Investors who thought value funds were the ticket to navigating tough markets have learned otherwise in recent years. Value stocks have lagged both growth stocks and the broader market during the past one-, three-, five- and 10-year periods.

Why is this?

The short answer: financials. The “value” category tends to have a much higher weighting in the sector than the growth segment. This is reflected in the financial sector’s weighting in the three ETFs based on the Russell indices shown in the table above:

• iShares Trust Russell 1000 Index Fund (NYSE:IWB): 16.5%
• iShares Russell 1000 Growth Index Fund (NYSE: IWF): 6.8%
• iShares Russell 1000 Value Index Fund (NYSE:IWD): 26.1%

The large divergence among the funds’ weighting in financials has magnified the impact of the sector’s enormous underperformance both during and after the financial crisis. Since June 1, 2007, the Select Sector Financial SPDR (NYSE:XLF) has returned -57.8%, versus -2.46% for the SPDR S&P 500 ETF (NYSE:SPY). Take this out of the equation, and value would have outperformed on the strength of the favorable returns of traditional value sectors such as utilities, consumer staples and health care.

Apple (NASDAQ:AAPL) — or the lack of it — also has played a role in value funds’ shortfall. While pundits might debate whether Apple is a growth or value stock, the index providers have come down firmly on the growth side of the argument. Apple makes up 8.3% of the IWF growth portfolio — and is its No. 1 holding — but it isn’t represented in IWD. Combine the zero-weighting in Apple with the large position in financials, and value hasn’t stood a chance.

Does this mean fund investors should toss all of their value funds overboard? Not exactly. Over time, large-cap value actually has provided superior returns versus large-cap growth, and it has outperformed in 48 of the past 85 calendar years (a hit rate of 56.5%).

At the same time, however, the periods of outperformance for growth and value tend to be very streaky — meaning that tilting one way or the other could have left you far behind the broader market over extended time periods. For example, growth has outperformed value in the past five calendar years. But prior to that, value had outperformed for seven years in a row. Growth dominated the mid-1950s and the period from 1989-99, but there also have been four different stretches where value strung together five or more consecutive years of outperformance.

The point? While value has a long-term edge, trying to predict which style will come out on top is a fool’s game. Also, given the streaky nature of the results, value’s recent underperformance provides little insight as to what the next few years will bring. Finally, the distinction between the two is arbitrary. Again, Apple is a prime example. Does the stock — which is trading at less than 10 times forward estimates when the cash on its balance sheet is factored in to the equation — belong in the growth or value category? Or perhaps both?

Looked at this way, the best approach is to forget the style boxes and maintain exposure to the entire market through a vehicle such as the Vanguard Total Stock Market ETF (NYSE:VTI). It’s not sexy, but it saves investors from concerns about market cap and style performance — not a bad benefit for a 0.2% expense ratio.

As of this writing, Daniel Putnam did not hold a position in any of the aforementioned securities.