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I've been faulted for being an eternal optimist. What follows should not be construed in any way as pessimistic, but, we're closing in on the year-end -- a time that often prompts us to reflect on investment changes that might bring more rewards in the year ahead.

Those who stayed put and waited patiently for the stock market to return to pre-crash levels can experience smug satisfaction while selling today at pre-crash prices. Moreover, we're all four years closer to retirement, which would normally auger for a more conservative tilt.

Rebalancing the different investment styles and types in a portfolio is an exercise in selling small portions of your relative winners and buying more of your losers to bring them all back to the original percentage share of the portfolio they represented a year ago. We're talking "buy low and sell high" in incremental steps.

By comparison, too many investors can't resist the temptation to second guess what might happen next in the markets and make their investment changes accordingly. To these folks, I always suggest the classic book, "Do You Want to Make Money or Would You Rather Fool Around?"

"Fooling around" by my definition includes trying to guess the outcome of the fiscal cliff, tax hikes in general or even war in the Middle East. Today's increasing snapback in housing prices and new construction could trump any one of these extraneous events.

We need to set aside the noise and focus on our own unique personal situation. The question is, "Since markets will fluctuate, how much fluctuation can I endure, and how much potential gain do I want to forego to achieve smoother results?"

The "sweet spot" mix of bonds and stocks is one-third bonds and two-thirds stocks. This offers the most amount of downside protection while costing the least in potential upside gains.

Meanwhile, the reverse of this mix would have generated only about six years of losses over the past 40 years with average annual returns about 2 percentage points lower than the former, more aggressive, tilt toward stocks.

The question then becomes, "Which stocks and which bonds?" The famous S&P 500 Index of the largest stocks has been faulted in recent years because it became dominated by single sectors of the market. In the early 2000s almost 40 percent of the value of the 500 Index consisted of financial service companies because their enormous profits propelled them to a combined value way out of proportion to the rest of the market. We lived by the sword and died by the sword -- especially those of us who tried to catch the falling knife.

Today, we are starting to have the same problem with technology stocks. Including Apple (AAPL), they now represent 19 percent of the 500 Index.

The inventors of the index were the Stanford professors who threw darts at the Wall Street Journal. They proved that the best investment strategy was to pick stocks randomly and then not mess with them, because 70 percent of any stock's performance was based on the direction of the entire market. Active money managers and their stock churning create no predictable additional value.

For 20 years from 1980 to 1999, the 500 Index was unbeatable while rising at a rate of 16 percent per year. However, the first 10 years of the 2000s -- the "lost decade" -- taught us that the 500 Index itself was not the panacea many had come to rely upon. It could be contaminated by the dominance of single market sectors -- first financial and now perhaps tech.

A better mousetrap was the use of a selection of mutual funds that included several market sectors -- small company, real estate, foreign, midcap, dividend growth, health care, energy, etc. Low-cost index funds can represent all of these categories. By choosing the mix ourselves, we have control over the percentages and have something to rebalance periodically.

A typical mix of the selection outlined above actually returned about 6 percent per year during the "lost decade" -- a decade defined by the 500 Index, which earned zero.

The same rebalancing and diversification argument can be made for bonds. A mix of short-term corporate, GNMA, high-yield corporate, and even emerging markets bond funds can generate a composite result that will mean higher earnings with moderately fluctuating capital values.

Prospectively, there's no right answer. We'll never know until after the fact if changes we make are for the better. But, given the luxury of strong markets, we can make some calm, informed shifts in asset classes without feeling like we're responding to panic prompted by some future crash.