With stocks continuing on their tear, I'm reminded of the late '90s, 1999 to be exact, when large cap growth mutual funds had an average return of 60 percent that year. Small cap value funds, by contrast, earned 0.

The following year, large cap growth funds lost 30 percent, while small cap value funds were up 30 percent. It was a remarkable flip flop from one year to the next for the two corners of the "style box." The style box is the cornerstone of Modern Portfolio Theory, which identifies three investment styles -- value, blend and growth. Each of those can be applied to large, medium and small companies. The "box" therefore identifies nine possible investment styles.

Getting back to history, small cap value funds went on to earn an average of 20 percent per year for four years, while large cap growth funds continued their slide for another two years.

The definition of a growth fund is that it invests in companies that put a premium on growing market share and revenues as fast as they can. Being profitable may be secondary. In other words, they borrow as much money as they can get their hands on and they reinvest what otherwise would have been taxable profits with the goal of business expansion. Most expenditures incurred to grow a company include hiring more people and renting more space -- all of which are tax deductible. The argument that reducing corporate taxes creates more jobs, therefore, has always been a specious argument.

But I digress. Beyond just the fact that growing companies sooner or later create more value in the form of a higher stock price, there are other factors working as well. A phenomenon known as "momentum" contributes to rising stock prices of growth companies. Some cynics would describe momentum as nothing more than "the Greater Fool Theory," which means that no matter how unreasonable the stock might be priced today, there is a "greater fool" who will pay more tomorrow.

Tesla could be in that category today. The actual value of its outstanding shares, which have increased by a factor of four in recent months, now pegs the value of the entire company on a par with Ford Motor. But hey, the company has tremendous potential and today's price is simply anticipating and reflecting a future value that enough investors feel lies ahead over the next 10 years.

Growth and value investing have traditionally been viewed as incompatible or inversely correlated styles of investing, but Warren Buffett would disagree. He points out that they are "joined at the hip." Value investing evaluates the discounted present value of an investment's future cash flow (in plainer language, how much is a dollar tomorrow worth today), and growth investing is simply an attempt to calculate what that future cash flow will become as the future unfolds.

So, as Apple (AAPL) became the world's most valuable company with a stock price of more than $700 a share, it was the expectation that profits would increase indefinitely that brought the shares to that price. It was a classic growth stock. When it dawned on the investing public that this expectation might not be sustainable, the stock price dropped by almost half while the rest of the market continued to rise. That could make it a value stock.

It's reassuring to note that there's room for every thought process in the investment world. The latest research suggests that a mix of value and momentum investing increases returns while reducing risk. Think for a moment about the two corners of the style box back in '99 and 2000, and imagine how you would have done had you had a 50/50 mix of both corners that had been rebalanced periodically between say, 1995 and 2005. I rest my case.

Stephen J. Butler is CEO of Pension Dynamics. Contact him at 925-956-0505, ext. 228 or sbutler@pensiondynamics.com.