By Jeff Herman
Most investors assume that emotional investing occurs only during market downturns.
It doesn’t.
In many cases, emotions become even more powerful when markets are performing well.
When a stock or investment has generated strong returns, selling even a small portion can feel like making a mistake. Investors begin to think, “What if it keeps going?” or “I don’t want to miss the next leg higher.”
Those thoughts are understandable. They’re also emotional.
The S&P 500 has gained roughly 8% year-to-date, and multiple Wall Street firms have recently raised their year-end targets, citing strong corporate earnings and continued optimism around artificial intelligence.
When markets are delivering those kinds of returns, selling anything can feel counterintuitive.
Don’t misunderstand my point: this isn’t about timing the market to sell at the top.
One of the most common behavioral biases in investing is allowing recent performance to shape future expectations. Just because an investment has appreciated doesn’t necessarily mean it should continue to occupy an ever-larger portion of your portfolio.
That’s where disciplined investing requires a shift in perspective.
Rebalancing isn’t about predicting that an investment has reached its peak. It’s about recognizing that success changes risk.
Every asset should have a purpose, and every position should remain aligned with your long-term strategy. Left unchecked, yesterday’s biggest winner can quietly become tomorrow’s largest source of portfolio risk.
This is why I encourage clients to think beyond individual investments and focus on the overall portfolio.
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When you have a disciplined process for reviewing allocations and managing exposure, decisions become much easier. You’re no longer asking, “Should I sell my winner?” Instead, you’re asking, “Does my portfolio still reflect the strategy we set out to build?”
Those are two very different questions.
At The Jeffrey Group, we believe successful investing isn’t about chasing the next winner. It’s about building a portfolio that can support your goals through changing markets and changing seasons of life.
Sometimes that means trimming a winner because you have the discipline to keep your portfolio balanced long before emotions can make that decision for you.
Want to talk about it with me? Schedule a call HERE.
