Both phonics and word-recognition are OK. I 'taught' my two daughters to read by reading to them on my knee so they could follow the words above my finger as I read.
One of them clearly 'taught herself' by word recognition and the other clearly used phonetics. The first acquired a bigger vocabulary quickly, but the second one was better able to handle new words seen for the first time.
Really. I've read stories about that sort of thing.. one child will teach himself to read over Sunday comics, and the other one will sound out every word. Did their reading comprehension differ as they developed?