Growth and value are the two oldest labels in stock investing. Growth investors pay up for companies whose sales and profits they expect to expand quickly; value investors hunt for companies whose shares look cheap next to what the business already earns or owns. The labels matter beyond stock picking, because index providers turn them into formulas, fund issuers build products on those formulas, and academics have measured the gap between the two styles for a century. This comparison covers how each style is defined, how the indexes draw the line, what the portfolios look like today and what the long-run record does and does not show. For the basics of share ownership, start at the stocks hub.
What is the difference between growth and value investing?
Growth investing buys expected future expansion, while value investing buys current earnings, assets or cash flow at a price that looks low by comparison.
The difference shows up clearly in the two halves of the S&P 500, as measured in the fact sheets of the funds that track them at the end of September 2026.
| Growth investing | Value investing | |
|---|---|---|
| What you are buying | Companies expected to grow sales and earnings faster than average | Companies priced low against earnings, book value, sales or cash flow |
| Forward P/E of S&P 500 style fund holdings | 22.57 | 18.13 |
| Price-to-book ratio | 8.79 | 3.54 |
| Index dividend yield | 0.55% | 1.80% |
| Analysts' 3 to 5 year EPS growth estimate | 28.02% | 14.81% |
| Number of holdings | 151 | 436 |
| Largest sector weight | Information technology, 54.1% | Information technology, 21.5%, then financials, 15.2% |
| Where the return has to come from | Earnings growth that beats what the price already assumes | Prices recovering toward fundamentals, plus dividends |
| Typical way it goes wrong | Growth slows and the high multiple shrinks | The business is cheap for a reason and keeps shrinking |
Neither column is a better kind of company. A growth stock's higher multiple is the price of faster expected growth, and a value stock's lower multiple is the discount for slower growth or greater doubt. How multiples work is covered in the P/E ratio explained.
How do index providers decide what counts as growth or value?
Each provider scores every company on a handful of measures, ranks them, and splits the market's value between a growth index and a value index.
S&P Dow Jones Indices gives each company a growth score and a value score from standardized factors. The companies with the strongest growth rankings that together make up 33% of the parent index's market value go entirely into the growth index; the strongest value rankings, another 33%, go entirely into the value index. The middle 34% is divided between the two according to how close each company sits to the center of each group, so the parent's value ends up split roughly in half. The style indexes are rebuilt once a year, in December.
| Index family | Growth factors | Value factors | How stocks are assigned |
|---|---|---|---|
| S&P, through December 18, 2026 | Three-year change in EPS over price; three-year sales per share growth; 12-month price momentum | Book value to price; trailing earnings to price; sales to price | Top third of market value by growth score to growth, top third by value score to value, middle third split |
| S&P, from December 21, 2026 | Three-year change in EPS over price; three-year sales per share growth | Book value to price adjusted for intangibles; average of trailing and forward earnings to price; sales to price; free cash flow to price | Same three-way split |
| CRSP | Forecast long-term and short-term EPS growth; three-year historical EPS growth; three-year historical sales growth; investment to assets; return on assets | Book to price; forecast and historical earnings to price; dividend to price; sales to price | Ranked by composite scores in cumulative market value, with buffer bands so stocks near the line move gradually |
CRSP says it tested almost 2,600 candidate models and found that factors are not equally useful: earnings measures carry the most weight on the value side, and historical sales trends and analysts' estimates matter most for growth. FTSE Russell uses its own approach and assigns each company a probability of being growth or value; it reassesses style in June and updates new or moving members in December.
What changes in the S&P style indexes on December 21, 2026?
S&P announced on October 23, 2026 that its growth and value factors will change at the December rebalance, effective before the market opens on December 21.
On the growth side, the 12-month price change drops out, leaving two measures of earnings and sales growth; a stock will no longer lean toward growth simply because it has risen. On the value side, three changes arrive. Book value is adjusted for intangible assets, earnings yield becomes an average of trailing and forecast figures, and free cash flow to price joins as a fourth factor. Free cash flow is left out of the value score for real estate companies, banks, insurers and several other financial industries. S&P said the update reflects changes in market structure, company fundamentals and data availability, and pro forma files reach clients from December 4.
The intangibles adjustment speaks to an old criticism of book value. Accounting rules record most research, software and brand spending as an expense rather than an asset, so companies built on those investments carry little book value and can look expensive on price-to-book even when their earnings say otherwise. Fund fact sheets dated before the change still describe the old factors, and the holdings of growth and value funds may shift once the new ones apply.
Can a company be both growth and value?
Yes: providers split companies in the middle of the rankings between both indexes, and the split can change sharply from one year to the next.
Worked example: Where the largest companies sat, autumn 2026
| Company | S&P 500 Growth weight, September 30 | S&P 500 Value weight, September 30 | Russell style split from June 2026 |
|---|---|---|---|
| Apple | 6.60% | 8.34%, the largest holding | 54.2% growth, 45.8% value |
| Amazon | 3.52% | 3.94% | Not listed among the changes |
| Microsoft | 10.34% | Not in the top 10 | 50.0% growth, 50.0% value |
| Nvidia | 15.00%, the largest holding | Not in the top 10 | Not listed among the changes |
- Apple and Microsoft moved from 100% growth to partly value in the Russell indexes in June 2026
- Alphabet moved the other way, from partly value to 100% growth, and Micron and Sandisk switched from 100% value to 100% growth
A label is a statement about a company's numbers relative to every other company's at one date, not a permanent trait. When a mature technology company's growth slows while its profits stay large, it drifts toward value; when a cyclical business's earnings jump, it can move to growth. Owning both a growth fund and a value fund can therefore mean owning the same company twice, in different proportions.
How do growth and value portfolios differ today?
Beyond valuation, the two halves of the market differ sharply in concentration, company size and sector mix.
Worked example: Funds tracking the S&P 500 and its two style halves, September 30, 2026
| Characteristic | Growth fund | Value fund | Full S&P 500 fund |
|---|---|---|---|
| Forward P/E | 22.57 | 18.13 | 20.38 |
| Price-to-book | 8.79 | 3.54 | 5.34 |
| Index dividend yield | 0.55% | 1.80% | 1.10% |
| Estimated 3 to 5 year EPS growth | 28.02% | 14.81% | 22.21% |
| Average market cap of holdings | $2.51 trillion | $715 billion | $1.72 trillion |
- Ten largest growth holdings: 15.00 + 10.34 + 6.60 + 5.48 + 4.54 + 4.40 + 4.34 + 3.52 + 3.27 + 2.71 = 60.2% of the fund
- Ten largest value holdings: 8.34 + 3.94 + 2.30 + 2.05 + 1.59 + 1.39 + 1.38 + 1.30 + 1.23 + 1.21 = 24.7% of the fund
The growth half is a concentrated bet on large technology and communication companies: those two sectors made up 69.6% of it, and Nvidia alone 15%. The value half is broader, spread across financials, health care, industrials, energy, consumer staples and utilities. The full S&P 500 lands between the two on every measure, which is what you would expect from an index that holds both. Company size is the other axis of the familiar style grid, covered in market cap explained, and dividend-focused approaches are explored in dividend investing basics.
Has value beaten growth over the long run?
Over a century of US data value stocks have outperformed growth stocks on average, but the advantage has disappeared for stretches lasting more than a decade.
Researchers measure the gap with HML, short for high minus low, from the data library Kenneth French maintains at Dartmouth. It is the average return of two portfolios of cheap stocks, ranked by book value relative to market value, minus the average return of two portfolios of expensive ones. It is a paper portfolio that ignores trading costs, not a fund anyone can buy.
| Period | Value minus growth, average per year | Notes |
|---|---|---|
| July 1926 to September 2026 | +4.2% | Full history in the library |
| July 1926 to December 2006 | +5.6% | Before the long slump |
| July 1963 to June 1991 | +5.0% | First half of Fama and French's 2021 study period |
| July 1991 to June 2019 | +2.5% | Second half; too noisy to be statistically reliable |
| January 2007 to December 2020 | −5.3% | Value lagged in 10 of the 14 years, including −46.9% in 2020 |
| January 2021 to December 2022 | +25.4% | +25.6% in 2021 and +25.7% in 2022 |
| January 2023 to September 2026 | −1.0% | −14.0% in 2023, −8.4% in 2024, +8.7% in 2025, +6.7% in the first nine months of 2026 |
Averages are monthly returns multiplied by 12, calculated from the library's factor file built on CRSP data through September 2026.
Eugene Fama and Kenneth French, whose 1993 paper made this factor standard, revisited it in 2021. Measuring the premium as value portfolio returns minus market returns, they found it much lower in the second half of the July 1963 to June 2019 period than in the first, but monthly returns were so volatile that they could not reject the idea that the expected premium was the same in both halves. In plain terms, the evidence cannot tell a smaller premium apart from a long run of bad luck. Over the ten years to September 2026, HML averaged −0.2% a year.
What explains the long swings between the two styles?
No single cause is settled, but a few explanations come up again and again, and each points to a different risk.
- Interest rates. Growth companies' profits lie further in the future, so their present value is more sensitive to the rates used to discount them. The 2022 rise in rates coincided with value's second straight 25% year.
- Intangible assets. Measures based on book value miss research, software and brands, which is the gap S&P's December 2026 change tries to close.
- Winner-takes-most industries. A few very large, very profitable technology companies drove much of the growth index's run, and their weight in growth indexes rose with them.
- Crowding and timing. When many investors chase one style, its valuations stretch and later returns can disappoint; when a style is abandoned, it can become cheap enough to rebound.
None of these explanations tells you which style will lead next, and the record above shows reversals arriving with little warning. The broader question of how much prices already reflect public information is covered in fundamental vs technical analysis.
How do investors get growth or value exposure?
Most do it through style index funds, a tilt within a diversified portfolio, or simply a broad index fund that already holds both styles.
A broad market or S&P 500 fund owns growth and value companies in roughly equal value, so a holder of one is already exposed to both. Style funds let investors lean one way; the two S&P 500 style funds whose fact sheets are used above each listed a gross expense ratio of 0.04%. Building a style portfolio from individual stocks means doing the homework the index formulas automate, starting with reading an earnings report. How index funds are built and what they cost is covered in index funds explained, and how the S&P 500 itself is assembled is in what is the S&P 500.
What are the risks of growth and value investing?
Each style fails in its own way, and an investor who commits to one should expect years when it trails the market.
- Paying too much for growth. A high multiple assumes years of strong results; a slowdown can cut both earnings estimates and the multiple at once.
- Value traps. Some cheap stocks stay cheap or get cheaper because the business is in decline, so a low P/E is a question, not an answer.
- Concentration. At the end of September 2026 the growth fund's ten largest holdings, only nine companies because both Alphabet share classes made the list, were 60.2% of its weight, and Nvidia alone was 15%.
- Sector bets. Growth leans heavily on technology and communication companies, value on financials, energy and other cyclical industries, so each is exposed to shocks in those areas.
- Long droughts. Value lagged growth in 10 of the 14 years from 2007 through 2020, and a style investor needs the patience, and the diversification, to live through a spell like that.
- Moving definitions. Methodology changes and annual rebalances can shift what a style fund owns without any decision by its holders, as the December 2026 S&P update will.
To see how the largest companies in both indexes have traded recently, check their prices on the stock dashboard or Apple's stock page.