Time to ask a timeless question: Whither growth? For the five years that ended with January, large-cap growth stocks as a group have badly lagged the pack. Indeed, the Russell 1000 Growth -- a benchmark whose top holdings include Intel (Nasdaq: INTC ) , Google (Nasdaq: GOOG ) , and Amgen (Nasdaq: AMGN ) -- has trailed its 1000 Value sibling -- which is headed up by ExxonMobil (NYSE: XOM ) and Citigroup (NYSE: C ) -- by almost 52 percentage points over the period.
And if you think that margin seems substantial -- and it is -- consider the yawning performance chasm that exists between the 1000 Growth bogey and the Russell 2000 Value. Over the same five-year stretch, that latter, small-cap centric benchmark -- whose top 10 includes Big Lots (NYSE: BIG ) and NBTY (NYSE: NTY ) -- has beaten the former by nearly 86 percentage points.
Did somebody say, "shellacked"?
Against the wind
To my contrarian way of thinking, the data points above point to one fairly emphatic conclusion: Now looks like a fine time for savvy investors to dial up their exposure to an underachieving asset class. Doing so could provide a choice opportunity to snap up shares of high-quality companies while they're trading on the cheap.
Thing is, stocks with outsized growth prospects come with plenty of potential for volatility. If they fail to deliver on earnings-growth expectations or if a hotly anticipated product fails to, um, catch fire, high-flying growth stocks can become what the pros like to call "fallen angels" during the course of just a single market session. Moreover, as recent history suggests, when investors turn cautious, a dry spell for growth can ensue -- and it can last for a mighty long time.
How to proceed
The upshot? Well, for my money, if you're concerned with both growing and protecting your nest egg, world-class mutual funds provide a smart way to proceed. And that's as true for aggressive investors as it is for buttoned-down conservative types -- indeed, perhaps even more so.
After all, if you're looking to invest in, say, emerging markets, high-yield bonds, and high-flying growth stocks, your best bet is to do so in the context of a carefully calibrated portfolio. Funds make building one of those a cinch -- provided, of course, that you know how to separate the fund industry's relatively few keepers from its plentiful duds and how to assemble the puzzle pieces of a portfolio.
The Foolish bottom line
If you'd like to learn more, I encourage you to check out the Fool's Champion Funds investment service. We aim to assist on both fronts -- our overall list of recommended funds is beating the market by more than 14 percentage points, and we provide three model portfolios -- carefully calibrated asset-allocation "starter kits" that come in aggressive, moderate, and conservative flavors.
In the issue of Champion Funds that releases tomorrow, we begin reviewing every recommendation we've made since the newsletter opened for business in 2004. I also highlight the fund I like best for new money now, which -- you guessed it -- does indeed specialize in large-cap growth stocks. If you'd like to sneak a peek at the whole shebang, you can do so for free with a 30-day guest pass. There's no obligation to subscribe, so if you're looking to jump-start your financial future, our annual review issue is a great (and free) place to start.
Take Champion Funds for a free test drive now and you'll also have access to our latest special reports: "The Challenge: ETFs vs. Mutual Funds" and "Add Kick to Your 401(k)!" Just click here to snag the reports and your free 30-day guest pass.
Shannon Zimmerman runs point on the Fool's Champion Funds newsletter service and co-advises Motley Fool Green Light with his pal Dayana Yochim. At the time of publication, he didn't own any of the securities mentioned above. Intel is an Inside Value recommendation. You can check out the Fool's strict disclosure policy by clicking right here.