered off because back then reasonable investors recognized it's insane to expect that a company can grow forever. Then, while there may be some ongoing capital growth, the major focus was on dividend income - getting a piece of the profits a large, established company could pull in.   The dotcom (among other things) broke that. People got obsessed with capital growth and instant returns. The idea of a decent yield over time became laughable. Instead a company had to show a percentage year over year growth or they got filleted by Wall Street.   If you put one penny on the first square of a checkerboard, then two pennies on the next, then four pennies on the square after that... once you fill the entire checkerboard how much money do you have?" Rebalancing your portfolio doesn't have to include selling.  You could simply adjust your buying to keep your portfolio in balance.  If you portfolio has shifted from 50% stocks and 50% bonds to 75% stocks and 25% bonds, you can just only use new savings to buy bonds, until you are back at 50-50. Remember to take into account taxes if you are thinking of selling to rebalance in taxable accounts. The goal of rebalancing is to keep your exposures the way that you want them.  Assuming that you had a good reason to have a portfolio of 50% stocks and 50% bonds, you probably want to keep your portfolio similar in the future.  If you end up with a portfolio of 75% stocks and 25% bonds due to stock market fluctuations, the exposure and the risk / return profile of your portfolio will have changed, and it's probably not something that you want. You don't want to rebalance just for the sake of rebalancing either.  There can be costs to rebalancing (taxes, transaction fees, etc...) and these aren't always worth the effort.  That's why you don't need to rebalance every month or if your portfolio has shifted from 50/50 to 51/49. I take a look at my portfolio once a year, and adjust my automated investments so that by the end of the next year I'm back to the ratio I want.