Growth ETF vs Value ETF: Which Performs Better?
Growth and value ETFs offer easy access to two classic investment styles. Performance cycles between them, making it important to understand when each tends to shine.
What Is Growth ETF?
Growth ETFs like VUG or IWF hold fast-growing companies with high revenue and earnings growth. They tend to have higher valuations and lower dividend yields.
What Is Value ETF?
Value ETFs like VTV or IWD hold companies trading below their intrinsic value based on metrics like P/E and P/B ratios. They tend to have higher dividend yields and lower volatility.
Key Differences
| Feature | Growth ETF | Value ETF |
|---|---|---|
| Focus | Revenue/earnings growth | Undervalued companies |
| Dividend yield | Low (~0.5-1%) | Higher (~2-3%) |
| Volatility | Higher | Lower |
| Recent winner | 2010-2020: Growth | 2000-2007, 2022: Value |
| P/E ratio | Higher | Lower |
The Bottom Line
Both styles have multi-year periods of outperformance. Holding both ensures you are never completely on the wrong side. A 50/50 split or market-cap weighted approach works well for most investors.
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