Growth and Value Disparity

Chart of the Week for June 17-23, 2005

Standard deviation is a common risk measure for evaluating investment performance; the higher the standard deviation the greater the performance volatility. Standard deviation can also be used as a measure of the likelihood of a future outcome. Statisticians tell us that 66% of all observations will fall within plus or minus one standard deviation, 95% will fall within plus or minus two standard deviations and 99% will fall within plus or minus three standard deviations.

The above chart plots the difference between the 5 year annualized return of the Russell 1000 Growth Index and the 5 year annualized return of the Russell 1000 Value Index. When the Growth Index has outperformed the line is upward sloping and vice versa. Value has outperformed Growth on a trailing five year basis for the past 52 months (since February 2001). In February of this year, the difference fell outside of minus three standard deviations (based on rolling five year returns from May 1990 - May 2005) when the spread grew to -17.6%. The return differential has since tightened. This illustration provides a real-world example of investment styles changing leadership and why keeping investments diversified is so important.

This illustration was compiled by information from outside sources. These companies are not affiliated with ICMA-RC. This information is being provided for educational purposes and is not intended to be construed as or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice. Individuals are advised to consider any new investment strategies carefully prior to implementing.

Investment information can change rapidly and the changes can be significant particularly in volatile markets. For this reason “as of”’ dates are provided for specific data where applicable. The information should not be considered current after the dates provided.

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The performance data quoted represents past performance. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data illustrated. For performance data current to the most recent month end, contact ICMA-RC Services, LLC by calling 800-669-7400 or by writing to 777 North Capitol Street, NE, Washington, DC 20002-4240. Para asistencia en Español llame al 800-669-8216. Performance data current to the most recent quarter end is available by visiting www.icmarc.org.