, Columnist
Growth and Value Stock Indexing Are Both Broken
The shift from active investment to passive portfolios has made an old debate irrelevant.
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The long feud between growth and value equity investors can end. Both concepts are increasingly unhelpful with the shift from active investment to passive portfolios.
As a result of this transition, growth and value are now broken approaches that have the potential to create significant and unnecessary risk for many investors. All-or-nothing methods of index construction create portfolios with dramatic over/under weights in volatile sectors. Single stock weightings can be double more broadly based indexes. Instead of helping investors diversify via traditional “style boxes,” growth and value now herd them into tightly fenced pens.