- The U.S. Large Cap Value asset class has outperformed the U.S. Large Cap Blend asset class by 1.01% CAGR over the past 46 years
- The oldest U.S. Large Cap Value ETF has outperformed an S&P 500 index fund by 1.03% CAGR over the past 20 years
- There are currently 92 ETFs available in the Morningstar category Large Value. 23 of those ETFs are ten years old or older
The Large Cap Value asset class has a long history of superior returns when compared to the Large Cap Blend (or the S&P 500) asset class.
U.S. Large Cap Value vs U.S. Large Cap Blend: January 1972 – September 2018
Source: https://www.portfoliovisualizer.com/
The SPDR® Dow Jones® Industrial Average ETF (DIA) is the oldest available ETF in the Large Value category. Its’ inception date was January 14, 1998. It has been outperforming the S&P 500 ever since.
DIA vs S&P 500 index fund: February 1998 – September 2018
Source: https://www.portfoliovisualizer.com/
DIA vs SPY: January 20, 1998 – October 20, 2018
Source: https://www.koyfin.com/home
There are currently 92 ETFs available in the Morningstar category called Large Value. 23 of those ETFs are ten years old or older. I have compared and ranked all 23 of these older ETFs head-to-head using the back-testing tools at Portfolio Visualizer and Koyfin. The ETFs were ranked by long-term performance only. No consideration was given to valuations, diversification, tax efficiency, suitability, quality, dividend yield or expense ratios. Investors in this asset class should perform that due diligence prior to investing in any fund.
Source: https://www.morningstar.com/
Now, let’s see how the top 4 Large Cap Value ETFs compared with each other over the last 12 years.
FVD vs DIA vs RPV vs PWV: April 2006 – September 2018
Source: https://www.portfoliovisualizer.com/
And, here are the top 4 Large Cap Value ETFs compared with the most popular S&P 500 ETF.
FVD vs DIA vs RPV vs PWV vs SPY: March 7, 2006 – October 20, 2018
Source: https://www.koyfin.com/home
Now, let’s look at the top 4 U.S. Large Cap Value ETF’s stated objectives and product details.
FVD – The First Trust Value Line® Dividend Index Fund is an exchange-traded index fund. The objective of the Fund is to seek investment results that correspond generally to the price and yield, before fees and expenses, of the Value Line® Dividend Index. The index begins with the universe of stocks that Value Line® gives a SafetyTM Ranking of #1 or #2 using the Value Line® SafetyTM Ranking System. All registered investment companies, limited partnerships and foreign securities not listed in the U.S. are removed from this universe. From those stocks, Value Line® selects those companies with a higher than average dividend yield, as compared to the indicated dividend yield of the Standard & Poor’s 500 Composite Stock Price Index. Value Line® then eliminates those companies with an equity market capitalization of less than $1 billion. The index seeks to be equally weighted in each of the securities in the index. The index is rebalanced on the application of the above model on a monthly basis. (Best long-term performance, best diversity, best yield)
DIA – The SPDR® Dow Jones® Industrial AverageSM ETF Trust seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Dow Jones Industrial AverageSM (the “Index”). The Dow Jones Industrial AverageSM (DJIA) is composed of 30 “blue-chip” U.S. stocks. The DJIA is the oldest continuous barometer of the U.S. stock market, and the most widely quoted indicator of U.S. stock market activity. The DJIA is a price weighted index of 30 component common stocks. (Lowest expense ratio, best liquidity)
RPV – The Invesco S&P 500® Pure Value ETF (Fund) is based on the S&P 500® Pure Value Index (Index). The Fund will invest at least 90% of its total assets in securities that comprise the Index. The Index measures the performance of securities that exhibit strong value characteristics in the S&P 500® Index. Value is measured by the following risk factors: book value-to-price ratio, earnings-to-price ratio and sales-to-price ratio. The Fund and the Index are rebalanced annually. (Best 10-year performance, lowest P/E & P/B ratios, lowest U.S. Market correlation)
PWV – The Invesco Dynamic Large Cap Value ETF (Fund) is based on the Dynamic Large Cap Value Intellidex℠ Index (Index). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index is designed to provide capital appreciation while maintaining consistent stylistically accurate exposure. The Style Intellidexes apply a rigorous 10 factor style isolation process to objectively segregate companies into their appropriate investment style and size universe. The Fund and the Index are rebalanced and reconstituted quarterly in February, May, August and November. (Smallest drawdown during the Great Recession)
The U.S. Large Cap Value asset class has a long history of superior performance on its’ side. The future will not look like the past, but it should rhyme a bit. Investors are wise to make this asset class a portion of their equity portfolios. Large cap value is one of the most popular asset classes traded. Therefore, investors have many good large cap value ETFs to choose from. Personally, I’d prefer any of the top 4 ETFs in this category, but I believe investors will get good results with just about any fund in the top half of the list.
Thank you for taking time to read this article. If you found it useful, please share it with a friend.
Respectfully yours, Micah McDonald, aka the Deep Value ETF Accumulator
Disclosure: We own shares of FVD and we intend to buy more shares in the future. I am not a professional investment advisor. Please perform your own due diligence or seek assistance from a Registered Investment Advisor prior to investing in any fund mentioned in this article.
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