Don’t Chase Recent Winners Instead Rebalance to Buy Low and Sell High

Imagine drifting in the ocean without a compass: one wave from a bull market sweeps you too far into stocks, the next crash maroons you with heavy bonds. That’s the fate of investors who let recent trends drive their portfolios. Behavioral research shows we overvalue recent winners and underweight underperformers. It feels good to pile into hot sectors, but you end up buying high and selling low.

Rebalancing is your compass. By selling a bit of whatever surged and buying what’s lagging, you force yourself to buy low and sell high—a practice proven to boost returns by up to 1% annually, according to Vanguard’s “Advisor’s Alpha” study. This mechanical reset removes emotions, stops greedy overreach, and taps into market mean reversion.

It only takes minutes: pick a date, compare your actual mix to targets, sell the overweight slices, and buy the underweight ones. Over decades, these small shifts compound into meaningful gains. You’ll never dodge every storm, but you’ll sail straighter through them.

With rebalancing in your arsenal, you won’t be a sheep chasing the flock. You’ll stay centered on your long-term course, capturing value no matter which way the wind blows.

Circle an annual date in your calendar for a quick portfolio health check: compare where you are versus where you aimed to be, sell a portion of the overweights, buy the underweights, and jot down what you did. That small ritual puts you in control, forcing you to buy low and sell high without plastering your emotions on your sleeve. Give it a try next week and notice how calmer you feel when markets gyrate.