More Pain Likely in Store for Growth Investors through 2021MGK: Growth
MGC: Blended
MGV: Value
As we can see, value is pulling ahead. Growth has expended its fuel through 2021. Beware of growth, bias portfolios toward blended or value.
Market insights
Growth Stocks Ride to Moon to Level out at 1000 Ft in 2021MGK: Vanguard Growth Mega Cap
MGC: Vanguard Blended Mega Cap
MGV: Vanguard Value Mega Cap
In my previous divergence analysis of MGK and MGV, I noted the deviation of MGK away from MGV suggests MGK is overvalued relative to MGV. I also noted that MGK's divergence away from MGC was disproportionate with MGV's inverse divergence. As a result, I concluded that not only is MGK overvalued wrt MGV, but its excessive divergence away from MGC suggested general overvaluation (ie. Tesla, Apple, Amazon, etc are overvalued) wrt to the US economy.
I post this new analysis today to show that the past 6 months have yielded practically no divergence of MGK away from MGV. They are both tightly banded about MGC. My prediction is that this trend will continue for the next 1-2 years, as all of MGK's components' (ie TSLA) has been expended in the past 5 years.
My conclusion, by proxy, also indicates that MGK is a BAD INVESTMENT. Along with other major growth ETFs, it entails greater risk, more volatility, and lower dividends than its value-based counterpart (MGV).
Thus, for younger investors, I maintain my opinion that the blended ETFs (MGC, VV, VO, VIOO) are the best option and MGK and its component companies should typically be avoided. Other growth etfs should likely also be avoided.
Growth stocks out of touch with realityMGK: Vanguard's growth mega cap etf
MGC: blended mega etf
MGV: value mega etf
MGK's divergence away from MGV reflects the fact that the surging prices of stocks such as TSLA have become far overvalued relative to stocks with good price to book ratios (ie banks). This divergence can't last, its the largest ever seen and totally out of touch with reality. Growth is always tied to value and higher risk should always be rewarded, but MGK is due for a set back. I recommend young investors (like me) shift away from growth and into blended to dampen the impact.
