Where to Invest in 2006? Large Caps, Not Small Caps, and Growth Versus Value? (ETFs: IVV, SPY, IWB, IVW, IWF)

Excerpt from Raymond James strategist Jeffrey Saut's most recent weekly essay:

...looking longer term for 2006 our investment posture assumes that “cash is not trash�? and "defense continues to be a decent offense," a stance that has produced superior returns for us over the last five years. Currently, we now are favoring large caps (not mega caps) over small/mid-caps. That is a big strategic change for us after adamantly recommending small/mid-caps as THE place to be from October 2001 until October 2005. While we will still "mine" this universe, believing that outsized earnings growth will come from select small/mid-cap situations, their outperformance since April 1999 makes said performance VERY long-of-tooth and therefore not good “odds bets." As for the “growth versus value" question we keep getting, we have always stated that Wall Street will “pay up" for outsized growth, yet we agree with Warren Buffett that the growth versus value question is “fuzzy thinking."

ETFs have made it easy to implement this sort of investment advice at low cost. Large cap US equity ETFs include the S&P 500 ETFs (IVV and SPY), and the iShares Russell 1000 ETF (IWB). Note, however, that all large cap indexes are dominated by the "mega-cap" stocks which Geoffrey Saut is less enthusiastic about.

Large cap growth ETFs include the iShares S&P 500 Growth ETF (IVW) and iShares Russell 1000 Growth ETF (IWF).