Stay the Course?
With growth stocks in correction territory, down a double-digit percentage from their highs earlier this year, what are investors to do–cut their losses or stay invested?
Alger On the Money
Inspired by Change, Driven by Growth.
Alg
er is a signator
y to the PRI and carbon neutr
al.
•
We believe the chart above suggests that it’s common for equities, including growth stocks, to
experience drawdowns, which we define as the largest intra-year decline occurring each calendar
year. Over the past 25 years, the median drawdown of the Russell 3000 Growth Index was 12%.
•
Drawdowns, however, have historically not precluded strong positive returns. Despite consistently
large annual drawdowns, Russell 3000 Growth Index annual returns have been positive in 20 of
the past 25 years. In fact, there have been 14 years in which double-digit drawdowns coincided
with double-digit annual gains.
•
Measured in days since its inception in 1979, the Russell 3000 Growth Index has been in correc
-
tion territory, having fallen 10% or more from its previous high, for more than a third of the time.
However, the index has still returned over 10% annually over that time. The message: no pain, no
gain and we believe patience can potentially result in positive investment gains over the long haul.
Stay the Course?
With growth stocks in correction territory, down a double-digit percentage from their highs
earlier this year, what are investors to do–cut their losses or stay invested?
2021
2019
2017
2015
2013
2011
2009
2007
2005
2003
2001
1999
1997
29
-11
35
-24
34
-12
31
-13
7
-12
5
-8
9
-10
-22
-34
-20
-41
-28
-37
2
-19
15
-10
34
-6
12
-8
-38
-22
36
-8
38
-32
26
-10
5
-12
7
-12
30
-2
11
-49
37
-22
18
-16
-2
-9
Annual Return (%)
Drawdowns (%)
Source: FactSet and Alger.
Russell 3000 Growth Returns vs. Drawdowns
Fred Alger & Company, LLC
100 Pearl Street, New York, NY 10004 / www.alger.com
800.305.8547
(Retail)
/ 800.223.3810
(Institutional)
AOM272
The Russell 3000® Growth Index combines the large-cap Russell 1000® Growth, the small-cap Russell 2000® Growth and the Russell Microcap® Growth Index. It includes
companies that are considered more growth oriented relative to the overall market as defined by Russell’s leading style methodology. The Russell 3000 Growth Index is con
-
structed to provide a comprehensive, unbiased, and stable barometer of the growth opportunities within the broad market. Investors cannot invest directly in any index. Index
performance does not reflect deductions for taxes. The Russell 3000® Growth Index performance does not reflect deductions for fees or expenses.
The views expressed are the views of Fred Alger Management, LLC as of March 2022. These views are subject to change at any time and may not represent the views of all
portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by Fred
Alger Management, LLC. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.
Risk Disclosure: Investing in the stock market involves certain risks, including the potential loss of principal.
Growth stocks may be more volatile than other stocks
as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. Local, regional or global
events such as war, acts of terrorism, the spread of infectious illness such as COVID-19 or other public health issues, recessions, or other events could have a significant
impact on investments.
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