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One New Year's resolution worthy of consideration is an annual rebalancing of investments in our IRAs and other retirement plans. While almost every mutual fund invested in stocks is showing gains for the year, some have done better than others -- some far better, like health care and technology funds up more than 50 percent. Selling portions of some of our relative winners and adding more to the shares of our relative losers is counterintuitive, but we just have to hold our noses and take the plunge.

Here's why. History is full of examples in which substantial gains of one or more funds at the expense of the rest has been offset by the mirror opposite within a few years. One of the purest examples was the performance back in 1999 of large company growth funds that averaged a 60 percent return that year. Small company value-oriented funds earned almost exactly zero.

The following year, small-cap funds were up 30 percent and large-cap growth funds had lost 30 percent. Large cap continued to lose substantial amounts in the following two years while small-cap value funds consistently racked up 20 percent annual gains for the next three years. They weren't alone. Real estate investment trust funds, virtually ignored during the final years of dot-com mania, came roaring back with 20 percent annual gains for the early half of the 2000 decade.

So what's an investor to do after experiencing a year of roughly 30 percent gains in most stock investments? After all, the S&P 500 gained 32 percent for the year. Step one is to dismiss any thought that we had anything to do with whatever success we enjoyed. We can't confuse brains with a bull market. If we deserve any credit at all, it was that we had the discipline to stay the course through the downdraft and enjoy what history has shown to be the inevitable snap-back following a crash.

Reviewing my own collection of investments, I find only two that stand out as losers to any substantial extent. One is Vanguard Precious Metals and Mining (VGPMX), which has really been struggling over the past three years. It lost 35 percent last year alone, and over the past three years has dropped 55 percent of its previous value. In the two years prior to that, however, it gained 150 percent of its value after having lost 56 percent the year before that ... and so on. Obviously, this fund is volatile, but it offers a great candidate for rebalancing.

The second rebalance candidate is the REIT fund in our company 401(k) plan. This fund type, in general, has not lost money over the past three years but they have generally lagged the rest of the other fund types. In 2013, the total return of our Vanguard REIT Index fund (VGRSX) was just 2.43 percent.

If my objective is to have 3 percent of my total portfolio invested in precious metals and 5 percent in real estate funds, then I would have to take a few chips off the table of my biggest winners -- health care and technology, both up about 52 percent last year -- and add those dollars to my two losers. This gets me back to my original percentage objective.

It's heart-rending to deprive our deserving winners of even a few bucks, but anytime I have failed to do this in the past, I have always been disappointed. Inevitably, the next phase of the cycle boosted the values of previous losers at the expense of former winners.

One of the key attributes of systematically rebalancing is that you can let simple math do the work. You don't have to second-guess, as an amateur, where you think gold or real estate values might be going next. After all, even the experts who claim to know these things rarely get it right. The Swiss National Bank lost $16 billion on its gold reserves last year. Just know that reduced values below a pre-set portfolio percentage amount deserve to be replenished, and the opposite applies when winners exceed what you determined had been your pre-set percentage maximums.

You only have to rebalance once a year, which makes it even easier, since it can be stressful to actually pull the trigger. To the question, "Are we making money here, or just fooling around?" the answer is that we are adding about one half to one full percentage point per year to our average annual rate of return -- while reducing volatility of the entire portfolio. Most important is the fact that we are doing something methodical and constructive rather than destructively responding to some knee-jerk reaction.

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