The last few years of the 1990s were a textbook case of investment delusion. Millions of investors got caught up in the idea that no price was too high to pay for a stock that promised "growth."

People lost sight of the homely truth that stocks are just pieces of paper representing a fractional interest in a real business. If the business can't generate an honest profit, it's worthless--and its stock (like Enron) will eventually go to zero.

What's more, if the business can't churn out profits in the amount investors are hoping for, the stock will fall (even though it may not drop to zero).

Most of us have had the unnerving experience of seeing more than one of our stocks go down in recent years. How do we lessen the chances of that happening while increasing our upside potential?

Wall Street "wisdom" often tells us we've simply got to make these unpleasant tradeoffs. You can't enjoy much growth unless you're willing to give up a lot of safety.

However, this old chestnut is just plain wrong. If you study the markets, as I've done for the past 30 years, you find occasional anomalies--investments that deliver a little extra return for no extra risk or cost. It may be true, as Milton Friedman used to say, that "there's no such thing as a free lunch." But how about a free dessert?

There's an approach to growth investing that has worked for decades. Buy stocks with a price-earnings ratio below the market average--the lower, the better. (To compute the P/E of a stock, divide the share price by the earnings per share.)

I'm a bit of a research hound myself, so I was intrigued by a recent study from Ford Equity Research that demonstrated how a low-P/E strategy would have paid off over the past 28 years. For purposes of this study, the 500 stocks in the Standard & Poor's Composite Index were split into "deciles" (groups of 50 each), from the lowest P/Es to the highest. Earnings for each year were based on the trailing 12-months' results.

Since 1975 through 2002, the 50 stocks in the lowest P/E decile scored a compound annual total return--price gain plus dividends--of 21.4%. From there, the return drops steadily as you go up the P/E scale. The highest P/E stocks returned only 7.9%, well below the S&P 500 index as a whole.

Sure, you can point to high-P/E glamour stocks that have torn up the tracks, like Microsoft or Krispy Kreme. But the averages tell us what the momentum gurus won't--the failure rate in pure "growth" investing is painfully high.

Now that the stock market has rallied sharply off last October's lows, it's time to rein in our risks. (Remember: The higher the market climbs, the closer we are to the next important peak.) We aren't running away from stocks. Rather, I advise gradually swapping some of the higher-P/E names for safer, lower-P/E stocks.

My subscribers and I have made two such swaps in recent weeks. Better yet, I was able to locate a couple of lower-P/E stocks that offer stronger growth prospects than the companies we sold. It's like trading a two-year-old car for a new one and getting money back!

Let me share just one of the "P/E swaps" we made this month:

Sell Disney (NYSE: DIS) and buy H&R Block (NYSE: HRB). Disney is a great company, with enormous creative talent and a formidable brand. Furthermore, Wall Street analysts polled by First Call expect the Mouse House's earnings to soar 15% annually for the next five years. (I'm always skeptical of the magnitude of analyst projections--they're too high--but they're useful for comparing one company against another.)

So why not stick with DIS? After all, the stock did exceptionally well for us this year, up 37% through late August.

The trouble: Disney is now trading at a lofty 34X this year's estimated earnings. (The S&P index is only at 18X). If I thought the economy and stock market were headed for another 1990s-style boom, I wouldn't mind hanging on to a pricey share like DIS.

However, I'm not convinced the Age of Aquarius is dawning. I want to protect myself--and you, too.

H&R Block may not be as glitzy an outfit as Disney, but it boasts a rock-solid, recession-resistant franchise. Despite the fluff we hear from politicians, the income tax isn't about to go away, nor is it becoming any simpler. Last year, HRB prepared returns for 19.4 million taxpayers in the United States, Canada and Great Britain.

For do-it-yourselfers (3.4 million of them), HRB provides the Kiplinger Tax Cut software as well as an online tax-preparation service. The company has also branched out into securities brokerage and mortgage lending, among other financial services.

Over the next five years, Wall Street is projecting 15% annual growth in HRB's earnings. Again, I don't take that guess as gospel, but I think it's reasonable when you consider that HRB has boosted its profits at a 27% rate in the past five years.

What really intrigues me, though, is that HRB is trading at less than 12X this year's estimated profits--roughly a third of Disney's multiple. With HRB, we get the same growth for 34 cents on the dollar. That's my definition of a bargain!

What to do now: Buy HRB at $45 or less. I'm looking for a gain of 20%-30% in the coming year with this blue chip. As an added bonus, HRB throws off a modest dividend yield of just under 2%.

Richard Band is America's #1 investment advisor for individuals seeking low-risk growth. His conservative model portfolios have multiplied eight times in value since 1984, while taking far less risk than popular stock index funds. Band authored Contrary Investing (named "Best Investment Book of the Year"); is an in-demand speaker at investment conferences; and has won numerous awards, including in the coveted "Best Financial Advisory" category multiple times. To try his Profitable Investing service without risk, click here now.