If the cap fits
Value and growth, and relative allocations to mainly large-cap indices are for large investors, their consultants and big asset managers.
It is hard to comprehend why retail investors hinder themselves with the burden of large-scale investing when it is unnecessary.
The need to switch from growth stocks into whatever you determine a value stock is, makes for some thought-provoking headlines. However, buying into miners and banks is a traditional approach that might mean less to a retail investor than ‘what components do I need to achieve my investment goal?’
This is a need the FCA recognises might not be reflected by an index and relative weights to it. I will leave that discussion to the large-scale, multibillion pound investors who have little choice but to invest that way and, in striving for low costs, usually pay for a consultant to help them.
Look out for index-agnostic, conviction investors who recognise the capacity limits of their strategy and in doing so put the investor first. That is more important than cost, as are after-fees returns in achieving investors’ goals.
This is a skill for a wealth or multi-manager to seek out those managers and put them into a portfolio to deliver a relevant and understandable investment outcome. Those managers can be harder to find than you think and letting a skilled fund picker do that job while the adviser concentrates on what they do best – financial planning – means not having to think like an institutional investor with too much money to invest.
The real value in this is not wasting too much time pondering over the imperfections of value versus growth, however you want to define those two factors.
It is worth noting that the world’s most famous value investor’s company appears at number seven on the list of top-10 companies in the MSCI World Growth Index. I rest my case.
