Growth vs. Value: Which Investing Style Is Better for High-Net-Worth Investors?

The Short Answer: Growth and value stocks take turns leading the market. But the real question is not which style will win next. A more planning-focused approach is building a diversified portfolio that reflects multiple sources of potential return and remains aligned with your goals, tax situation, and overall financial plan.

Every few years, the investing world reignites a familiar question: Should you lean into growth stocks or value stocks right now?

It is an understandable question. Leadership shifts over time, and those shifts can be dramatic. The early 2000s looked very different from the 2010s, and recent years have offered another reminder of how quickly market leadership can change.

The challenge is that style cycles are difficult to predict, and investors who chase recent winners often end up buying after much of the upside has already occurred.

Instead of trying to guess the next winner, it is more useful to understand what growth and value represent and how they fit into a long-term investment strategy.

In this article, we will break down what growth and value really mean, why these styles behave differently, and how investors can build a more evidence-based allocation in real life.

What Is a Growth Stock?

Growth stocks represent companies expected to deliver above-average earnings or revenue growth in the future. Because of those expectations, they often cost more compared to what they are earning today.

In other words, investors are willing to pay a premium now because they believe the company will grow faster later.

When Growth Tends to Outperform*

• Periods of lower or declining interest rates
• Periods when investors place greater value on future earnings growth
• Market environments that favor companies with strong growth expectations

The Tradeoff: Growth stocks can deliver powerful compounding when the business continues to scale, but they can also fall sharply if expectations are too high or if interest rates rise.

What Is a Value Stock?

Value stocks trade at lower prices relative to fundamentals such as earnings, book value, or cash flow. In many cases, the market may be discounting these companies because of near-term uncertainty, cyclical pressures, or lower expectations for future growth.

Importantly, value does not necessarily mean “cheap for no reason.” In the academic sense, value stocks are typically those with higher book-to-market, earnings-to-price, or cash-flow-to-price characteristics relative to the broader market.

When Value Tends to Outperform*

• Certain inflationary or rising-rate environments
• Periods of economic recovery in which cyclical companies participate
• Periods when investor expectations for discounted companies improve

The Tradeoff: Value stocks can provide strong returns when the market undervalues fundamentals, but they can underperform for long stretches, and some discounted companies do deserve their lower valuations.

*These relationships have varied across market cycles and should not be treated as reliable timing signals.

The Long-Term History of Growth vs. Value

Looking at decades of market history, two truths stand out:

1. Leadership rotates

There have been extended periods when value stocks outperformed growth stocks and extended periods when growth stocks dominated. Neither style wins forever.

2. Timing the rotation is difficult

The biggest challenge is that style turning points are usually obvious only in hindsight.

Investors who move heavily toward whichever style has recently performed best often discover they arrived just as leadership began changing.

That shift serves as another reminder that building portfolios around recent winners can leave investors vulnerable when market leadership changes.

How to Allocate Growth vs. Value in Real Life

Most investors agree diversification makes sense, but they disagree on how to put it into practice. There are three common approaches, and each makes a different trade-off.

Option A: Own the whole market

A low-cost total-market index fund holds growth and value stocks in proportion to their size. For many investors, this is a great starting point. It's broad, inexpensive, tax-efficient, and easy to stick with. Its suitability and tax implications will depend on the specific fund, account type, existing holdings, and the investor’s broader financial plan.

The trade-off is that market-cap weighting only asks how big a company is. It puts more money into whatever has already grown largest. After a long run for mega-cap growth, that can leave a portfolio more concentrated in a handful of expensive companies than an investor ever intended. That's especially true for someone who also holds company stock or legacy positions in the same names.

Option B: Split between growth and value funds

Some investors combine separate growth and value funds to manage their desired exposure to each style.**  A 50/50 allocation may appear balanced, but it is not inherently appropriate for every investor and should be evaluated in the context of the investor’s overall portfolio and financial plan.

Fund providers define "growth" and "value" differently, so two value funds can own very different portfolios. Many style indexes rebalance on a fixed schedule that other traders can anticipate, which raises trading costs. In taxable accounts, that turnover can create avoidable tax bills. And there's no evidence behind a 50/50 split in the first place.

**The result will depend on how each provider defines the categories, the underlying holdings, rebalancing methodology, costs, turnover, and tax consequences.

Option C: An index core with a systematic tilt

The approach we favor keeps the discipline and low cost of indexing, then tilts modestly toward characteristics that academic research has associated with differences in long-term returns and risk:

• Lower relative prices

• Smaller size

• Stronger profitability

These historical relationships may not persist, and a tilted portfolio may underperform the broader market for extended periods.

A thoughtful tilt differs from a value bet in a few ways:

• It's broadly diversified across stocks, not a handful of "cheap" picks.
• Several characteristics work together. Combining relative price with measures such as profitability is intended to avoid evaluating companies on price alone.
• Patient, rules-based implementation may also help manage turnover, trading costs, and potential tax consequences
• It's coordinated with the rest of the household balance sheet, including concentrated holdings and asset location.

Is a tilt right for you?

A factor tilt should generally be considered only by investors who understand its risks and are prepared for extended periods of underperformance relative to the broad market. These premiums show up unevenly, and a tilted portfolio can trail the broad market for years. A tilt may fit if you:

• Have a long-term horizon
• Don't need much liquidity relative to the size of your portfolio
• Are comfortable with results that look different from the S&P 500 for long stretches

If that last point would push you to abandon the plan, a simple index portfolio may be the better choice. The goal isn't to predict whether growth or value will lead next. It's to own a portfolio you understand and can stick with, even when it looks wrong.

What This Means for Investors

This is where the conversation becomes more relevant for high-net-worth investors.

A portfolio can own both growth and value stocks and still overlook important planning considerations.

Many investors already have meaningful exposure to growth-oriented companies through employer stock, legacy holdings, or broad market index funds. Others may have significant tax consequences associated with changing their allocation.

For that reason, the right approach is rarely as simple as choosing a growth fund, a value fund, or an arbitrary 50/50 split.

Instead, investors should consider questions such as:

• How concentrated is my portfolio today?
• How do taxes affect potential portfolio changes?
• Do my investments align with my long-term goals and cash-flow needs?
• Am I taking risks I actually intend to take?
• How does my investment strategy fit with my broader financial plan?

These considerations may be more directly connected to an investor’s financial plan than a short-term forecast about whether growth or value will lead the market.

How Behavior Factors In

Even a thoughtfully constructed portfolio can fail if an investor abandons it at the wrong time. An advisor may help clients revisit the assumptions behind their plan and evaluate whether changing market conditions warrant an adjustment.

Style cycles can last for years. During those periods, it is natural to question an allocation that appears out of step with recent headlines.

An advisor may help investors revisit the assumptions behind their allocation and keep short-term market developments in the context of their goals, time horizon, tax situation, and broader financial plan. Maintaining a consistent process may be just as important as deciding how to divide a portfolio between growth and value.

Plancorp's Evidence-Based Perspective

At Plancorp, our investment philosophy is grounded in research, diversification, and long-term thinking. We believe portfolios should be designed around a client's goals and overall financial life, not short-term forecasts.

That means:

• Diversifying across asset classes, regions, and investment styles
• Using evidence-based strategies rather than making tactical market predictions
• Being thoughtful about taxes, costs, and implementation
• Maintaining discipline through changing market environments
• Coordinating investment decisions with the rest of a client's financial plan

For investors with substantial wealth, the key question is rarely growth versus value. It is whether your portfolio is intentionally designed around your goals, financial circumstances, and long-term planning priorities.

Ask yourself:

• Has my portfolio become concentrated in recent market winners?
• Do my investments reflect my goals, tax situation, and overall financial plan?
• Am I making intentional allocation decisions or simply inheriting the results of past market movements?
• Would a second opinion help identify risks, opportunities, or blind spots?

If you are unsure, working with an advisor can help you evaluate how growth and value exposure fit within a broader strategy designed around your goals, not market predictions.

Want to Learn More About Evidence-Based Investing?

Download our Evidence-Based Investment Insights Whitepaper to explore the research behind long-term investment strategies, diversification, factor investing, portfolio design, and the principles that guide our investment approach.