So you "get" value investing. You understand the concept of buying stocks when they are unloved and therefore cheap based on metrics such as P/E and P/B, as you realize that such stocks tend to outperform over time. But you don't have the time to constantly screen and then investigate the latest value ideas. So why not invest in an ETF like the S&P 500 Index Fund (IVE)?
This ETF seeks to mimic the returns of the S&P 500 Value Index. It has done a pretty good job of doing so, having returned 3.86% annually over the last 10 years against the S&P 500 Value Index's return of 4.00% per year over the same period. However, this calculation doesn't include the ETF's management fee of 18bps, which would have served to reduce this annualized return to 3.68%.
But just how good is the S&P 500 Value Index at giving your portfolio the kind of value you crave? Perhaps not very. First of all, every S&P 500 (SPY) stock (or portion thereof) has to be either in the S&P 500 Value Index or the S&P 500 Growth Index, so a lot of stocks with marginal value characteristics get included. As a result, the index currently has a P/E of 18 and a P/B of 2.3...not exactly "deep value" stuff!
Second, the index is market-cap weighted, just like the S&P 500. This means you end up owning a lot of the largest companies, making your portfolio not that different from that of the market. For example, currently IVE's top holdings include GE (4% of the portfolio), AT&T (3%), Exxon (3%)...you get the picture!
Finally, the index is only re-balanced once a year. This does limit transaction costs, but can lead to some style drift.
In the end, you might think you're getting some good value with IVE in the long term, but you're really just getting the market! As such, you may be better off looking for a deeper value index, such as those that are available through the Russell family, as there you will find smaller market weightings and a greater number of stocks from which to choose, resulting in value indices with deeper value statistics.