Morningstar MD Don Phillips on asset classes (JKE, IWF, IVW, JKL, IWW, IJS, IYR, RWR, VNQ)

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Includes: IJS, IUSV, IVW, IWF, IYR, JKE, JKL, RWR, VNQ
by: David Jackson

The WSJ carried an interview (paid subscription required) with Morningstar managing director Don Phillips. Here are his comments about asset classes, followed by a list of ETFs to translate his views into action:

There has been a profound difference in the performance of large-cap growth stocks and small-cap value stocks over the last five years. Over the past five years, according to the Morningstar style indexes, large growth stocks have declined 15.5% a year, while small-cap value stocks have risen 18.4%. That's just a phenomenal performance differential.

In many ways we're at the inverse of where we were in late 1999. In the late 1990s everyone loved large-cap, high-visibility growth, technology-oriented funds and stocks and no one wanted to buy things like REITs or small-cap value or commodities. Yet those were exactly what you needed to add to your portfolio if you wanted to survive the next five years.

Today we're at the opposite position. Real estate has had a great run, small-cap value has done phenomenally well and if there is a discount in the market, it's in the larger-cap, higher-quality names. It seems to me that there is a real opportunity to perhaps tilt your portfolio that way.

ETFs for action

  • Large cap growth: JKE, IWF, IVW
  • Small cap value: JKL, IWW, IJS
  • REITs: IYR, RWR, VNQ