Value ETFs Compared: Performance, Drawdowns, and Value-Trap Risk
Value ETFs like VTV, SPYV, IWD, VLUE, and SCHV systematically favor lower-valued stocks. But the same screens that identify cheap companies can also expose investors to value traps, sector concentration, and prolonged underperformance. Here is the full analysis.
There is a deceptively simple idea at the heart of value investing: stocks trading at lower valuation multiples have historically earned higher average returns than more expensive stocks over some long periods.
This phenomenon, known as the value anomaly, is widely documented in academic literature (such as Fama & French's foundational research) and financial research. Funds like VTV, SPYV, and VLUE are built to harvest it systematically.
Key Findings:
- VTV and SPYV were the strongest value ETFs in the selected long-term period.
- All five value ETFs lagged SPY during the technology-led 2015–2024 period.
- Traditional value indexes experienced substantially smaller losses than SPY in 2022.
- Value performed poorly during the economically driven COVID shock.
- ETF methodology mattered almost as much as the value label itself.
Value is not a free lunch. When the factor lags — and it does lag, sometimes for years at a time — the underperformance can be painful compared to a traditional index fund. The 2023–2024 bull market was a severe period of underperformance for value relative to growth.
This analysis cuts through the marketing to show you exactly how value ETFs have actually behaved: in bull markets, in bear markets, during the COVID shock, and over a full decade.
How Value ETFs Actually Work
Before looking at the numbers, it helps to understand the mechanics.
A value ETF does not hold the broad market in market-cap-weighted proportions. Instead, it screens for stocks that are cheap relative to metrics like book value, earnings, sales, or cash flow. It then tilts the portfolio toward stocks that score favorably on those valuation measures.
The key mechanics to understand:
- Metrics: Most value ETFs measure cheapness using price-to-book, price-to-earnings, or dividend yield.
- Sector Biases: Because value screens for cheapness, the portfolio often becomes heavily concentrated in mature, capital-intensive sectors like financials, energy, and industrials, while systematically underweighting technology.
- Value Traps: Sometimes a stock is cheap because its business model is fundamentally broken. When value ETFs hold companies facing structural decline, investors can become exposed to value traps despite the diversification of the overall fund.
Value ETF Comparison
Not all value ETFs are constructed the same way. The differences in methodology create meaningfully different performance profiles.
| ETF | Provider | Methodology | Expense Ratio |
|---|---|---|---|
| VTV.US | Vanguard | CRSP US Large Cap Value Index | 0.03% |
| SPYV.US | State Street | S&P 500 Value Index | 0.04% |
| IWD.US | BlackRock / iShares | Russell 1000 Value Index | 0.18% |
| VLUE.US | BlackRock / iShares | MSCI USA Value Factor | 0.15% |
| SCHV.US | Schwab | Dow Jones U.S. Large-Cap Value Index | 0.04% |
(Note: ETF facts are approximate and based on fund sponsor data as of July 2026. Fees, holdings, and methodology details can change.)
VTV is one of the most widely used U.S. large-cap value ETFs and serves as the primary large-cap value reference point in this analysis. VLUE uses a more explicitly factor-targeted, sector-aware approach, comparing valuations within sectors rather than across the whole market.
StressTest.pro Analysis: Performance Across Market Regimes
To understand value ETFs honestly, you need to look at them across multiple market environments.
Methodology: All returns are total returns with dividends reinvested and before taxes. Long-term comparisons use the common January 2015–December 2024 period so every ETF is measured over identical dates. Max drawdown is the largest peak-to-trough decline during the stated period.
Long-Term Performance (Jan 2015–Dec 2024)
Long-term comparisons use the common January 2015–December 2024 period so all ETFs are measured over identical dates. Over the long term, value ETFs have lagged broad market indices like the S&P 500, largely because the last decade was dominated by mega-cap technology and growth stocks.
| Asset | Start Date | ETF CAGR | Matched SPY CAGR | Excess CAGR | ETF Max DD | Matched SPY Max DD |
|---|---|---|---|---|---|---|
| QQQ (Nasdaq-100, growth-oriented reference) | Jan 2015 | +18.3% | +13.0% | +5.3% | -35.1% | -33.7% |
| SPY (S&P 500) | Jan 2015 | +13.0% | +13.0% | 0.0% | -33.7% | -33.7% |
| VTV (Vanguard Value) | Jan 2015 | +10.0% | +13.0% | -3.0% | -36.8% | -33.7% |
| SPYV (SPDR S&P 500 Value) | Jan 2015 | +10.0% | +13.0% | -3.0% | -36.9% | -33.7% |
| SCHV (Schwab Value) | Jan 2015 | +8.9% | +13.0% | -4.1% | -37.1% | -33.7% |
| IWD (iShares Russell 1000 Value) | Jan 2015 | +8.3% | +13.0% | -4.7% | -38.5% | -33.7% |
| VLUE (iShares Value Factor) | Jan 2015 | +7.7% | +13.0% | -5.3% | -39.5% | -33.7% |
CAGR is annualized. Max drawdown represents the largest peak-to-trough decline during the period.
VTV and SPYV were the top-performing value ETFs, returning around 10% annualized, but they still lagged the S&P 500 by approximately three percentage points annually. More critically, notice that the max drawdowns for all value ETFs were actually worse than the S&P 500 during this decade. The idea that value is inherently "safer" over a full cycle was challenged by the data.
The Bull Market Performance (Jan 3, 2023–Dec 31, 2024)
The 2023–2024 bull market — heavily influenced by AI and the Magnificent Seven mega-cap tech stocks — was a brutal relative period for value.
| Asset | Total Return | Max Drawdown | Difference vs SPY |
|---|---|---|---|
| QQQ (Nasdaq-100, growth-oriented reference) | +95.8% | -13.6% | +37.6 percentage points |
| SPY (S&P 500) | +58.2% | -10.0% | Baseline |
| SPYV (SPDR S&P 500 Value) | +36.5% | -10.9% | -21.7 percentage points |
| IWD (iShares Russell 1000 Value) | +27.2% | -11.6% | -31.0 percentage points |
| VTV (Vanguard Value) | +27.0% | -9.9% | -31.2 percentage points |
| SCHV (Schwab Value) | +24.4% | -11.3% | -33.8 percentage points |
| VLUE (iShares Value Factor) | +22.5% | -11.7% | -35.7 percentage points |
Returns are cumulative total returns over the stated period. Max drawdown represents the largest peak-to-trough decline during that period.
Traditional value indexes held substantially less mega-cap technology exposure because many leading technology stocks scored poorly on value metrics. Sector-aware strategies such as VLUE retained more technology exposure but still lagged the broad market. VTV and IWD underperformed the S&P 500 by over 30 percentage points in just two years. SPYV did slightly better but still lagged severely.
The Bear Market Reality (Jan 3, 2022–Dec 30, 2022)
The 2022 bear market — which coincided with rapidly rising interest rates and inflation — was when value finally had its moment in the sun. As long-duration growth stocks crashed, value stocks held up.
| Asset | Total Return (2022) | Max Drawdown | Notes |
|---|---|---|---|
| QQQ (Nasdaq-100, growth-oriented reference) | -33.2% | -34.8% | Tech crash |
| SPY (S&P 500) | -18.6% | -24.5% | Baseline |
| VTV (Vanguard Value) | -2.5% | -17.0% | Standout downside protection |
| SPYV (SPDR S&P 500 Value) | -5.7% | -17.9% | Strong protection |
| SCHV (Schwab Value) | -7.9% | -19.8% | Strong protection |
| IWD (iShares Russell 1000 Value) | -8.1% | -19.0% | Strong protection |
| VLUE (iShares Value Factor) | -15.4% | -27.1% | Disappointing protection |
Returns are cumulative total returns over the stated period. Max drawdown represents the largest peak-to-trough decline during that period.
VTV was the standout winner in 2022, only dropping 2.5% while QQQ fell 33.2%. SPYV, SCHV, and IWD also provided substantial relative outperformance.
Because VLUE applies value selection within sectors while limiting large sector deviations, it retained more technology exposure than traditional value indexes. That reduced the downside protection investors might have expected from a value strategy in 2022.
Value ETF Drawdowns Across Different Bear Markets
While diversified ETFs reduce single-company risk, they can still suffer from systematic exposure to industries undergoing structural decline or cyclical stress.
The COVID Crash (Feb 19, 2020–Dec 31, 2020)
During the COVID crash, value stocks were hit especially hard because they are heavily weighted toward economically sensitive sectors like energy, financials, and industrials.
| Asset | Feb–Dec 2020 | Max Drawdown (Feb–Jun 2020) |
|---|---|---|
| QQQ (Nasdaq-100, growth-oriented reference) | +42.1% | -28.6% |
| SPY (S&P 500) | +17.5% | -33.7% |
| SCHV (Schwab Value) | +4.7% | -37.0% |
| VTV (Vanguard Value) | +4.6% | -36.8% |
| IWD (iShares Russell 1000 Value) | +4.5% | -38.5% |
| SPYV (SPDR S&P 500 Value) | +3.8% | -36.9% |
| VLUE (iShares Value Factor) | +3.2% | -39.5% |
Returns are cumulative total returns over the stated period. Max drawdown represents the largest peak-to-trough decline during that period.
While tech-oriented stocks (QQQ) soared as people worked from home, value ETFs languished. Their drawdowns were deeper than the S&P 500, and their recoveries were much slower.
The Value Trap Risk
A value trap is a company that appears inexpensive based on historical financial metrics but remains cheap—or becomes substantially cheaper—because its fundamentals continue to deteriorate. When several holdings face similar structural problems, they can drag down the ETF’s overall returns.
The chart above shows that value ETFs provide protection in some bear markets (2022, rate-driven) but can suffer worse drawdowns in others (2020, economically-driven).
Annual Return Scorecard
Looking year by year reveals the regime-dependence of value factor returns.
The chart illustrates a recurring pattern: value can struggle during technology-led bull markets but may provide ballast when rates rise rapidly or highly valued stocks reprice.
Rolling 12-Month Return: The Value Premium Over Time
The standardized performance tables end on December 31, 2024. This rolling-return chart extends through July 17, 2026 to show more recent factor behavior.
The rolling return chart shows that the value premium goes through extended periods of underperformance. Investors who buy value ETFs must have a long time horizon and the behavioral fortitude to hold them while growth stocks soar.
When Value ETFs Make Sense
Value ETFs have a legitimate place in a diversified portfolio. Investors may use value:
- Strategically, as a persistent diversified factor allocation to balance growth exposure.
- Tactically, based on valuation or macroeconomic views (such as expecting structurally higher inflation).
- As a complement to a growth-heavy portfolio to diversify factor exposure and reduce concentration in highly valued growth stocks.
When Value ETFs Are Dangerous
They can create poor outcomes if you:
- Expect them to beat the S&P 500 in every market environment.
- Cannot tolerate extended periods of relative underperformance.
- Buy them purely based on a low P/E ratio without understanding the sector biases (heavy financials, low tech).
- Attempt tactical factor timing without realizing how difficult it is to predict regime changes.
Frequently Asked Questions
Are value ETFs safer than the S&P 500?
Not necessarily. While value ETFs protected capital better during the 2022 bear market, they suffered deeper drawdowns than the S&P 500 during the 2020 COVID crash. Value is defensively useful against valuation and duration risks, but can be vulnerable to economic and credit shocks.
Which value ETF performed best?
In the common January 2015–December 2024 period we analyzed, VTV and SPYV were the strongest performers, returning around 10% annualized, though still trailing the S&P 500.
Do value ETFs perform better when rates rise?
Not reliably, but value can hold up better than growth during some periods of rapidly rising rates. In 2022, for example, traditional value ETFs experienced substantially smaller losses than SPY and QQQ. Many high-growth companies derive more of their valuations from expected future cash flows, which can make their valuations more sensitive to increases in discount rates.
What is the difference between VTV and VLUE?
VTV buys the largest U.S. value stocks and results in significant sector biases (heavy in financials, light in tech). VLUE aims to be sector-neutral by finding the cheapest stocks within each sector, meaning it still holds a significant amount of technology stocks relative to VTV.
Run Your Own Stress Test
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See how VTV, SPYV, or VLUE would have changed your portfolio’s returns and drawdowns.
Run a Value ETF Backtest- Compare VTV vs SPY — Full performance breakdown
- Compare VTV vs VUG — Value vs Growth
- Compare SPYV vs VTV — Methodology showdown
- Explore more StressTest Resources
- Read more on the StressTest Insights Blog
Sources and Methodology
- Fama & French Factor Research: Academic foundations for the value anomaly, available via the Kenneth R. French Data Library.
- Index Provider Documentation: Methodology details from CRSP (Vanguard VTV), S&P Dow Jones (SPYV), FTSE Russell (IWD), MSCI (VLUE), and Dow Jones (SCHV).
- Performance Data: All returns use the exact data window stated. Daily adjusted-price and distribution data was obtained from End-of-Day historical prices. Adjusted prices account for stock splits and cash distributions. Total returns assume distributions are reinvested on the applicable date. CAGR is calculated as
((Ending Value / Beginning Value)^(365.25 / elapsed days) - 1). Max Drawdown is determined by calculating the largest peak-to-trough loss in daily adjusted closing prices over the specified date window.
Disclaimer: This article is for educational purposes only and does not provide personalized investment, tax, or financial advice.