Imagine two racing cars. One is called Growth. The other is called Value. They have been racing each other around the same giant track for more than 100 years. Sometimes, Growth records faster lap times. Other days, Value circles the track far faster than Growth. But Value is usually the faster car. That’s why it adds to its lead roughly 8 out of every 10 decades. As a result, it’s thousands of miles ahead.

But when Growth runs well, people often bet in droves. They say, “This time it’s different. Growth will now always win.” But when almost everyone believes in a turning of the guard, Value kicks into gear to increase its long-term lead.

I’m really talking about growth and value stocks. A growth stock is one that’s rapidly increasing its business profits. It’s a stock like Facebook, Alphabet (Google) and Tesla. Unfortunately, when growth stocks are popular, their stock prices rise far faster than their business earnings. Eventually, that always spells trouble. It’s like a racing car’s pit crew forcing more air into the tires after every fast lap. That’s what’s happening with growth stocks now.

Their business profits are growing. But their stock prices are rising far faster than business profits. At some point, those prices are going to burst.

In contrast, value stocks are boring. Sometimes, their stock prices rise slower than their business earnings. The longer this happens, the bigger the reward for patient value stock investors. Today, growth stocks are in vogue. They have beaten value stocks for more than 10 years. But value always roars back. Below, I’ve listed the decades when value beat growth and when growth beat value.

When examining the past 83 rolling 10-year periods, value beat growth about 82 percent of the time.

Growth Versus Value: Which Won and When?

Decade Winner What Did People Say?
1928-1937 Growth “This time it’s different.
Growth will now always win.”
1929-1938 Growth “This time it’s different.
Growth will now always win.”
1930-1939 Growth “This time it’s different.
Growth will now always win.”
1931-1940 Growth “This time it’s different.
Growth will now always win.”
1932-1941 Value
1933-1942 Value
1934-1943 Value
1935-1944 Value
1936-1945 Value
1937-1946 Value
1938-1947 Value
1939-1948 Value
1940-1949 Value
1941-1950 Value
1942-1951 Value
1943-1952 Value
1944-1953 Value
1945-1954 Value
1946-1955 Value
1947-1956 Value
1948-1957 Value
1949-1958 Value
1950-1959 Value
1951-1960 Value
1952-1961 Value
1953-1962 Value
1954-1963 Value
1955-1964 Value
1956-1965 Value
1957-1966 Value
1958-1967 Value
1959-1968 Value
1960-1969 Value
1961-1970 Value
1962-1971 Value
1963-1972 Value
1964-1973 Value
1965-1974 Value
1966-1975 Value
1967-1976 Value
1968-1977 Value
1969-1978 Value
1970-1979 Value
1971-1980 Value
1972-1981 Value
1973-1982 Value
1974-1983 Value
1975-1984 Value
1976-1985 Value
1977-1986 Value
1978-1987 Value
1979-1988 Value
1980-1989 Value
1981-1990 Value
1982-1991 Value
1983-1992 Value
1984-1993 Value
1985-1994 Value
1986-1995 Value
1987-1996 Value
1988-1997 Value
1989-1998 Growth “This time it’s different.
Growth will now always win.”
1990-1999 Growth “This time it’s different.
Growth will now always win.”
1991-2000 Value
1992-2001 Value
1993-2002 Value
1994-2003 Value
1995-2004 Value
1996-2005 Value
1997-2006 Value
1998-2007 Value
1999-2008 Value
2000-2009 Value
2001-2010 Value
2002-2011 Growth “This time it’s different.
Growth will now always win.”
2003-2012 Growth “This time it’s different.
Growth will now always win.”
2004-2013 Growth “This time it’s different.
Growth will now always win.”
2005-2014 Growth “This time it’s different.
Growth will now always win.”
2006-2015 Growth “This time it’s different.
Growth will now always win.”
2007-2016 Growth “This time it’s different.
Growth will now always win.”
2008-2017 Growth “This time it’s different.
Growth will now always win.”
2009-2018 Growth “This time it’s different.
Growth will now always win.”
2010-2019* Growth “This time it’s different.
Growth will now always win.”

Growth stocks are racing. But that doesn’t mean value stocks are running on flat tires. According to Vanguard, U.S. value stocks gained 11.07 percent over the past 12 months, ending November 30, 2019. They also averaged compound annual returns of 11.69 percent, 9.57 percent and 12.37 percent over the past 3, 5 and 10-year periods.

In other words, if somebody invested $10,000 in U.S. value stocks on November 30, 2009, it would have grown to almost $33,000 ten years later. That’s a compound annual return of 12.37 percent. It’s far higher than the long-term average return for growth and value stocks.

But U.S. growth stocks, by comparison, have raced on nitrate fuel. Over the past 1, 3, 5 and 10-year periods, they averaged compound annual returns of 21.7 percent, 18.49 percent, 12.33 percent and 14.69 percent respectively. If somebody invested $10,000 in U.S. growth stocks on November 30, 2009, it would have ballooned to about $39,300 ten years later.

Growth stocks’ price-to-earnings ratios continue to increase. That puts them in a danger-zone, much like a car with over-inflated tires. If stocks soon fall hard, overpriced stocks (as always) will lead the downward plunge.

It’s tough not to buy growth stocks (or growth stock index funds) when they’re scorching around the track. But investors should remember several important rules:

  1. Maintain a diversified portfolio of low-cost index funds.
  2. If the portfolio includes a growth stock index, make sure it includes a value stock index too (a total stock market index would include both).
  3. Make sure the portfolio includes exposure to international stocks.
  4. Include a bond market index, based on your tolerance for risk. Higher bond allocations bring lower long-term returns. But bonds add stability when stocks crash.

Too many investors, unfortunately, chase past performance. In many cases, they’re breaking sound investment rules to stockpile money in America’s fastest growing stocks. But when their racetrack turns to ice or those tires decide to burst, these are the drivers who will pay the highest price.

Andrew Hallam is a Digital Nomad. He’s the author of the bestseller Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas