While many finance professionals that I respect (like John Bogle) claim Value funds outperform Growth funds, there are investment opportunities when one class of funds dramatically outperforms another. Currently, Value funds have been kicking the pants off Growth funds, but that might be helping set the stage for a contrarian trend that favors Growth in the next 1-3 years.

Take for example the following broad Value Index ETFs and their 1yr and 3yr performance:

Russell 2000 Value Index (IWN): 1yr – 13.1%, 3yr – 18.5%
Russell 3000 Value Index (IWW): 1yr – 19.4%, 3yr – 18.1%
S&P500 Value Index (IVE): 1yr – 18.7%, 3yr – 17.2%

Contrast these with their sister broad Growth Index ETFs and their 1yr and 3yr performance:

Russell 2000 Growth Index (IVW): 1yr – 7.8%, 3yr – 13.3%
Russell 3000 Growth Index (IWW): 1yr – 13.8%, 3yr – 9.68%
S&P500 Growth Index (IVE): 1yr – 15.5%, 3yr – 9.2%

I’m not certain how statistically significant these differences are, but they are fairly strong differences and they certainly aren’t chump change. The 3yr really highlights the long trend towards Value that’s been underway and running this bull market. Usually a bull will have a surge in Growth somewhere in it’s rise, and this bull should be no exception. If this bull still has legs, it should find them in the growth sector.

Something to consider, if you believe that the bull will continue onward, then I challenge you to really test your beliefs and lean on the growth sectors when you rebalance this year. You can always just buy a broad index, but you have more flexibility if you buy the broad index in two parts, typically in 50/50 increments equally purchasing the Value side and the Growth side. A potential plan of action in this scenario would be locking in some profits on the Value side and leaning a bit towards the Growth side – nothing fancy, but a 60/40 lean towards growth might help add a little profit in the next year or two while not totally sticking your neck out.