What segments of US stocks outperformed in 2018?
Posted on January 4, 2019

I like looking at the Vanguard Style Box (I call it a Nine Box.) at the end of the year to get a snapshot of what segments of stocks outperformed and underperformed the US stock market as a whole. This post discusses the 2018 snapshot. You can see 2017 here.


I display 2018 returns for Vanguard index funds that focus on segments of the total US market. The returns shown are very close to the appropriate index for each constructed by an independent third-party. Each fund performs very close to its index less the fund’s expense ratio, no greater than .07% for these funds.


The columns are Value, Blend, and Growth stocks and rows are Large-Capitalization (Cap), Mid-Cap, and Small-Cap stocks. I also display for reference the return for VTSAX, the index funds that holds all +3,600 US stocks: VTSAX declined in total market capitalization value by -5.17% in 2018.



All segments were in negative territory. Large-Cap Growth had the least decline in 2018. (It had the biggest gain in 2017.) Mid-Cap and Small-Cap Value had the biggest decline. (Small-Cap Value was the clear laggard in 2017.)




I show the percentage point difference in each box relative to VTSAX.



Two of the nine boxes were better than VTSAX and seven were worse. Large-Cap Growth beat VTSAX by 1.8 percentage points. Mid-Cap Value was the worst at -7.3 percentage points. Small-Cap Value was right behind it at -7.1 percentage points. Large-Cap Growth outperformed those two by about nine percentage points. All funds in the Growth column were significantly better than those in the Value column. All funds in the Large-Cap row were significantly better than the Small-Cap row.




Common wisdom is that you can tilt your portfolio to outperform the average (VTSAX). The thinking is that Value will outperform Growth given enough years, and Small Cap will outperform Large or Mid Cap. Tilting these ways clearly did not pay off for 2018 or 2017 and has not for the last five years (See below). I put the Small Cap tilt permanently out of my mind here. We retirees hopefully have decades to go. I can’t see how anyone could conclude that a tilt will clearly result in better performance than a fund like VTSAX over that many years. That’s why I hold total market funds.



For reference for 2018: total world market stock index MSCI All Cap World Index = -8.93%. Total International Stocks (VTIAX) = -14.43%

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