While growth funds have the potential to deliver stellar returns, their performance has been uneven over the past 10 years, in which they declined 32%, USA Today reports. By comparison, large-cap value funds have lost only 1%.
Known for chasing performance, investors have responded in kind, with $185 billion in net redemptions from large-cap growth funds over the past decade, three times the amount that was redeemed from large-cap value.
Given the increasing volatility and risk, academic researchers are now saying that “growth investors belong somewhere between people who believe the Earth is flat and those who get their stock tips from talking dogs,” USA Today says.
Nonetheless, it is possible the market is entering a period when growth will reward investors. Robert Millen, manager of the Jensen Fund, which has delivered returns in the top 5% over the past 10 years, thinks the economic recovery is for real, although it will be slow due to tepid consumer spending, lingering debt, and higher interest rates and taxes inevitably on the horizon.