A Value-Stock ETF Joins the Kiplinger ETF 20

Powershares Dynamic Large Cap Value favors stocks with earnings momentum, strong balance sheets and rising dividend payouts.

Exchange-traded funds that feature high-flying growth stocks can fire up your portfolio. But ETFs with a value tilt can be a solid bet, too. These funds hold stocks that are cheap based on such measures as price-earnings ratios. Value stocks also tend to offer above-average dividend yields.

Historically, a strategy of focusing on the market’s cheaper stocks has resulted in above-average returns. But since the bull market began in 2009, growth stocks, fueled by big tech companies such as Facebook and Alphabet, have led the way most of the time. Although some tech darlings have faltered lately, growth may still trump value, especially if the economy weakens. That’s because big chunks of the value universe, such as energy and financial stocks, are closely tied to the overall health of the economy. “I would stick with growth if you think the economy is slowing,” says Doug Ramsey, chief investment officer of the Leuthold Group, a research firm.

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Daren Fonda
Senior Associate Editor, Kiplinger's Personal Finance
Daren joined Kiplinger in July 2015 after spending more than 20 years in New York City as a business and financial writer. He spent seven years at Time magazine and joined SmartMoney in 2007, where he wrote about investing and contributed car reviews to the magazine. Daren also worked as a writer in the fund industry for Janus Capital and Fidelity Investments and has been licensed as a Series 7 securities representative.