Is it Time to Pay Attention to Value ETF Investing Again?

The last year was marked by tariff fears, geopolitical tensions and AI bubble concerns. This year too looks set for no less volatility, evident from the investor nervousness about the geopolitical landscape.

Following the recent U.S. military operations in Venezuela and ongoing tensions in the Middle East and Asia’s major flashpoints, President Trump is weighing military action over Greenland. This has further complicated an already fragile geopolitical landscape, boosting risk aversion and fueling safe-haven demand. According to a CNBC article, on Sunday, President Trump stated that the United States requires Greenland for national security, driven by increased Russian and Chinese activity in the Arctic.

Additionally, a tech-driven inflation surge could quickly dampen the mood, with markets already signaling concern over rising costs and potential AI overinvestment. Per Reuters, a tech-driven inflation surge could be one of the most overlooked threats to the market for 2026.

Amid potential near-term volatility and a complex geopolitical backdrop, investors are likely to grow more risk-averse over time, turning toward more stable strategies such as value investing. Even the possibility of a downturn may be enough to push conservative investors in that direction.

An Introduction to Value Investing

Value investing is a strategy that focuses on purchasing stocks that are undervalued, based on some fundamental analysis, relative to their intrinsic value. Value investors actively seek out stocks currently overlooked by the market and seek to profit by purchasing them at a discount compared with their intrinsic value.

By purchasing and holding these undervalued stocks for the long term, value investors rely on the expectation that the market will eventually recognize their true value, allowing them to reap significant rewards. Value stocks aim to exploit market inefficiencies, investor sentiment and short-term fluctuations, offering the potential for higher returns with lower volatility than growth stocks.

What Makes Value Investing Compelling

With geopolitical tensions rising, AI bubble fears easing but still lingering in the background, and the risk of AI-driven inflation, value investing emerges as an appealing strategy for investor portfolios.

From Jan. 2 to Jan. 6, the S&P 500 Value Index gained about 2%, outperforming the S&P 500 Growth Index, which rose roughly 0.98% over the same period, highlighting renewed near-term momentum in value stocks. That said, the growth index has outpaced the value over the past year, which may keep many investors broadly bullish on the market.

While maintaining a long-term growth outlook may still make sense, incorporating value investing offers distinct advantages. Compared with growth stocks, value stocks are often viewed as less risky due to their greater stability and reduced volatility, making them attractive for investors focused on risk-managed equity investing.

Why ETFs Are a Smart Way to Play Value

Value investing requires discipline and patience. Assessing a stock's intrinsic value involves financial analysis and subjectivity, often making it a time-consuming and complex process. Value investing through ETFs offers investors an easy and accessible way to follow this strategy. Using value ETFs may present an appealing alternative, simplifying the implementation of the strategy for investors.

Value ETFs focus on stocks characterized by strong fundamentals and robust financial health, which trade below their intrinsic value, representing undervaluation. They offer the potential for higher, more stable returns and lower volatility than growth and blend stocks.

Value funds act as a cushion against market volatility. Additionally, value ETFs can serve as a source of income through dividends. Investors with a medium to long-term investment horizon are better positioned to benefit from this strategy, with a stronger preference for long-term investing.

Adopting a value investing approach also serves as a strong diversification option for investors seeking to safeguard their portfolios.

Value ETFs to Consider

Investors can consider Vanguard Value ETF VTV, JPMorgan Active Value ETF JAVA, Avantis U.S. Large Cap Value ETF AVLV, iShares Russell Mid-Cap Value ETF IWS and Vanguard Small Cap Value ETF VBR.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research