Thread: The I Fund is a special bargain

ahh, well now you're arguing from a buy-and-hold standpoint. I'll admit I mostly speak under the assumption that most folks here are not buying-and-holding. My recommendation was only for this coming year, or maybe 2.

You may be right about value being the superior strategy (now) considering the nasdaq was ~ 75% off its peak of 4700 in Jan 03, but i think from 1999 prior, growth strategies actually was historically superior or, if not, very very close. The only superiortypes of stocks i'maware of either 99' or today, is small caps are about a good 2% better than large caps, i believe, historically.

Growth stocks destoyed value in the 90s.

The problem with the returns achieved by growth stocks in the 90s is the potential for mean reversion and lower returns in future periods. I think we saw some of that in the recent bear market with value keepingdiversified portfolios out of trouble. That is why I wish that we hadvalue andinternational small - further diversification.

The biggest hole is international small and perhaps emerging markets but I think international value, large value, and small value wouldbe nice as well. DFAs model portfolios include the following asset classes: large, large value, small, small value, eafe, internationalvalue,international small, international small value,and 3 emerging markets funds (ooops almost forgot REITS). Unfortunately, TSP is giving us the dreaded hybrid L fund rather than further diversification. Value certainly would havebeen a nice option during the recent bear market.

I think we saw some of that in the recent bear market with value keepingdiversified portfolios out of trouble. That is why I wish that we hadvalue andinternational small - further diversification.

My understanding is that the C fund and S fund are large cap "blend" and mid/small cap "blend" funds respectively (because the S&P500 is large blend, and the Wilshire 4500 is mid/small blend) so "we" are every bit as much value oriented as we are growth. My understanding ofthe definition of a"blend" fund is one which has either 1. A mixture of growth and value stocks and/or 2. a fund holdingstocks having both growth and value elements. Point - i doubt a portfolio of 50/50 growth and value funds would have performed much different than the C and S fund did.

I think you'll find that "true" growth funds took a much worse beating in 2000-2002 than the C and S fund did, and likewise, "true" value funds obviously did a lot better. So we just "lost" less via inherent diversified funds. The only portfolio that would have made money during that period was probably a true value stock holding and/or one also having bonds/government securities.

I do not disagree with anything in your last post. Blend funds take aneutral position holding roughly equal positionsacross value, blend, and growth. Modern Portfolio Theory asserts that there is a value premiumand a small premium. Large valuehas provideda more consistent premium as opposed to small and small value. The Efficient Market Theory and "the random walk" would say thatthis should not continue to happen and yet,thepremiums of value over growth and small over largecontinue to persist (perhaps overstated earnings reports by large growth companies explain part of it). As you suggest, our blend funds should wind up someplace in between and historically, the return of the S&P falls directly between value and growth with value at a premium.

Just want to add thatmany including John Bogle, do not feel that the portfolio should be tilted in any way but rather the portfolio should approximate the market capitalization of the entire U.S. stock market ala Vanguard's Total Stock Market index.Ironically,theTSM indexis very heavily tilted towards large blend (about 75% of the index is in U.S. large).