Lessons learned from the value-versus-growth debate

  • Cathie Wood’s growth plays stumbled against value
  • Comparison of Wood’s ARK Innovation ETF and Arnott’s Invesco FTSE RAFI US 1000 ETF
  • Wood’s fund had a negative total return of 30.2% annually
  • Lessons learned from the debate: owning both value and growth, picking the right companies, being wrong isn’t necessarily bad, compelling arguments can be wrong, market concentration is dangerous, and owning total stock index funds

One of the most fascinating investing debates I’ve witnessed was the value-versus-growth debate between Rob Arnott, founder of Research Affiliates, and Cathie Wood, founder of ARK Investment Management. The debate took place at the 2021 Morningstar Investment Conference in Chicago. Since the 2024 Morningstar conference just wrapped up, I decided to take a look at—three years out—who was right and what lessons could be learned for investors. Wood argued for growth, suggesting that disruptors like companies in genetic sequencing and artificial intelligence would lead to share outperformance. Arnott argued that the valuation spreads between growth and value were near record levels and would narrow, with value outperforming growth. I compared Wood’s ARK Innovation ETF to Arnott’s Invesco FTSE RAFI US 1000 ETF and found that Wood’s fund had a negative total return of 30.2% annually, while Arnott’s fund slightly outperformed the overall Russell 3000 index. The debate highlights the importance of owning both value and growth, picking the right companies, and understanding that being wrong isn’t necessarily bad. It also emphasizes the dangers of market concentration and the benefits of owning total stock index funds. Overall, the debate provides valuable lessons for investors.·

Factuality Level: 3
Factuality Justification: The article provides a detailed account of a debate between Rob Arnott and Cathie Wood on value versus growth investing, including their arguments and subsequent performance of their strategies. However, the article contains unnecessary background information, tangential details, and personal opinions that detract from the main topic. The author’s bias towards a specific investing approach is evident, and the conclusion drawn at the end is subjective rather than purely factual.·
Noise Level: 3
Noise Justification: The article provides a detailed analysis of the value-versus-growth debate between Rob Arnott and Cathie Wood, discussing their arguments, predictions, and actual outcomes. It offers insights into the performance of different investment strategies and funds, highlighting the importance of picking the right companies to invest in. The article also draws lessons learned from the debate, emphasizing the unpredictability of market trends and the risks of market concentration.·
Public Companies: Tesla (TSLA), Nvidia (NVDA)
Key People: Cathie Wood (Founder of ARK Investment Management, Chief Executive Officer, Chief Investment Officer), Rob Arnott (Founder of Research Affiliates)

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Financial Relevance: Yes
Financial Markets Impacted: The article discusses the performance of different investment strategies (value vs. growth) and the impact on specific companies and ETFs (ARK Innovation ETF and Invesco FTSE RAFI US 1000 ETF). It also mentions the performance of Tesla and Nvidia, two companies in the technology sector. These discussions have implications for investors and may impact financial markets and companies in the technology sector.
Financial Rating Justification: The article analyzes the performance of different investment strategies and specific companies, which are relevant to financial markets and investors.·
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: ·

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