Growth ETFs hold stocks that are in growth mode, or are growing faster than the markets.  Value ETFs hold stocks that are “diamonds in the rough” – in other words, they’re undervalued and are being shunned by the market, states Ron Rowland of Money and Markets.

In simple terms, all stocks and ETFs can be considered either value- or growth-oriented, or a combo style known as “blend.” For this reason, it helps to take a look at  market capitalization, as well, to further define styles.  Investors now have more choices: there’s value and growth as well as large-, mid-  or small-cap.

What’s more is that certain categories tend to perform better at some times than at others: small-cap and growth tend to outperform in booming economies; large-cap and value tend to do better in recessionary climates. This isn’t a given, though.

Determining which one to choose is usually up to an investor’s appetite for risk, the type of exposure desired and how diversified one’s portfolio already happens to be.

The SPDR Dow Jones Large Cap Growth (NYSEArca: ELG) is a common choice for large cap growth stocks, whereas the iShares S&P Small Cap 600 (NYSEArca: IJR) is common for value oriented small-cap investors.  Regardless of which way one goes, it is important to have a strategy and mind the trend lines.  For more information on how to watch trend lines, check out our new book.

For more stories on strategy, visit our trend following category.

Kevin Grewal contributed to this article.

Analysts and experts are still debating whether the U.S. economy will experience inflation, deflation, or stagflation, remarks Lauren Young for Yahoo Finance.

Inflation fears stem from recent government stimulus plans that could cause prices to sky rocket. Deflation can develop as prices decline coupled with falling demand which would further fuel price cutting. Stagflation may occur as a result slow growth and increasing inflation.

Inflation. The large volumes of money smothering the banks has economists and financial advisers worried over inflation. The main sign of inflation can be seen through the Consumer Price Index (CPI).

How To Play It. Rising inflation would deteriorate asset value over the long-term for bondholders, and a way to combat this is through Treasury Inflation-Protected Securites (TIPS). Another way to hedge against inflation is through commodities, gold being a classic inflation hedge.

• SPDR Barclays Capital TIPS (IPE): up 4.3% year-to-date
• iShares COMEX Gold Trust (IAU): up 4.3% year-to-date

Deflation. A deleterious cycle can be created as banks stop lending, businesses halt expansions, wages fall, people reduce spending and prices would be driven further downward. The CPI is a good indicator for deflation.

How to Play It. Investors should look to short-term investment strategies, such as short-term certificates of deposit or money-market funds. But those with a 10-year time table could look into the technology sector since companies that seek to boost productivity will do so through technology.

• PowerShares QQQ (QQQQ): up 15.3% year-to-date
• PowerShares Dynamic Semiconductors (PSI): up 8.3% year-to-date

Stagflation. Stagflation is market by high inflation and slow economic growth. Lenders, households and businesses would be pessimistic about the markets, meaning that growth would come to a crawl. Shortage of production capacity will cause a rise in inflation. The misery index, a combination of unemployment and inflation rates, gauges the rate of stagflation.

How to Play It. Protecting your portfolio from stagflation is a real challenge. If stagflation is coming, investors may look into high-quality growth stocks (or in the case of ETFs, such funds that hold high-quality growth). Gold and/or TIPs can help ease some of the risk on the inflation side, as well.

• RevenueShares Navallier Overall A-100 (RWV): up 5.3% since inception (note that this fund is a blend)
• SPDR Dow Jones Large Cap Growth (ELG): up 6.8% year-to-date

For full disclosure, some of Tom Lydon’s clients own shares of QQQQ.

Max Chen contributed to this article.

Joanne Von Alroth for Investor’s Business Daily explains that companies can only pass these expenses off to the consumers so much before the prices become too high.

The recent credit tightening is also passing along the higher prices to consumers. Health-care and pharmaceutical companies will also play a big role in value-oriented companies taking the upper hand. The upcoming election will also help to stabilize the lean because the growth gap will close.

When there is more time to put towards tax and spending policies, it will signal the end of the credit tightening, and a shift toward value will come on.

Compare and contrast:

• iShares Morningstar Large Cap Growth Index Fund (JKE), down 8.7% year-to-date
• iShares Morningstar Large Cap Value Index Fund (JKF), down 16.6%
• SPDR Dow Jones Wilshire Large Cap Growth Index (ELG), down 7.1%
• SPDR Dow Jones Wilshire Large Cap Value Index Fund (ELV), down 13.1%